5 Australian legal requirements for hiring an employee
Updated: 8 December 2019
If you're considering hiring a worker in Australia, read on for some useful tips. Here are 5 Australian legal tips for hiring an employee.
1. Employment Contract
Even though your worker’s employment contracts can be written, verbal or a mix of the two, it’s a great idea to have a written employment contract.
A written contract can help you set clear expectations, minimise misunderstandings and disputes with your workers.
And it's always easier to refer back to a written document (if you need to) than a verbal conversation that you had with a worker some time ago.
Bonus tip - make sure that all employment contracts have terms that are either the same as any applicable industry award or more favourable.
Also, don't forget, you cannot pay less than the industry minimums.
2. Fair work information statement
It's a legal requirement that you give every new employee a fair work information statement. you can download this form from the Fair Work Ombudsman’s website.
Employees and contractors are treated differently for tax purposes. You should get tax advice about your circumstances.
Generally, you need to withhold tax from an employee’s wages but contractors pay their own tax.
There are other types of tax you need to be aware of, including:
- Pay As You Go (PAYG) - You must register for PAYG withholding if you need to withhold an amount from a payment for tax purposes. You also need to withhold an amount from directors or businesses that don't quote their ABN to you.
- Payroll Tax - Payroll tax is collected by each state and territory government on the wages paid by employers each month. You must register for Payroll Tax in each state or territory that your staff are located if your monthly Australia-wide wage bill is above the thresholds set by that state or territory government. For example, in financial year 2013-14, QLD and NSW have a 31-day threshold of $91 666 and $63 699 respectively. If you employ staff in QLD and NSW and your total Australia-wide wage bill for those 31 days is $95 000, you will need to register for Payroll Tax in both states. If your bill is $75 000, you would only need to register in NSW. You can read more on the Revenue NSW website for your state or territory.
- Fringe benefits given to your employees can attract FBT. This might include providing:
- a company car
- discount or free car parking
- low interest loans
- Christmas parties
- payment of private expenses as part of a salary package.
You should register for FBT as soon as you decide to start providing fringe benefits to your employees.
The Australian department of industry innovation and science is a good starting point for understanding taxes that you need to register for.
Superannuation is money you pay for your workers to provide for their retirement. You pay employees superannuation. Contractors pay their own (usually).
Currently, superannuation is 9.5%.
If you pay an employee $450 or more before tax in a calendar month, you have to pay super on top of their wages.
The minimum you must pay is called the super guarantee (SG):
- The SG is currently 9.5% of an employee’s ordinary time earnings.
- You must pay SG at least four times a year, by the quarterly due dates.
- Your super payments must go to a complying super fund – most employees can choose their own fund.
- If you don’t pay the SG on time, you may have to pay the super guarantee charge.
You can read more about superannuation on the ATO’s website.
Your employees have leave entitlements. Here are some of the key type of leave.
- Annual leave;
- Sick And carers leave;
- Compassionate leave;
- Maternity and paternity leave;
- Community service leave; and
- Long service leave.
Also, if your worker is part-time, their leave is typically provided on a pro rata basis.
Here's an example of pro rata leave: Suzie works 3 days per week, thats 60% of a full time equivalent (FTE) so she is entitled to 60% x 4 weeks annual leave = 12 days per calendar year.
To find out more, check out the Fair Work Commission's website.
Do you want to learn more about the difference between employees and contractors? read this.
These are the key points to keep in mind when hiring workers:
- Prepare & give a written employment contract to your workers.
- Give all new employees a fair work information statement.
- Find out what taxes you need to pay. Consult with an accountant if needed.
- Comply with super legislation and pay your workers super.
- Make sure you give your employee's their leave entitlements.
Do you have any questions or comments about hiring workers? Be sure to leave them below.
I wish you success in your ventures!