Dismissal Costs and Their Impact on Employment: Evidence from Australian Small and Medium Enterprises*

Abstract

The influence of labour market regulation on employment is intensely debated across the OECD. In Australia, the focus is currently on the employment impact of recent changes to unfair dismissal provisions. There is surprisingly little research on the magnitude and structure of dismissal costs, and this paper presents new data from a major survey of small‐ and medium‐sized Australian enterprises. Dismissal costs are compared for different types of separations, including redundancy, uncontested fires and complex fires. Using the data and a simple labour demand model, we estimate the direct employment impact of Australia's changes to unfair dismissal protection. The impact is found to be modest.

HR practices in US and Australian family wineries: cultural contrasts and performance impact

“…The Australian Redundancy Law is one example; this law requires compensation for workers generally employed for at least one year and whose jobs are seen as redundant by the employer due to technological change, outsourcing or corporate restructuring (Shi 2008). Although dismissal costs and their impact on small businesses in Australia is said to be minimal (Freyens and Oslington 2007), this perception is not shared by some operators of small family wineries. One vineyard owner reported such dismay and fear of the government's attitude toward employment regarding a variety of issues (wrongful dismissal, occupational safety, payment levels for non-qualified people) that the organization was dedicated to keeping its number of employees purposefully lower than necessary to grow the business (Kidwell and Fish 2007).…”

Sacked! An investigation of young workers' dismissal

“…For example, attention has focussed on the implications of changes to the regulation of employee dismissal under Workchoices (Chapman 2006, Forsyth 2008, and more recently the Fair Work Act (Chapman 2009;Forsyth 2009;Gollan 2009;Lambert 2009). Studies addressing the economic effects of dismissal include work by Freyens and Oslington (2007) on the impact of legislative changes on the organisational cost of dismissal (see also, Klaas, Brown & Heneman 1998;McLeod 2005;Southey 2007). However, this perspective does not consider the phenomenon as a specific interaction between an employer and employee.…”

Models of Labour Services and Estimates of Australian Productivity

“…The costs of firing and retrenchment include the preparation and delivery of written warnings, managerial time on mentoring, legal advice, gathering and recording evidence, conciliation and arbitration costs and redundancy payments and, arguably, the additional costs of foregone firm productivity in retaining unsuitable employees for longer than required. Harding (2002) and Freyens and Oslington (2007) contend that firing and retrenchment costs are influenced importantly by the industrial relations system, particularly the rules on firing and redundancy. The total costs of firing and retrenchment compiled by Freyens and Oslington (2007), as given by their EPV(F) and EPV(R) terms, represent about 5.5 per cent of total labour costs.…”

“…Harding (2002) and Freyens and Oslington (2007) contend that firing and retrenchment costs are influenced importantly by the industrial relations system, particularly the rules on firing and redundancy. The total costs of firing and retrenchment compiled by Freyens and Oslington (2007), as given by their EPV(F) and EPV(R) terms, represent about 5.5 per cent of total labour costs.…”