Employment Archives - Page 5 of 5

Home
Category: Employment

Transfer of business & employee contracts: how to manage your employee's contracts after buying a business

Employment, Startup Contracts

Transfer of business & employee contracts: how to manage employee contracts before and after buying a business

Updated: 8 December 2019

If you are thinking about buying a business with existing employees, here are some useful tips to help you.

In a hurry? Jump ahead.

Quick Navigation

1. Pre-purchase check of employment contracts

2. No liability for current employee entitlements

3. Liability for employee entitlements

4. New employment contracts

5. Insurance

Key points

First, you should check any employee contracts.

1. Pre-purchase check of employment contracts

Before you buy a business, you can check the key terms of any written employee contracts.

So what should you check for in a contract ?

Here are some ideas of what you should be checking for:

if an award applies, and if it does, if the employee has the correct duties assigned;
correct pay is paid; and
other minimum employee entitlements.

Importantly, national employment standards will still apply, even if there's no written agreement or an award does not apply.

What if you discover there's an underpayment ?

First, you should make sure that the current business owner corrects any underpayments before you buy the business.

Also, you'll want to reduce the risk of being liable for underpayments.

So, for your protection, it's a good idea to have a clause in your sale of business contract like this one:

The Vendor will be responsible for all pre and post completion date claims, suits, demands, actions or proceedings arising out of or in connection with the employees that were ever employed by the vendor or the cessation of their employment.

Next, you can negotiate a business sale to either include or exclude current employee entitlements.

2. No liability for current employee entitlements

If you agree with the seller that you will not be responsible for existing employee entitlements, the current business owner will pay what's due up until the settlement date.

And in this case, you should write to the employees and explain a new employment contract applies and also that the period of service with the old employer will not count.

So what happens if you don't do this ?

If you don’t write to an employee, then that employee can claim their employment period is continuous. They can do this because of section 384 of the Fair Work Act 2009 (Cth).

3. Liability for employee entitlements

If you reach an agreement with the seller that you will assume employee entitlements, then the seller will not pay these.

Also, employee entitlements will continue to accrue and as the new owner, your business will be responsible for them.

This means, you will be responsible for accrued entitlements like long service leave, annual leave and sick leave.

4. New employment contracts

As the new business owner, employment contracts will be important for you to outline employee rights and responsibilities.

Because you may have different expectations of employees compared to the current owner, it's fair to the workers to set these out in an employment contract.

Here's what you can include in the employment contract:

employer details;
employee position & duties;
employee entitlements;
dispute resolution steps to reduce the risk of a law suit; and
any other new terms.

5. Insurance

Insurance generally is important for any business.

Workers compensation insurance is important to protect your business.

You may also need professional indemnity insurance, particularly if you are buying a service business.

So you should make sure you are insured right from the start

Also, if you are entering or taking over a lease, most landlords will require you to have workers compensation.

Key points

Here's a summary of the key points above:

check employment contracts (if any) before buying the business;
decide whether you or the seller will pay for existing employee entitlements;
draft new employee contracts for employees that will be kept on; and
get the insurance you need - e.g. workers comp, professional indemnity etc.

Help me with an employment agreement

Sources of employee rights - an explanation of how contracts, awards, enterprise agreements, case law and legislation all interact together and the essentials you need to know

Employment, Startup Contracts

Sources of employee rights: awards, NES, agreements, legislation and what you need to know

Updated: 8 December 2019

Did you know that employees have rights that come from contracts as well as awards, enterprise agreements and legislation ?

Quick Navigation

Employee contracts

Employee contract case study

An employer pays an employee $550 to work 3 days per week per a written employment contract. About 18 months later, the worker resigns.

Awards

Enterprise agreement

Legislation

Avoid the flat rate pitfall

Summary of tips

It’s easy to get confused if you don’t know how all the pieces work together.

But there’s no need to be confused.

