Are you actually a small business? The headcount question that can kill a claim.

Most owners think they know whether they run a small business. Under 15 employees, yes. Over, no. Simple.

It is not that simple, and a Fair Work Commission decision from this week shows why the answer can decide a case before anyone argues about whether a dismissal was fair.

Why the number 15 matters so much

Small business employer status under the Fair Work Act does two big things. It gives you access to the Small Business Fair Dismissal Code, and it stretches the minimum employment period from 6 months to 12. That second one is the quiet hero. An employee who has not served the minimum period cannot bring an unfair dismissal claim at all. No hearing about fairness, no argument about process. The claim simply dies at the door.

Which is exactly what happened here.

What happened

A Sydney investment firm dismissed an employee about 7 months in. She lodged an unfair dismissal claim. The firm itself employed only 10 people, so on its own numbers she was inside the 12 month minimum period and had no claim.

Her argument was clever. The 15 employee count is not just the entity on your payslip. It includes every “associated entity” as well. She pointed to companies the firm had invested in, including one where a member of the firm’s staff sat on the board, and argued that once you counted those employees too, the group crossed 15. That would make the minimum period 6 months, and her claim would be alive.

Where the line landed

The Commission disagreed, and the reasoning is the useful part. Holding shares in a company is not enough. Having a person on its board is not enough. Even having genuine influence over its strategic direction is not enough. The test for an associated entity turns on control: the practical capacity to determine the outcome of decisions about the other company’s financial and operating policies.

The firm was an investment manager. Its influence over the investee company existed because of duties owed to external investors, not because it ran the show. Influence is not control, and an investment is not an associated entity. Headcount: 10. Small business. Minimum period: 12 months. Claim dismissed.

The lessons for SMEs

• Know your real headcount before you dismiss anyone. Count every employee across every entity that is genuinely connected: related companies, entities you control, entities controlled by the same people who control you. Casuals employed on a regular and systematic basis count too. If you run two companies with 8 staff each, you are not a small business.
• The count is taken at the time of dismissal. Not at the time of hiring, not on average. If you are hovering around 15, your status can flip from one termination to the next.
• The minimum employment period is a genuine shield, so do not waste it. If someone is not working out, deal with it inside the minimum period. Hesitating past the 6 or 12 month mark hands them unfair dismissal rights you could have avoided triggering.
• Investment and influence do not make you one business. If you hold shares in another company, or sit on its board, its employees are unlikely to count toward your 15 unless you actually control its finances and operations. Useful comfort for owners with a side investment or two.
• But do not get cute with structure. Where one person or entity genuinely controls multiple employing companies, the Commission will look through the paperwork at practical reality. Splitting one workforce across two ABNs does not make you small.

Frequently Asked Questions

How do I know if I count as a small business employer under the Fair Work Act?

Start by counting every employee across every entity you genuinely control, not just the one on the payslip. Related companies, entities controlled by the same people, and regular casual employees all count. If the total across the group is under 15 at the time of dismissal, you are a small business employer. If you run multiple entities and are not sure how they connect, get advice before you next move someone on.

Do my investments in other companies count toward my headcount?

Generally no. Holding shares in a company or having someone on its board is not enough to make it an associated entity. The test is control: whether you have the practical capacity to determine that company’s financial and operating decisions. Influence over strategy, or duties owed to external investors, does not meet that bar. An investment is not the same thing as control.

What does small business status actually mean when I need to dismiss someone?

Two things. First, you can use the Small Business Fair Dismissal Code, which sets a simpler process than the standard framework. Second, and more importantly, the minimum employment period stretches from six months to twelve. An employee who has not served that twelve months cannot bring an unfair dismissal claim at all. The claim dies before anyone argues about whether the dismissal was fair.

We have two companies with separate ABNs. Are we still considered a small business?

Not necessarily. The Commission looks at practical reality, not paperwork. If one person or entity genuinely controls both employing companies, the employees across both will likely be counted together. Splitting a workforce across two ABNs to stay under 15 is not a strategy that holds up under scrutiny. If your structure is genuinely separate, with different ownership and independent decision-making, you are on safer ground.

The takeaway

This employer won without anyone ever asking whether the dismissal was fair, because they knew their numbers and their structure held up under scrutiny. Jurisdiction arguments like this are won and lost on facts that exist long before the dismissal: how your entities are set up, who controls what, and how many people you employ across the lot.

If you run more than one entity and could not say with confidence whether you are a small business employer under the Act, find out before you next move someone on, not in a Commission hearing. HR Gurus can map it for you in plain English. Get in touch.