What is the small business exemption?
The small business exemption extends the minimum employment period for unfair dismissal claims to 12 months for businesses with fewer than 15 employees.
Under the Fair Work Act, small business employers — those with fewer than 15 employees at the time of dismissal — have a longer minimum employment period before an employee can make an unfair dismissal claim. Employees must have worked for at least 12 months, compared to 6 months for larger employers.
Small businesses also have access to the Small Business Fair Dismissal Code. If an employer follows this code when terminating an employee, the dismissal is considered fair. The code sets out a simplified process covering warnings, performance management, and summary dismissal for serious misconduct.
Key facts
- •Small business = fewer than 15 employees at the time of dismissal (including casuals employed on a regular and systematic basis)
- •Minimum employment period for unfair dismissal is 12 months (vs 6 months for larger employers)
- •The Small Business Fair Dismissal Code provides a safe harbour if followed correctly
- •General protections claims are NOT affected by the small business exemption — they apply from day one
- •The employee count includes all employees of associated entities
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Employment CheckFrequently asked questions
How is the 15-employee count calculated?
Count all employees at the time of dismissal, including part-time staff (each counts as one regardless of hours), regular and systematic casuals, and employees of associated entities. Do not count irregular casuals.
Can a small business employee make any claim before 12 months?
Yes. General protections claims (adverse action for exercising a workplace right, discrimination, etc.) can be made from day one regardless of business size. The 12-month period only applies to unfair dismissal.
General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.