With all the focus on the new Paid Parental Leave scheme that came into effect at the start of the year, many smaller businesses may have failed to note the important change to the definition of “small business” that occurred at the same time.

If you own or manage a “small business”, the new rules could very well affect you.

As of 1 January 2011, only businesses that employ fewer than 15 employees – by simple headcount – qualify as a small business when an employee makes an unfair dismissal claim.

Before the change, a small business was one that employed fewer than 15 full-time equivalent employees.

This is a very important distinction, especially if you employ a number of part-time staff, encourage job sharing and provide flexible working arrangements. Your employees may do the work of fewer than 15 full-time equivalent staff, but in themselves add up to more than 15 people.If this situation applies to your business, you will find that you’re no longer eligible for the special unfair dismissal arrangements that apply to small businesses.

These special arrangements include a minimum employment period of 12 months before employees can make an unfair dismissal claim, and a simple Fair Dismissal Code to help employers ensure dismissals are not unfair.