Australia’s peak small business advocacy groups have delivered scathing criticism of the Fair Work Ombudsman’s decision not to recommend changes to the definition of small business employers, describing it as a disappointing failure to address the mounting pressures facing the sector.
The Fair Work Ombudsman’s review, which examined whether the current threshold of 15 employees should be expanded, has concluded without recommending any changes to the existing definition under the Fair Work Act 2009.
This outcome has sparked frustration across the small business community, with industry leaders arguing that the regulator has failed to grasp the economic realities facing thousands of Australian enterprises.
Zero relief for SMEs
The Australian Retailers Association (ARA) led the charge in condemning the FWO’s decision, with CEO Chris Rodwell characterizing it as an “effective non-review” that represents a fundamental missed opportunity.
“We need a small business definition to reflect the reality of doing business in Australia. It is disappointing that the FWO has now passed the baton back to the Federal Government on this critical issue,” said Rodwell.
The ARA’s concerns center on what they describe as an increasingly unsustainable regulatory burden that is strangling small retail operations across the country. Rodwell emphasized that the current definition fails to acknowledge the scale of challenges facing the sector.
“The failure to address this point provides zero relief for the thousands of small retailers caught in a mire of red tape and regulation. This debate has gone on for far too long in Australia,” he said.
Economic impact and sector significance
The retail sector’s significance to the Australian economy cannot be understated, with the industry generating $430 billion annually and employing hundreds of thousands of Australians. Small and family-owned businesses form the backbone of this sector, yet continue to face mounting pressures that threaten their viability.
“Small and family-owned businesses are the backbone of Australia’s $430 billion retail sector, driving local economies and providing essential employment. These businesses face mounting financial pressures from rising regulatory costs, compliance burdens and operating expenses, leading to an increase in business closures and insolvencies,” Rodwell explained.
The ARA CEO painted a picture of businesses caught in a “relentless cost of doing business crisis” that is fundamentally undermining their capacity to invest in productivity improvements and contribute to economic growth.
“Too many continue to confront a relentless cost of doing business crisis which undermines their capacity to invest for higher productivity and economic growth,” he said.
Proposed solutions
The retail association has advocated for what they describe as a “common-sense” solution to the current impasse. Their proposal would see the employee threshold expanded from 15 to 25 employees, a change they argue would provide immediate relief to struggling businesses.
“It is critical Australia reckons with the challenge of an underperforming economy in a practical and substantial way. Expanding the threshold of employees from 15 to 25 is an obvious, common-sense way to kickstart the shift,” Rodwell argued.
The failure to act, according to the ARA, sends a troubling message to the business community about the government’s commitment to addressing their concerns.
“The failure by the FWO to act sends a disappointing signal to small businesses that their challenges will remain unacknowledged in workplace law,” Rodwell said.
COSBOA: hugely disappointing outcome
The Council of Small Business Organisations Australia (COSBOA) delivered an even more pointed critique of the FWO’s decision, with CEO Luke Achterstraat describing the outcome as “hugely disappointing” and questioning whether the review was conducted in good faith.
“While we appreciate the FWO’s work in consulting stakeholders, it is inadequate that the review has not recommended any changes to the outdated 15-headcount definition of a small business employer,” Achterstraat said.
COSBOA’s frustration extends beyond the specific outcome to broader questions about the review process itself. Achterstraat suggested that the conclusion may have been predetermined, undermining the legitimacy of the entire exercise.
“This 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,” he 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.”
More ambitious reform proposals
COSBOA’s submission to the review went significantly further than the ARA’s proposal, advocating for a comprehensive overhaul that would bring Australia in line with international standards. The organization called for updating the definition to encompass 50 full-time equivalent (FTE) employees, a change that would align Australia with major international economies.
“A headcount-based definition is no longer fit for purpose,” Achterstraat argued. “It discourages growth, burdens businesses with compliance costs, and is completely out of step with international counterparts like the European Union, the United Kingdom and Canada, who use the 50 FTE benchmark as the standard.”
The COSBOA proposal would extend small business protections to 97.5% of employing businesses nationwide, addressing what they describe as a significant gap in the current regulatory framework.
Central to COSBOA’s argument is the recognition that businesses employing between 15 and 49 people face unique challenges that are not adequately addressed by current workplace relations laws. These enterprises, while larger than traditional small businesses, lack the resources of major corporations yet face similar regulatory obligations.
“COSBOA argues businesses with 15 to 49 employees make up a significant portion of the Australian economy but are too often treated the same as large corporations when it comes to workplace relations obligations. Despite lacking comparable HR, legal and compliance resources, these businesses are expected to navigate complex requirements – from multi-employer bargaining to workplace delegates’ rights and wage compliance – while continuing to operate within the constraints typical of small enterprises,” the organization stated.
Government response and future prospects
The criticism from both organizations extends to the federal government’s broader approach to small business policy. Both the ARA and COSBOA have called for political leadership to address the regulatory challenges facing the sector. “Retailers expect and need clarity, not delay. It’s critical the Federal Government show leadership where the regulator has not,” Rodwell concluded.
Achterstraat was equally direct in his assessment of the government’s commitment to small business reform, questioning whether political rhetoric matches policy action. “The Government has spoken a lot about reducing red tape and boosting productivity, yet has failed at this basic hurdle,” he said.
The COSBOA CEO drew unfavorable comparisons with international approaches to small business regulation, suggesting that Australia is falling behind its international counterparts. “If the European Union can agree on a universal definition, why can’t we?” he asked.
Broader economic implications
The debate over small business definitions reflects broader concerns about Australia’s economic competitiveness and productivity performance. Both organizations have framed their arguments in terms of the national economic interest, rather than narrow sectoral concerns.
Achterstraat concluded with a call for action that extends beyond the specific issue of business definitions to encompass the government’s broader economic agenda.
“Australia needs a workplace relations system that reflects the value of small business, not one that panders to vested interests and outdated assumptions,” he said.
“It’s time to stop talking about productivity and start acting.”
The FWO’s decision to maintain the status quo leaves the issue in the hands of the federal government, which now faces mounting pressure from the small business community to demonstrate leadership on what they describe as a critical economic issue. Whether the government will act on these concerns remains to be seen, but the strength of the criticism suggests that the debate is far from over.
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