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Protecting Your SME When an Employee Leaves

By Andrew Jewell

Small businesses and startups face as much risk in employment as larger enterprises but they are often less well-equipped to address these issues. When working in a small business, people tend to form strong personal relationships and employers plan to retain staff. Sometimes, however, businesses need to dismiss staff for a number of reasons.

While larger employers have human resource departments and sophisticated policies to assist with the dismissal procedure smaller business often have less experience and expertise which increases the risk of legal claims. Whenever a small business determines that it must move on from an employee it needs to ensure that it fulfils its legal obligations in order to protect itself from any legal action.

The first issue that businesses face when conducting dismissals is clearly communicating the reason for dismissal. If an employer has a genuine reason for a dismissal this should be communicated because often an employee’s biggest concern is that they were unsure of the reason they were moved on. If an employer can calmly explain the reason this goes a long way to avoiding a legal claim whereas stating something like the employee was “not the right fit” will most likely inflame the situation.

The next issue for small business is being aware of the claims that can be made. Generally, these claims are to the Fair Work Commission as an unfair dismissal or general protections application.

First, for an employee of a business under 15 employees to be able to make an unfair dismissal claim he or she must be employed for at least 12 months. Assuming this requirement is met, the Commission will consider whether the Small Business Unfair Dismissal Code under the Fair Work Act 2009 (Cth) has been complied with. The Code states that if an employer wishes to terminate employment for a reason other than serious misconduct the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.

Regardless of unfair dismissal restrictions, any employee (with any length of service) can make a general protections application alleging that their dismissal was for a prohibited reason. Prohibited reasons include discriminating against an employee for reasons such as race, sexual orientation, age, physical or mental disability, marital status family or carer’s responsibilities, pregnancy, religion or political opinion or dismissing an employee because they exercised a workplace right. In order to guard against these claim employers should limit any dismissal to reasons of performance and/or conduct and communicate this reason clearly.

Generally speaking, a simple way that small businesses or startups can safeguard themselves from legal action is to keep well documented notes on employees.  By keeping notes of any issues that arise in relation to the employee’s conduct or performance throughout the duration of their employment an employer can defend its decision to terminate an employee.  Similarly, notes should be recorded at all formal disciplinary meetings. If small businesses don’t have appropriate documentation to support the reasons for dismissal they leave themselves open for legal recourse.

Finally, employers should educate themselves on the laws that apply to their business and develop and enforce policies and procedures which are consistent with these laws.

 

Source: Dynamic Business

Testimonials

  • Kellie Pincham

    Director
    Automotive Parts Retailing business

    Cruz & Co offer a great professional and friendly service. Ritchie gave me confidence running the business knowing that he was readily available for…

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    Business Tax – Electrical Contractors

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    Business Tax – Travel Industry

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    Restaurant Owner

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    Ritchie as always provide me with honest and efficient service.

    Is a great communicator, always replies efficiently to…

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    Business Tax – Beauty Salon 

    Ritchie has been managing my tax matters as a sole trader for 2 years+. Always very responsive to my questions and make effort to reply…

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    Director, Technical Design Company

    This is a new business startup and Cruz&Co. have provided great help, guidance and reassurance from the beginning.

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    Director, Import and Distribution Company

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    Director, Travel Company Operations

    Ritchie Cruz and Co are accommodating and have excellent service.

    Cruz & Co have impressed me the most is due to their efficient service.  They are…

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    Cosmetic and Implant Dentistry

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  • Home
  • About
    • Meet the Team
    • Our Clients
    • Testimonials
  • Services
    • Tax Consultant and Compliance Services
    • Small Business and Sole Trader Accountant
    • Outsourced Accounting Solutions
    • Business Structure
    • Outsourced CFO
    • Working Visa Refunds
  • Resources
    • Tax Refund Process
    • Client Assistant Schedule forms
    • Downloadables
    • Helpful Links
    • Rental Property Cashflow calculator
    • SMSF Tax Refund Process
  • Contact Us
  • Blog