How many small businesses are there in South Australia?
65,000, 135,000,150,000? Pick a number, because the truth is no-one really knows. Different authorities, including government, all provide a figure based on their own unique metric.
Why should we care? Well as the adage goes, what gets measured gets managed, so understanding the size and shape of our business community isn’t a nice-to-have — it’s a must.
Part of the problem is the definition of a small business, which has cost and productivity implications that are having a detrimental impact on businesses across the country.
For example, it can determine which government rules and regulations apply, or whether a business qualifies for an exemption from an onerous policy that is designed to influence much larger operations.
The Fair Work Act currently defines a small business as having 14 or fewer employees. The Australian Taxation Office states a small business entity is one with an aggregated turnover of less than $10 million. The Australian Bureau of Statistics uses a definition of fewer than 20 employees while the Corporations Act classifies 50 employees as a benchmark. Confused?
The Australian Chamber of Commerce and Industry has advocated for the Fair Work Act to increase the number to 25 employees. That seems reasonable and would significantly reduce red tape for an estimated 46,500 businesses across the country.
We know that the complexity of the Act and the changes to IR legislation in the last few years have made it tougher for small businesses. They do not have the resources to deal with the complexity of the legislation. It’s a burden on profitability, productivity and for the owners, their mental health. It’s reflected in the increase in insolvencies and business closures.
According to our March SA Business Chamber/William Buck Survey of Business Expectations, ‘government policies, legislation and compliance’ is the number two issue affecting businesses in our state. If we look back eighteen months ago it was number four.
Unfortunately, government policy is rarely nuanced. As a blunt instrument it can have unintended consequences. An operation of 14 employees is not a big business yet gets caught in the bureaucratic net designed to regulate entities where staff numbers run well into the hundreds and thousands. Lift the number of employees in the definition and with it we ease the regulatory burden on small business.
The previous Federal Workplace Relations Minister had little appetite for change in this area, reducing the debate to one about a new definition making it easy for more businesses to get rid of staff by removing unfair dismissal protections for workers.
I’d argue that if you want to protect jobs, you should enable those small businesses to be as productive and efficient as possible, not cripple them with over-regulation. Belonging to a healthy, profitable business is the best form of job security in the private sector.
New Workplace Relations Minister Amanda Rishworth will receive a report from the Fair Work Ombudsman this week with a recommendation on the definition of a small business. If we are serious about generating more power out of Australia’s economic engine room, that definition must lift the number of employees and be implemented with haste.
POSTSCRIPT
The Fair Work Ombudsman (FWO) handed down its report since this article was written and disappointingly failed to come up with any meaningful recommendations.
Instead, the FWO has deferred to the Government by advising it “may wish to consider whether further work is warranted to evaluate possible options.”
SA Business Chamber CEO Andrew Kay expressed his disappointment with the FWO’s inaction. “Recommending the Government look into it further, is absolving the FWO of its responsibility with this review and simply kicking the can down the road,” he said. “I’m sure we have not heard the last on this from peak bodies and advocacy groups.”
