The small business fair dismissal code, explained

If you employ fewer than 15 people and you're dismissing someone for conduct or performance reasons, the Small Business Fair Dismissal Code is what protects you from an unfair dismissal claim, provided you actually follow it. Most small business owners have heard of it. Fewer have read what it actually requires, which is exactly how good-faith dismissals turn into costly claims.

Here's what the Code covers, and where businesses typically trip up.

What the Code actually is

It's a short, practical checklist published by the Fair Work Ombudsman, and it exists specifically because small businesses don't run formal HR processes the way larger employers do. If you follow it, the Fair Work Commission will generally find a dismissal was fair, even without the paperwork trail a bigger company might have. The full code sits on the Fair Work Ombudsman's unfair dismissal page, and it's worth reading in full before you act, not after.

The two situations it covers

What "following the Code" looks like in practice

Where small businesses usually get caught out

The gap is rarely bad intent. It's usually one of three things. The warning was verbal and vague ("you need to lift your game") rather than specific about what needed to change and by when. There's no record at all, so if it's disputed later, it's your word against theirs. Or the final conversation happens the same day a manager decides they've had enough, with no lead-up the employee could point to as fair warning.

A habit worth building fixes some of this: after any real performance conversation, send a short follow-up email or note summarising what was discussed, what needs to change, and by when. That's not the whole answer though, it protects the paperwork, not necessarily the person. Genuine procedural fairness means actually giving someone a real chance to improve, not just going through the motions of a warning you've already privately decided won't change anything. That distinction matters more than most business owners realise, and it's usually the harder judgment call, not the easier one.

It's a shield, not a shortcut

Worth being direct about this. The Code exists to protect genuine, reasonable dismissals from being unfairly punished by process technicalities, not to make it easy to remove someone you've simply lost patience with. If the underlying reason for the dismissal isn't sound, following the Code's steps won't save you. The Fair Work Commission looks at the substance of the decision as well as the process.

It's also worth being honest about something else: these situations are genuinely nuanced, and treating the Code as a simple checklist to tick off is its own risk. Every dismissal carries a different level of risk depending on the person, the history, the reason and how it's likely to be received, and different business owners will have different appetites for that risk. What looks straightforward on paper, a warning, a chance to respond, a support person if asked, can be a lot harder to execute well in a real conversation with a real person whose job and income are on the line. These conversations tend to deserve more care, not less, and often benefit from an outside, experienced perspective precisely because the stakes for everyone involved are high.

If you're heading toward a dismissal

The stakes of getting this wrong are real, and they go further than the claim itself. Beyond the time, money and headspace an unfair dismissal claim costs regardless of the outcome, a badly handled termination has a way of rippling through the rest of your team. People notice how an exit was handled, even when they only see the edges of it, and it shapes how safe they feel raising their own performance issues, how much they trust the business to be fair, and whether they believe a similar conversation with them would be handled with the same care. That impact on culture and trust is easy to underestimate and hard to undo.

If you're not sure whether what you've documented so far is enough, or you want someone to sanity check the situation before you act, that's exactly the kind of conversation we have with clients regularly.

Book a free consultation or get in touch at hello@happyhumans.com.au.