The Fair Work Ombudsman has finalised a report over whether the definition of a small business should change, with employer groups furious over its conclusion.
The lengthy 88-page report comes a year of stakeholder input after the former Minister for Employment and Workplace Relations, Tony Burke, called on the FWO to investigate whether to update the small business definition under Section 23 of the Fair Work Act 2009.
The report concluded with no official recommendations, citing mixed reviews.
“Employer stakeholders and the ASBFEO [Australian Small Business and Family Enterprise Ombudsman] advocated for expanding the definition to capture a greater number of businesses, while employee representatives supported retaining the existing definition, citing concerns about the potential impact on employee rights and protections,” the report read.
“Among those supporting change, a range of proposals were put forward, including adjustments to the headcount threshold, the method of calculating headcount, the inclusion of regular casual employees, and the exclusion of associated entities. These proposals reflect differing views on how best to recognise the diversity of small business structures and operations.”
A small business is defined as a company with fewer than 15 people in Australia, according to the FWO.
Industry peak bodies were quick to react, calling the final review “hugely disappointing” and offering “zero relief” to retailers.
The Australian Retailers Association (ARA) called it a “non-review”, with ARA CEO Chris Rodwell saying it is disappointing that the FWO has passed the baton back to the Federal Government on this critical issue.
“The failure to address this point provides zero relief for the thousands of small retailers caught in a mire of red tape and regulation. This debate has gone on for far too long in Australia,” Rodwell said.
“Small and family-owned businesses are the backbone of Australia’s $430 billion retail sector, driving local economies and providing essential employment. These businesses face mounting financial pressures from rising regulatory costs, compliance burdens and operating expenses, leading to an increase in business closures and insolvencies.”
The ARA was one a few employer organisations recommending the headcount should be upped to 25. Rodwell said upping the current definition by 10 people could be a common-sense way to kickstart a shift in the current underperforming economy.
“The failure by the FWO to act sends a disappointing signal to small businesses that their challenges will remain unacknowledged in workplace law,” Rodwell said.
“Retailers expect and need clarity, not delay. It’s critical the Federal Government show leadership where the regulator has not.”
The Council of Small Business Organisations Australia (COSBOA) joined the ARA in condemning the report conclusion.
The organisation’s CEO Luke Achterstraat did acknowledge the FWO’s effort in consulting stakeholders, but called the lack of recommendations inadequate.
“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,” Achterstraat said.
“One has to wonder whether this review was commissioned in good faith or whether it was window dressing, with a foregone conclusion pre-decided at the outset.”
COSBOA’s submission to the FWO called for a lift in the headcount definition to fewer than 50 full-time equivalent (FTE) employees.
Achterstraat, however, noted that a headcount-based definition is no longer fit for purpose.
“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, COSBOA claim 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 per cent of employing businesses nationwide.
“The Government has spoken a lot about reducing red tape and boosting productivity, yet has failed at this basic hurdle,” Achterstraat said.
“If the European Union can agree on a universal definition, why can’t we?”