The clock is ticking – sack dud staff before it’s too late

Small and medium business owners could have less than a month to sack failed employees before Labor introduces new IR laws that make sacking workers much more expensive, leading IR lawyers say.

Labor deputy leader Julia Gillard today signalled that work will begin immediately on transitional IR laws to begin the change to a new system – laws that some speculate could be introduced into Federal Parliament before the end of this year.

They will be followed later – probably some time in late 2008 or early 2009 – by more substantial laws to fully implement Labor’s IR promises.

Crucially, however, the transitional IR laws could include provisions reinstating some unfair dismissal rights for small business employees. Labor has yet to make its position on this clear.

For businesses with less than 100 employees, that means there could be less than a month left to remove problem employees without the threat of unfair dismissal claims and go-away money.

“There’s no question that if employers are thinking about terminating an employee, one of the things they need to bear in mind is that the law that makes it easier to do that now is likely to change very shortly,” CCI Legal principal Peter Vitale says.

Vitale says that although the skills shortage means most employees are working to keep employees rather than get rid of them, it is likely there will be a sharp increase in unfair dismissal claims once the law changes.

The SmartCompany Election 2007 Poll found that 57.5% of businesses polled said they will be more reluctant to hire if Labor won, up from 33% just three months ago. And 45% said they would be more reluctant to fire under Labor, an increase from 23% three months ago.

NSW Business Lawyers managing partner Tim Capelin agrees that the pressure is now on employers to start thinking about what the change of government means for them.

“If you’re a small business owner that has doubts about a current employee you’d want to utilise your rights now rather than wait,” Capelin says.

Employers also need to start thinking now about whether they want to maximise the amount of time they can keep employees on AWAs.

Labor has promised to allow existing AWAs to continue to run until 2012. That means that employers who move now to put staff on to AWAs could continue with those arrangements for as long as five years, according to Capelin.

“SMEs need to move quickly to lock in their employment arrangements – it’s not clear when the guillotine will come down, but no doubt they will be moving quickly with this,” Capelin says.

A vital factor in the timing of any change to the current IR regime will be the composition of the Senate, which will have to pass any new laws.

It is already clear that the Coalition will continue to hold a majority in the Senate until newly elected Senators take their place on 1 July 2008, although there is no guarantee that will prevent Labor passing legislation – National Party Senator Barnaby Joyce has already suggested he will back Labor’s IR laws.

After July, Labor will be forced to rely on Greens support for its laws, but even then will need one more vote to form a majority. This will give significant power to the likes of Joyce, Family First Senator Stephen Fielding and newly elected South Australian independent Nick Xenophon.