Australia: SME? How employment law applies to you

Last Updated: 23 November 2016
Article by Mark Cox and Joanne Knoth

The relationship between employer and employee is subject to a multitude of Australian state and federal laws and is key to the success of any business. Small and medium enterprises (SMEs) face a number of challenges when managing their employees. Many businesses lack a dedicated human resources department, leaving HR responsibilities to busy owners or senior managers.

There is a lot to manage and keep on top of, including recruitment, inductions and training, employment contracts, policies and procedures, compliance with industrial instruments and laws, avoiding bullying and discrimination, performance management and terminations.

As an employer, you need to know your legal obligations in order to protect your business. Ignorance of the law is no excuse if a claim is made against you. You may also be liable for the conduct of your employees, as well as needing to protect your business assets, including goodwill and confidential information with appropriate contracts, restraint clauses and workplace policies.

This article provides practical small business HR advice to help ensure you understand your responsibilities and successfully manage your employees.

INDUSTRIAL RELATIONS SYSTEM

Two different industrial relations systems operate in Western Australia: the state system and the national system. These systems determine the laws that govern the relationship between you as an employer and your employees. The system that applies to your business depends on the formal structure of the business.

The state system applies to businesses that operate as sole traders, unincorporated partnerships and certain unincorporated trust arrangements. In other words, businesses that do not have a separate legal identity from their owners operate in the state system.

The national system applies to businesses that are constitutional corporations, generally this is trading or financial corporations that have 'Ltd' or Pty Ltd' after their name. These businesses engage in significant trading or financial activity and can operate as an artificial legal person, allowing it to enter contracts, hold property, sue and be sued.

There are some areas of overlap, with certain provisions of the national Fair Work Act 2009 applying to businesses in both systems, as do state safety laws giving unions right of entry. Situations involving trusts can be particularly complicated because they are not always clear cut. If you are unsure where your business fits, we can provide you with legal advice.

PAY AND EMPLOYMENT CONDITIONS

Entitlements for work conditions and pay at constitutional corporations are governed by the national workplace relations system, which includes modern awards, the National Employment Standards (NES), and the terms of the employee's contract.

Some SMEs that operate in Western Australia will fall under the WA industrial relations system. Employees in the state system derive their conditions of employment from:

  • The Minimum Conditions of Employment Act 1993
  • Their relevant state award
  • An industrial agreement
  • A written contract between employer and employee

The Minimum Conditions of Employment Act 1993 provides minimum conditions for wages, hours of work, payment of wages, casual loading, public holidays and leave entitlements.

You should also be aware of tax requirements, superannuation, which are federal laws, and your health and safety obligations to your employees, which are state laws.

Regardless of whether your business falls under the national or state system, you will be required to comply with applicable equal opportunity legislation and workplace health and safety legislation.

Protect your business and avoid costly claims with proper employment contract and employee records (such as payslips or pay summaries, tax file declarations and superannuation payments – which need to be retained for seven years), and policies and procedures including on appropriate conduct in the workplace.

MANAGING WORKPLACE BULLYING AND DISCRIMINATION

Workplace bullying and discrimination is a key area of risk for all employers. According to the Fair Work Commission, around 33 per cent of bullying claims came from employees working in SMEs.

Employers have to adhere to the Equal Opportunity Act 1984 and various pieces of federal anti-discrimination legislation when recruiting new workers. These laws protect against discriminating on the basis of gender, age, marital status, religion, race, impairment, pregnancy and family status, among other things. Unlawful acts can include aiding or permitting discriminatory behaviour. Employers may be held vicariously liable for the discriminatory conduct of their employees. Failure to address or take proper notice of issues of discrimination in the workplace can leave you liable.

Preventing bullying, harassment and discrimination in the workplace is about creating a positive workplace culture with policies and clear standards about acceptable behaviour. It also involves transparent and open communication channels to deal with complaints. Employers should lead by example in their behaviour and formulate clear policies on workplace bullying and discrimination.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Mark Cox
 
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