Small and medium establishments and the new federal workplace relations system

Employment Relations Record, Jan, 2007 by Michael Lyons, Dennis Mortimer, Elizabeth Whiting, Fiona Wilkinson

SMALL BUSINESS AND EMPLOYMENT RELATIONS

Most employment related research are studies of workplaces employing more than 100 staff. This is surprising as employment relations are a vital factor for the viability of smaller firms (Buultjens and Orme, 2002: 106). Understanding the employment practices in small firms--those with fewer than twenty staff--should be important for the study of employment relations as these businesses account for half of all private sector employment in Australia (National Business Bulletin, 2002; Commonwealth Government, 2003: 2), and according to Prime Minister Howard SMEs are 'the engine room of the Australian economy' (Howard, 2005). However, their share of total employment varies from region to region, being dominant in Tasmania and the two Territories (about 60%), but less important in NSW (about 36%) (DITR, 2004). Research evidence has shown SME employers tended to be satisfied with the industrial award (arbitration) system (Morehead, Steele, Alexander, Stephen, Duffin, 1997) and unenthusiastic about formalised workplace level bargaining (Rimmer, 1998). Thus, smaller workplaces are more likely to have informal (over award) industrial arrangements (Barrett, 1999; Morehead et al., 1997). For instance, one study found only five per cent of firms employing less than twenty staff had a formal collective agreement (compared with 10 per cent and 43 per cent of firms employing twenty to ninety-nine staff and 100 or more staff respectively), while half of these businesses had over award (or unregistered) agreements (Seifman, 2000).

Defining 'small business' cannot be done with precision. Small business can be defined by their management structure: independently owned and operated and the 'owners' play a major role in decision making (Barrett, 1995: 344). Other indices of 'size' include market share and the number of staff employed (Holmes and Zimmer, 1994: 98). The Australian Bureau of Statistics (ABS) classifies firm size by the number of staff employed, with firms with less than twenty staff defined as 'small business', twenty to 200 staff defined as 'medium-sized businesses', and more than 200 staff as 'large businesses'. However, this method of classification is not based on the actual number of staff employed at each establishment but on the 'full-time equivalent' (Barrett, 2006). This method is not without its difficulties, as the manner by which staff are employed in smaller firms appears to vary considerably. The 2000 National Small Business Survey, for example, found that one third of small firms employed no part-time staff, while over half the staff in some other firms were employed on a part-time basis (National Business Bulletin, 2000). Therefore, a business can employ a relatively large number of staff but still be classified as a 'small business' by the ABS. The issues concerning the classification of small and medium sized firms are also found in research studies. For example, the 1995 Australian Workplace Industrial Relations Survey report classified 'small business' as those workplaces which were 'stand alone' operations and not part of a larger organisation, but also excluded those enterprises with multiple workplaces (Morehead et al., 1997: 299-300). However, the Illawarra Regional Workplace Industrial Relations Survey (IRWIRS) included any workplace employing fewer than twenty staff in their sample of 'small business' (Markey, Hodgkinson, Mylett and Pomfret, 2001: 349). Consequently, differentiating between 'small' and 'medium' sized establishments based on the number of staff employed is problematic.