The Achilles' heel of unfair dismissal arbitration in Australian SME's

Objectives: Employee grievances occur in both SMEs and large organisations as a by-product of the people management practices of the company. This paper aims to report on the differences in grievance arbitration outcomes between SMEs and large organisations in relation to unfair dismissal. This knowledge provides entrepreneurs with information about SME performance at the arbitration table. Prior Work: Researchers are investing energy into determining whether stereotypical thinking of HR for large organisations is also applicable in SMEs. This paper is built on the premise that employee dismissal (and subsequent arbitration of them) is within the domain of human resource management. Thus an examination of the differences between unfair dismissal outcomes in SMEs and larger organisations will provide further knowledge about people management practices in SMEs. Approach: Quantitative data were collected from 384 unfair dismissal decisions made by commissioners of the Australian Industrial Relations Commission during 2004 and 2005. Descriptive statistics are presented for business sizes ranging from micro to large, with Pearson chi-square analysis performed on SMEs employing up to 100 staff. Results: It appears that arbitration outcomes are not significantly different for SMEs employing up to 50 staff, from those of larger organisations. However, SMEs employing up to 100 staff are not performing as well at the arbitration table in comparison to larger businesses. Furthermore, the presence of a human resource expert is not significantly associated with the arbitration decision, in neither SMEs nor large firms. Implications: SMEs up to 100 employees tend to operate without HR specialist and the informal HR practices of SMEs seem to be holding up under the scrutiny of the arbitrators in firms of less than 50 staff. However there appears to be a vulnerable business size, 50 to 100 staff, with a significantly lower number of cases determined in favour of the SME employer. It is conceived that an ‘Achilles’ heal’ for SMEs exists for businesses of this size, whereby such businesses may not have the benefit of the arbitrators’ tolerance for the informal processing of dismissals that they appear to exhibit for smaller business. Value: This paper contributes empirical results to the debate surrounding the need for different (or similar) models of people management for SMEs and large organisations. It also identifies an area of risk in SME people management practices. Discussing variances in HR activity between SMEs and big business helps to identify the people management practices that work best in stimulating smarter, successful small business.