The Fair Work Ombudsman’s (FWO) review into the definition of a ‘small business employer’ has left industry bodies disappointed that meaningful change has not been recommended.
The Council of Small Business Organisations Australia (COSBOA) CEO Luke Achterstraat said the review’s outcome is a missed opportunity to bring Australia’s definition in line with modern business realities and global standards.
“While we appreciate the FWO’s work in consulting stakeholders, it is inadequate that the review has not recommended any changes to the outdated 15-headcount definition of a small business employer,” Mr Achterstraat said.
“This was a real chance to create clarity, reduce red tape and unlock growth, but instead, we’re left with a definition that continues to penalise ambition.”
The Australian Retailers Association (ARA) CEO Chris Rodwell said a small business definition is needed to reflect the reality of doing business in Australia.
“The failure to address this point provides zero relief for the thousands of small retailers caught in a mire of red tape and regulation,” he said.
“This debate has gone on for far too long in Australia.”
Numbers game
COSBOA’s submission to the review strongly advocated for updating the small business definition under Section 23 of the Fair Work Act 2009 from fewer than 15 employees to 50 full-time equivalent (FTE) employees.
“A headcount-based definition is no longer fit for purpose,” Mr Achterstraat said.
“It discourages growth, burdens businesses with compliance costs, and is completely out of step with international counterparts like the European Union, the United Kingdom and Canada, who use the 50 FTE benchmark as the standard.”
COSBOA argues businesses with 15 to 49 employees make up a significant portion of the Australian economy but are too often treated the same as large corporations when it comes to workplace relations obligations. Despite lacking comparable HR, legal and compliance resources, these businesses are expected to navigate complex requirements –from multi-employer bargaining to workplace delegates’ rights and wage compliance – while continuing to operate within the constraints typical of small enterprises.
The policy recommendations made by COSBOA maintain that updating the definition to 50 FTE better reflects these operational realities, brings consistency across regulatory frameworks, and extends support to 97.5% of employing businesses nationwide.
“The Government has spoken a lot about reducing red tape and boosting productivity, yet has failed at this basic hurdle,” said Mr Achterstraat.
“If the European Union can agree on a universal definition, why can’t we?”
“Australia needs a workplace relations system that reflects the value of small business, not one that panders to vested interests and outdated assumptions.”
Cost of doing business crisis
Small and family-owned businesses are the backbone of Australia’s $430 billion retail sector, driving local economies and providing essential employment.
These businesses, says ARA, face mounting financial pressures from rising regulatory costs, compliance burdens and operating expenses, leading to an increase in business closures and insolvencies.
“Too many continue to confront a relentless cost of doing business crisis which undermines their capacity to invest for higher productivity and economic growth,” Mr Rodwell said.
“It is critical Australia reckons with the challenge of an underperforming economy in a practical and substantial way. Expanding the threshold of employees from 15 to 25 is an obvious, common-sense way to kickstart the shift.”
Mr Rodwell says the failure by the FWO to act sends a disappointing signal to small businesses that their challenges will remain unacknowledged in workplace law.
“Retailers expect and need clarity, not delay. It’s critical the Federal Government show leadership where the regulator has not,” he said.
