FWO slammed for ‘useless’ review of small business definition

Small business advocates are calling on the Fair Work Ombudsman to deliver meaningful reform of the small business definition, following its “hugely disappointing” review.

This article first appeared on HR Leader’s sister brand, Accounts Daily.

The Fair Work Ombudsman (FWO) has “missed an opportunity” to modernise Australia’s small business definition in its recent review, failing to suggest meaningful recommendations.

In July 2024, the FWO was asked by the government to conduct a review into the small business employer in section 23 of the Fair Work Act 2009 to determine if it remained “fit for purpose”, and if not, to provide recommendations on how it could be improved.

Members of the business community were sent into an uproar following the release of the review on 2 July, which concluded with a statement advising the government to “consider whether further work was warranted to evaluate possible options”.

The Australian Chamber of Commerce and Industry (ACCI) expressed deep disappointment towards the final statement and said the FWO’s review was a “whitewash” in its failure to come up with any meaningful recommendations.

Andrew McKellar, ACCI CEO, said the FWO didn’t do what it was asked to and instead deferred to the government to consider “further work”.

“ACCI has been vocal on this issue following feedback from businesses that they are under-resourced to deal with mounting red tape and that broadening the definition would exempt smaller businesses from more onerous regulations,” he said.

“We were hoping for a substantial review to come up with meaningful recommendations, but instead the FWO squibbed it. What we have instead is a review which was established last year with submissions from multiple government and non-government organisations and no recommendations except for the government to look further into the issue.”

Similar sentiments were expressed by the Council of Small Business Organisations Australia (COSBOA), which noted the review was a missed opportunity to bring Australia’s small business definition in line with modern business realities and global standards.

Prior to the review, COSBOA’s submission to the FWO strongly advocated for the small business definition to be updated under section 23 of the Fair Work Act from fewer than 15 employees to 50 full-time equivalent employees, while ACCI campaigned for it to be expanded to businesses with less than 25 employees.

Luke Achterstraat, COSBOA CEO, said that while it was appreciated that the FWO consulted stakeholders, the lack of recommendations or changes included within the review was inadequate.

“There was a real chance to create clarity, reduce red tape and unlock growth, but instead, we’re left with a definition that continues to penalise ambition,” Achterstraat said.

“One has to wonder whether this review was commissioned in good faith or whether it was window dressing, with a foregone conclusion pre-decided at the outset. The government has spoken a lot about reducing red tape and boosting productivity, yet has failed at this basic hurdle.”

Business advocates voiced concern towards the lack of reform and recommendations, as businesses with 15 to 49 employees made up a significant portion of the Australian economy, yet were often treated the same as large corporations in relation to workplace relations obligations.

It has been argued by small-business bodies that the definition change was crucial, as it would bring consistency across regulatory frameworks and would extend support to 97.5 per cent of employing businesses across the country.

“The government has spoken a lot about reducing red tape and boosting productivity, yet has failed at this basic hurdle,” Achterstraat said.

“Australia needs a workplace relations system that reflects the value of small business, not one that panders to vested interests and outdated assumptions. It’s time to stop talking about productivity and start acting.”

McKellar added he intended to raise this matter at the Treasurer’s upcoming Economic Reform Roundtable in August.

“Small business is the engine room of the economy, employing approximately 42 per cent of the workforce and representing more than 90 per cent of businesses. If we are serious about lifting productivity, helping small businesses would be a good place to start,” he said.

“I’m very disappointed that this review has failed to come up with anything of substance and has proven to be an utterly futile exercise.”