In a nutshell, this is what you need to know:

An employee contract can have more but not less generous terms than those set out in an award, enterprise agreement and legislation.

Below is an outline of the sources of employee rights.

Employee contracts

A contract can be verbal, written or a mix of the two.

And your employee’s contracts can have more but not less generous terms for your workers than an award, enterprise agreement or legislation.

And if you have provided more generous terms in an employee contract, those terms will apply over the minimum legal requirements.

Employee contract case study

An employer pays an employee $550 to work 3 days per week per a written employment contract. About 18 months later, the worker resigns.

The employer writes to the worker once they have left and claims they have overpaid the worker by $20,000 because their wages in the contract exceeded the award rate.

Does the employer have the right to claim from the employee ?

No.

Why ?

The employment contract had a higher rate than the Award and this is allowed. The employer cannot then renege and claw back the difference between the Award and the contract.

Awards

So what exactly is an Award ?

An award outlines the minimum pay rates and employee conditions for some industries in Australia.

An employer can of course pay employee's more than the award minimums.

Currently, there are 122 Awards in Australia.

The term industry has to do with the product being produced. For example - the hair and beauty industry or the fast food industry.

Tip: You should always check the coverage section of an Award if you are unsure whether it applies to your workers (usually clause 4) and also review the job classifications section.

Always check the coverage section of an Award if you are unsure whether it applies to your owners (it's usually clause 4), also review the job classifications section.

Some examples of industry awards:

What do Awards typically cover:

consultation about major workplace changes;
dispute resolution processes;
types of employment (full-time, part-time and casual) and termination of employment;
redundancy;
classifications and wage rates; and
leave and public holidays.

Importantly, Awards won’t apply if an organisation has an enterprise agreement.

Also, an award cannot exclude the national employment standards.

So, what exactly is a registered agreement ?

Enterprise agreement

An enterprise agreement is an agreement made at the enterprise level and can be legally enforced.

An enterprise agreement sets out the rights and responsibilities of employees and employers covered by the agreement.

Similar to Awards, enterprise agreements cannot exclude the national employment standards and if an award does, then it will have no effect.

The Fair Work Act deals with enterprise agreements and covers:

making an agreement;
bargaining and representation during bargaining;
pre-approval steps and applications for the FWC’s approval; and
approval by the Fair Work Commission.

And finally, legislation.

Legislation

The Fair Work Act governs the employee/employer relationship in Australia.

And includes minimum entitlements for workers.

Here’s a sample of what’s covered:

national employment standards (minimum standards for employees) such as:
- hours and flexible work arrangements
- leave
- public holidays
- notice for termination and redundancy; and
- Fair work information statement
modern awards;
enterprise agreements;
minimum wages; and
transfer of business.

It's important to note that state and local employees are not covered by the Fair Work system.

Avoid the flat rate pitfall

One pitfall to avoid is paying your workers a flat rate in lieu of overtime and penalty rates that may apply under an award.

Many large employers have been caught out, because they've paid their workers a flat rate which has meant they have been underpaid and also penalised by the Fair Work Commission.

Instead, pay your Award covered workers at or higher than the Award rate and make sure you are covering all Award entitlements as well e.g. overtime, allowances, leave loading etc.

Summary of tips

Look at any applicable award, enterprise agreement (if any) and Fair Work legislation to see if your workers have other entitlements when you prepare employment contracts and also when your employee’s query their entitlements.

Employment agreement terms will apply unless an enterprise agreement, award or legislation contains more generous terms for your employee’s.

Also, avoid paying your Award covered workers a flat rate that means they are underpaid compared to their Award entitlements.

As always, If you are in doubt, it’s always a good idea to reach out for advice.

Help me with employment law advice

Employment

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.

Why?

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.

3. Taxes

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.

4. Superannuation

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.

5. Leave

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.

Key points

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!

Help me prepare a worker agreement

Employment

Have I hired a contractor or an employee?

Updated: 8 December 2019

Understanding the difference between an employee and contractor can save you a lot of money and help you avoid disputes with your workers.

