Labor Stands Firm: No Expansion for Small Business Definition to 25 Employees

The Albanese government has dismissed industry calls to expand the legal definition of a small business from 15 to 25 employees. Despite lobbying from industry groups like the Australian Chamber of Commerce and Industry (ACCI), Minister for Employment and Workplace Relations, Murray Watt, confirmed that the government will retain the existing threshold.

Why Define Small Business by Employee Count?

Under the Fair Work Act 2009, a small business is defined as an enterprise with fewer than 15 employees, covering full-time, part-time, and casual roles. This definition is crucial because it determines the regulatory framework for small businesses, including protections related to unfair dismissal. Employees in small businesses must complete a 12-month probation period before filing unfair dismissal claims, whereas those at larger businesses have a six-month waiting period.

ACCI argues that raising the small business threshold to 25 employees would allow more businesses to benefit from these protections. However, Labor contends that such a shift would increase the risk of unfair dismissal for workers and potentially lower job security across many sectors.

Government’s Response: Why Change Is Off the Table

In a recent interview with ABC RN, Minister Watt clarified the government's stance, stating, “There is absolutely no evidence that we need to make it easier for small- and medium-sized businesses to be able to unfairly sack workers, and that’s what this change would amount to.” He added that a business employing close to 25 individuals would more likely align with a medium-sized company, not a small one.

The Australian Council of Trade Unions (ACTU) is also pushing back, warning that a broader definition could affect up to one million workers. ACTU Secretary Sally McManus voiced concerns that this expansion would extend probation periods for many employees, leaving them vulnerable to longer job insecurity.

Current Definitions Cause Confusion

Australia’s regulatory landscape currently uses multiple definitions for small businesses, which can create complexity for business owners. For example:

• The Australian Taxation Office (ATO) considers a small business as one with turnover below $10 million.

• The Australian Bureau of Statistics (ABS) defines a small business as an entity with fewer than 20 employees.

The Council of Small Business Organisations Australia (COSBOA) reports that approximately 25 definitions of “small business” are in use across different jurisdictions. According to COSBOA CEO Luke Achterstraat, creating a uniform definition would simplify compliance and clarify regulatory expectations for business owners.

Industry and Political Reactions

The ACCI’s proposal for redefining small businesses has received varied responses. Some crossbench politicians, including Senator Jacqui Lambie, have signaled preliminary support for a revised definition. However, the Albanese government remains firm on maintaining current protections.

Meanwhile, the Coalition has suggested that, if elected, it would consider rolling back some of Labor’s recent workplace reforms. Shadow Minister for Employment and Workplace Relations, Michaelia Cash, confirmed that the Coalition is developing policies for the upcoming election that may include revisiting these definitions.

Looking Ahead: Legislative Consistency for Small Businesses?

While the Albanese government has shelved any immediate plans for redefining small business thresholds, the debate is far from over. With stakeholders split between labor protections and easing business compliance, small business classification is likely to remain a topic of discussion in the lead-up to future elections and reform initiatives.

For now, the existing definition under the Fair Work Act 2009 remains, shaping the legal landscape for small businesses across Australia.