Unfair Dismissals: What Small Businesses Need to Know

Let’s talk about a common HR headache—unfair dismissal claims. Many small business owners think, “I can let go of someone if they’re not the right fit, right?” Well, yes… but only if you do it the right way.

An unfair dismissal happens when an employee is fired in a way that’s harsh, unjust, or unreasonable. And guess what? Small businesses aren’t immune—many claims come from workplaces with just a handful of employees!

Where Small Businesses Go Wrong

No Paper Trail

Many small businesses fail to document employee performance issues, disciplinary actions, or warnings. Without this documentation, it's challenging to justify a dismissal if it's ever questioned.

Vague or Non-Existent Policies

Some businesses operate without clear policies outlining employee expectations and behaviors. This lack of clarity can lead to misunderstandings and make it difficult to hold employees accountable.

Skipping Due Process

In the rush to address performance issues, some employers may terminate employees without providing proper notice, issuing formal warnings, or giving the employee a chance to respond to concerns. Such actions can be deemed procedurally unfair.

The Bigger Picture

Unfair dismissal claims are more common than many think. In the 2022-23 period, nearly 14,800 unfair dismissal applications were lodged, marking a 5% increase from the 2011-12 period. (aim.com.au)

Interestingly, a significant portion of these claims are resolved before reaching a formal decision. Specifically, 89.86% of claims are settled or withdrawn prior to a Commission decision. Of the remaining cases, 73.50% are dismissed on administrative or jurisdictional grounds, 17.10% are found to be fair, and 9.40% are determined to be unfair. (acapmag.com.au)

How to Protect Your Business

Have Clear HR Policies

Develop comprehensive guidelines that clearly outline acceptable behaviors, performance standards, and the procedures for addressing issues. This ensures that all employees understand what's expected of them.

Document Everything

Maintain detailed records of all employee-related matters, including performance evaluations, disciplinary meetings, and any warnings issued. This documentation can be crucial if a dismissal is ever contested.

Train Your Managers

Ensure that anyone in a supervisory role is well-versed in proper dismissal procedures. This includes understanding legal requirements and following company protocols to handle terminations appropriately.

Follow the Small Business Fair Dismissal Code

Familiarize yourself with this code, which provides guidelines to help small businesses manage dismissals fairly and lawfully. Adhering to it can offer protection against unfair dismissal claims.

Need Help?

At Ritual HR, we’ve got ready-to-use templates and HR guides to help businesses handle dismissals the right way—without the legal drama. Plus, we offer expert support to make sure your HR practices are solid from hire to fire (and everything in between!).

If you’re unsure whether your offboarding process is up to scratch, let’s chat! A little preparation now could save you a massive headache later.