Too busy to read on? check out our 47 second summary video below.

Do you know how you have classified your worker? that is, if they an employee or a contractor? Do they know how they have been classified?

If you have a written agreement that clearly outlines your relationship with your worker then that's great. However, if not and you have a verbal arrangement that has become confusing, read on.

Contractor?

So how do you know if you've hired a contractor?

If you have hired a contractor it is likely that they will work on your startup this way:

autonomously with little or no direction
sets their own work hours.
uses their own tools and equipment to get the job done e.g. laptop
has and uses an ABN
pays their own taxes
pays their own superannuation
usually has their own insurance policy
does not receive paid annual leave

If your worker meets the criteria above, you may also wish to read up on our tips for hiring a contractor.

Employee?

It follows then if you have not got a worker with characteristics above it is likely they are an employee. And if you've hired an employee, it is likely that you:

set their work hours
pay them directly into their bank account At regular intervals
provide them with the tools and equipment they need to get their job done
deduct tax from their pay
pay them superannuation
supervise or direct the work that they complete
pay them annual leave

It's important to note that the courts will not look at one single factor. Rather, courts will look at the totality of the relationship to determine if your worker is an employee or a contractor.

Help for incorrectly classifying a worker

If you are still unsure whether you have hired a contractor or employee, be sure to get legal advice quickly.

A lawyer may be able to help you negotiate a settlement with the incorrectly classified worker in a way that protects and stops court action against your business.

How?

Terms of settlement or a deed of release summarise the incorrect classification issue and what will actions need to be taken to resolve it e.g. payment of annual leave, superannuation or a fixed amount of money.

Importantly, the terms will have a release clause to end the situation quickly and stop the worker from starting legal action against you including court etc.

Key points

Below are the key points to keep in mind when hiring a worker:

Make sure your arrangements with your workers are clear.
Check the criteria above, and fair work's page to determine if you have hired an employee or contractor.
Speak to a lawyer if you are unsure.
Look at ways to minimise damage from any incorrect classification - a lawyer can help you do this.

Got questions or comments about hiring a worker? Be sure to leave them below.

I wish you success in your ventures!

Help me prepare a worker agreement

Employment

How to use an employment agreement

Updated: 8 December 2019

While an employment agreement can be verbal, written or a mix of the two, it is a good idea to have a written employment agreement to set clear expectations early and minimise disputes.

And the beginning of the employment relationship is when you would typically expect to provide an employment agreement.

But did you know there are other times you may wish to revisit your worker’s employment agreements?

Let's go through each of the scenarios.

1. When you first hire a worker

First, when you hire a worker you should give them sufficient time to review their employment agreement.

This is to be fair to your worker and to avoid a situation where a worker says they were unfairly forced to sign quickly.

2. Temporary role changes

If you decide to temporarily change a worker's role, It's a good idea to have that change in writing. here is what you should include:

position title
start and finish date
new duties;
higher pay for that period of time (if applicable)
return to former position.

By doing this you avoid the risk of any dispute about expectations for a temporary change to be ongoing.

3. Directors

Directors that are also completing day-to-day work as employees should also have an employment contract that sets out their position.

And, if a director role is unpaid, you should make that clear upfront in writing.

4. Employment agreement vs founder's agreement

A founders agreement is suitable when you first launch your startup, particularly if you have a few founders and are still figuring out how to divide up roles.

Also paying for a single founders agreement can be more cost effective than paying from multiple employment agreements.

Don't forget you can always pay for employment agreements later on once you have a better idea of how you want to divide up roles at your startup.

Remember, founders are those people first involved in bringing an idea to market.

Key points

Below are the key points for issuing and using employment agreements:

give your recipient plenty of time to review an employment contract;
document role changes in a contract even if they are only temporary;
if your directors are also employees, give them an employment contract; and
consider a founders agreement if you have multiple founder’s rather than an employment agreement for each when you first launch.

