Small business employers get two specific protections around dismissal: a longer minimum employment period, and the Small Business Fair Dismissal Code. Both are genuinely useful. Both are narrower than most employers assume.

Who counts as a small business employer

Generally, an employer with fewer than 15 employees at the relevant time. The count includes full-time, part-time and regular and systematic casual employees, and it includes employees of associated entities. It is a headcount, not a full-time-equivalent calculation.

This matters more than it sounds. A business sitting at 13 or 14 employees can cross the threshold without noticing, and the consequences — a six-month rather than twelve-month qualifying period, and NES redundancy pay becoming payable — are significant. It is one of the clearest signals that a business has outgrown its HR setup.

The minimum employment period

An employee cannot bring an unfair dismissal claim until they have completed the minimum employment period: twelve months for a small business employer, six months otherwise. Note that this has nothing to do with the probation period in your contract, which is a separate contractual concept.

What the Code does

If you dismiss someone and you have complied with the Small Business Fair Dismissal Code, the dismissal is not unfair. It functions as a defined, checkable pathway rather than leaving everything to a general assessment of fairness. It covers two situations.

Summary dismissal. It is fair to dismiss without notice where the employer believes on reasonable grounds that the employee’s conduct is serious enough to justify it — theft, fraud, violence, or a serious breach of work health and safety. Where the conduct may be criminal, the Code contemplates reporting it to the police. “Reasonable grounds” means you need a basis for the belief, which in practice means you investigated.

Other dismissal. The employee must have been warned, verbally or preferably in writing, that they are at risk of being dismissed if there is no improvement. They must have been told the reason — conduct or capacity — in clear terms, and given a reasonable chance to fix it, including any training or support that would reasonably help. They are entitled to have a support person present at discussions about dismissal, if they request one.

Evidence matters

The Code is only useful if you can show you followed it. In practice that means:

  • A written warning that actually says employment is at risk — not one that hints at it.
  • A record of the discussions, who attended, and what the employee said.
  • Notes of any investigation, including what the employee was told and how they responded.
  • A written record that a support person was offered.

Verbal warnings are permitted by the Code but are extremely difficult to prove. Put it in writing.

What the Code does not cover

This is the part that catches employers out. Complying with the Code protects against an unfair dismissal claim. It does not protect against:

  • General protections claims — where the allegation is that the real reason was a workplace right, or industrial activity, or a protected attribute. No qualifying period, no cap on compensation, and the burden of proving the reason falls on the employer.
  • Discrimination claims under the Fair Work Act or anti-discrimination legislation.
  • Unlawful termination and breach of contract.

So a perfectly Code-compliant dismissal can still be unlawful if the underlying reason was the wrong one. The Code is about process; these claims are about reason.

The 21-day clock

Applications must generally be lodged within 21 days of the dismissal taking effect. If you have followed the process set out in ending employment step by step and kept the file, responding to one is manageable. If the file is thin, it is not.

The Fair Work Ombudsman publishes the Code and a checklist at fairwork.gov.au. It is one page. It is worth reading before you need it, not after.