Hiring and onboarding

Fair Work rules for small business employers

A small business employer under the Fair Work Act has fewer than 15 employees, counted by head count and including associated entities and regular casuals. Small businesses still owe award rates, the National Employment Standards, pay slips and records, but their employees must serve 12 months before claiming unfair dismissal, the Small Business Fair Dismissal Code applies, most don’t pay NES redundancy pay, and the maximum civil penalty for a company is lower.

Updated 5 November 2026. General information, not legal advice.

Am I a small business employer?

You are a small business employer if you employ fewer than 15 employees at the relevant time (Fair Work Act s 23). Count every employee by head count, including the employees of associated entities and casuals employed on a regular and systematic basis.

Head count, not full-time equivalents: a part-time employee on 1 day a week counts as 1.
Casuals: count only those engaged on a regular and systematic basis.
Associated entities: related companies are treated as one employer, including entities based overseas (Fair Work Ombudsman).
Dismissals: for unfair dismissal, count the dismissed employee and anyone dismissed at the same time, at the earlier of when notice was given or when the employment ended.
Redundancy: count everyone employed at the time of the redundancy, including the employees being made redundant.

This is the Fair Work Act definition. State payroll tax, workers compensation and tax concessions use different thresholds, so being "small" for one purpose doesn’t mean you are small for another.

Which obligations apply no matter how small I am?

Every national system employer, whatever its size, must pay at least the award or agreement rates, provide the National Employment Standards, give pay slips within 1 working day of pay day, keep records for 7 years and give new employees the Fair Work Information Statement.

The National Employment Standards cover maximum weekly hours, flexible working requests, casual employment, parental leave, annual leave, personal/carer’s, compassionate and family and domestic violence leave, community service leave, long service leave, public holidays, superannuation contributions, notice of termination and redundancy pay, and the information statements. None of these is reduced for a small business except NES redundancy pay.

Award coverage, classifications and penalty rates: modern award compliance.
Records and pay slips: employer record-keeping obligations.
Set-up for a new hire: hiring your first employee.
A quick check of all of the above: 30-minute HR compliance audit.

How is unfair dismissal different for a small business?

An employee of a small business can’t claim unfair dismissal until they have completed a minimum employment period of 12 months, compared with 6 months for larger employers. If you follow the Small Business Fair Dismissal Code, the dismissal is not unfair.

Once the 12 months are up, the employee can apply to the Fair Work Commission within 21 days after the dismissal takes effect, provided they earn under the high income threshold of $190,100 (for dismissals on or after 1 July 2026) or are covered by an award or enterprise agreement (Fair Work Commission). The minimum employment period applies to unfair dismissal only. A general protections dismissal application, alleging dismissal for a prohibited reason such as taking sick leave, has no length-of-service requirement and must also be made within 21 days.

The Small Business Fair Dismissal Code explains the Code’s steps for summary and other dismissals. For notice and final pay, see ending employment lawfully.

Do small businesses have to pay redundancy pay?

Most small business employers don’t have to pay redundancy pay under the National Employment Standards (Fair Work Act s 121). You still have to give notice or pay in lieu, and an award or agreement may require redundancy pay in your industry.

Downsizing exception: a business that drops below 15 employees because of insolvency-related redundancies may still owe NES redundancy pay for later redundancies (Fair Work Ombudsman).
Industry schemes: some awards and agreements contain redundancy terms that cover small businesses, and industry-specific redundancy schemes apply in some sectors.
Genuine redundancy: to rule out an unfair dismissal claim, the job must no longer be needed, you must follow any award or agreement consultation duty, and redeployment must not have been reasonable (s 389).

What else is different for small businesses?

A casual of a small business must be employed for 12 months, rather than 6, before giving notice to become permanent under the employee choice pathway. Small businesses give the Casual Employment Information Statement again at 12 months only, rather than at 6 and 12 months and then every year.

Rules that differ by employer size (as at 5 November 2026)
Rule	Fewer than 15 employees	15 or more employees
Unfair dismissal minimum employment period	12 months	6 months
Small Business Fair Dismissal Code	Applies	Does not apply
NES redundancy pay	Generally not payable	Payable (4 to 16 weeks)
Casual employee choice notice	After 12 months	After 6 months
Casual Employment Information Statement repeats	At 12 months	At 6 and 12 months, then every 12 months
Right to disconnect	Applies since 26 August 2025	Applies since 26 August 2024

When a casual gives notice, you must consult them and respond in writing within 21 days (Fair Work Ombudsman). The casual conversion notice template covers the written response.

What are the maximum penalties for a small business?

A court can order up to $109,200 per contravention for a company with fewer than 15 employees, or $1,092,000 for a serious contravention. For an individual, such as a sole trader, the maximum is $21,840, or $218,400 if serious.

Maximum civil penalties per contravention, from the Fair Work Ombudsman
Who	Standard	Serious contravention
Individual	$21,840	$218,400
Company, fewer than 15 employees	$109,200	$1,092,000
Company, 15 or more employees	$546,000, or 3 times the underpayment if greater	$5,460,000

The higher limit based on 3 times the underpayment applies only to employers with 15 or more employees (Fair Work Ombudsman litigation). Since 1 January 2025, intentionally underpaying wages or entitlements can be a criminal offence. The Fair Work Ombudsman can’t refer a small business employer for criminal prosecution if it is satisfied the employer complied with the Voluntary Small Business Wage Compliance Code. Honest mistakes are not covered by the offence, but they can still lead to back pay and civil action.

Questions

Do casual employees count towards the 15-employee threshold?

Only casuals employed on a regular and systematic basis. Employees of associated entities also count, and the count is by head, not full-time equivalent.

Can an employee of a small business claim unfair dismissal?

Yes, once they have been employed for at least 12 months, earn under the $190,100 high income threshold or are covered by an award or agreement, and lodge within 21 days. The dismissal is not unfair if you complied with the Small Business Fair Dismissal Code.

Does a small business have to pay redundancy pay?

Generally not under the NES, but an award or agreement may require it, and a business that became small because of insolvency-related redundancies may still have to pay.

Are pay slip and record-keeping rules lighter for small businesses?

No. Every employer must give pay slips within 1 working day of pay day and keep employee records for 7 years.

Sources

Checked against these sources on 5 November 2026. Spotted something out of date? Tell us.