Do you have questions or comments about employment agreements? Be sure to leave them below.

I wish you success in your ventures!

Help me prepare an employment agreement

3 tips for on-boarding an employee at your startup

Employment

A lawyer’s tips for on-boarding an employee at your startup

Updated: 8 December 2019

Have you decided to hire an employee for your startup ? Below, we share useful tips for on-boarding an employee at your startup.

1. Job description

A good job description sets clear expectations for a future employee.

Also, it reduces the risk of a misleading and deceptive conduct claim against your business.

Now the other part of avoiding a misleading and deceptive conduct claim is to make sure the job duties actually align to the job description.

To help with this, employment market place company Seek recommends that you include the following information in your job ad:

a. About the business

Who you are
The achievements and reputation of your business
Is your company local, national, or international?
How many people work for your business?; and
What is your business known for?

b. About the role

A high-level summary of the business’s goals, and explain how the role supports them
What are the reporting lines?
Who are the stakeholders?; and
How the role contribute to the success of the business ?

c. Duties

Day-to-day duties
A list of the duties the candidate would be required to perform; and
List core duties.

d. Skills and experience

What will get a candidate the job;
Skills and experience a candidate would need to succeed;
Qualifications that applicants must have?; and
How much experience (if any) do applicants need?

e. Culture

A video to introduce candidates to your business’s culture
Why do people enjoy working at your business ?
What kind of people thrive at your business ?; and
What is work/life balance like at your business ?

f. Benefits

List key benefits your ideal candidate would value most;
Learning and development programs;
Flexible work policies;
Share options; and
Mentoring.

Seek also provides a visual of good and bad job descriptions, reproduced below.

Seek's example of a good job description

Seek's example of a bad job description

2. Employment agreement

An employment agreement should cover the important terms and conditions for employment. Below are are some key items you can include:

position;
hours;
work location; and
employee entitlements including leave, pay and superannuation.

Also, your employment agreement should also include items to protect your business like:

confidentiality;
intellectual property; and
dispute resolution.

a. Confidentiality

A confidentiality clause explains what confidential information is, how it can be used and how it's to be handled when the employment relationship comes to an end.

b. Intellectual property

In Australia, an employer owns the intellectual property created by an employee for it's business. For example if an employee creates software or an article for your business then you own the intellectual property in those items.

However, it is still important to have a clause that deals with intellectual property in your employment contract.

Why ? because in the event of a dispute, you can refer the employee back to their employment contract and reduce the risk of a dispute escalating to formal legal proceedings.

c. Dispute resolution

Similar to the intellectual property clause above, a dispute resolution clause also helps you save on legal fees.

How ?

This clause allows either the employer or employee to raise issues and conciliate before a matter gets to court.

In Australia, employees have the right to bring a dispute before the Fair Work Ombudsman. Employees may also start unfair dismissal proceedings against you in some instances even if you do not fire them.

For example, even if you do not dismiss a worker, but handle a workplace dispute poorly and the employee then feels they have no choice but to resign, they may lodge an unfair dismissal application against you on the basis that they were forced to resign.

So this example above shows there is a strong case for a good dispute resolution clause.

e. Fair work information statement

You will need to provide workers with a copy of the Fair Work information statement before, or as soon as possible after they start working for you.

3. Minimum entitlements

An employee can be paid more than the minimums set out in an applicable award and legislation but not paid less.

Got questions or comments about onboarding a worker? Leave them below.

I wish you success in your ventures!

Help me prepare an employment agreement

Employment

What you need to know about volunteers and your startup

Updated: 8 December 2019

Have you thought about hiring volunteers at your startup ?

If you want to make use of volunteers at your startup, there are some things you should know to avoid legal problems.

1. Who is a volunteer ?

A volunteer gives their time willingly and does not get paid. They could undertake many diverse roles and they may be undertaking volunteer work to meet a course requirement.

2. Fair work ombudsman guidance

There is no obligation to attend work or perform work; and

3. Volunteer agreement tips

Here are some handy tips for drafting your volunteer agreements:

Clear agreement - call it a volunteer agreement instead of an employment agreement
Not legally enforceable - include a clause that reads “both parties do not intend to enter into a legally enforceable contract”.
Expenses - include a clause that states the volunteer will be reimbursed for reasonable expenses.
Notification - have a clause that requests the volunteer tell you if they cannot work their shifts.
Avoid words typically used in an employment agreement - e.g. work, appointment, salary, payment and “you must”.

4. Gifts and financial rewards

Be careful not to provide gifts or financial rewards to volunteers that can be construed as wages or payment for service, here are some situations to avoid:

Payments that are made based on hours worked.
Payment that exceeds an expense incurred by a volunteer.
Lump sum payments.

Got questions or comments about volunteers? Be sure to leave them below.

I need help with volunteers

Employment

Tips for choosing between employees and contractors for your startup

Tips for choosing between employees and contractors

Updated: 6 December 2019

If you are stuck deciding between employees or contractors, it’s helpful to understand the difference so you can classify correctly, avoid legal headaches and focus on growing your business.

1. Key differences between employees and contractors

Here are the key features of employee and contractors to help you understand the difference.

Item	Employee	Contractor
Tax	Employer deducts tax from pay	Contractor pays tax
Super	Employer pays	Contractor pays
Tools & Equipment	Employer supplies	Contractor supplies
Tools &	Employees are entitled to leave	Contractors are not entitled to leave
Autonomy	Employee’s take direction from their employer e.g. work hours, work direction	Contractors generally work autonomously, can set their own work hours and require little or no supervision to complete their work
Pay rate	The employer will set the pay rate for the employee, the employee may be able to negotiate higher pay	The contractor sets their own pay rate e.g. hourly, daily.
Invoices	The employer provides a payslip. The employee may complete a timesheet but does not invoice the employer for their work	The contractor may also complete a timesheet, but they will invoice the employer for their services. They will have an ABN or ACN and provide this detail on the invoice
Intellectual Property	It is presumed that the employer owns IP even if it’s not mentioned in the employment contract	A contractor owns IP created unless a work agreement states otherwise.

2. What to consider when choosing either an employee or contractor

Here are some factors that usually influence the decision to hire either an employee or contractor.

Item	Employee	Contractor
Hours	You need the worker to have a regular work pattern on an ongoing basis to run a business work process effectively e.g. 2 days per week 9 to 5 pm	Regular work pattern not required as long as work is complete
Autonomy	You need someone to run your existing business process(s), they simply need to follow straight forward steps and you can supervise them	The work required needs to be completed by someone that can work autonomously. You don’t want to supervise them because you may not have the capacity to
Tools & Equipment	You have all the tools and equipment required to complete the work and provide these to the employee	The contractor will supply the tools and equipment to get the job done
Specialised work	Your business has people with the skills to carry out your work processes effectively	Hiring a contractor with specialist skills is important because you do not have workers in-house with that skill set and you may only need that skill set for a specific project only
Project work	It’s a project and you want to rotate your employees so you can cross-train and up skill them	You know it’s for a specific time frame, you want someone that can get in, get the job done and get out because you may not have time to train your existing workers

3. Sham contracting

Sham contracting is against the law.

So what exactly is sham contracting ?

If you are either knowingly or recklessly denying workers employment benefits and protections then you could be engaging in sham contracting.

Sham contracting arrangements include:

misrepresenting employment as an independent contracting arrangement when it should be an employment arrangement; or
dismissing an employee then re-hiring them as an independent contractor; or
making false statements made to persuade someone to work as an independent contractor instead of an employee.

At the time of writing, penalties range from $6,600 for an individual to $33,000 for a body corporate.

Conclusion

If you have issues with your employees about their classification as contractor or employee, this can detract the focus from your business and cause morale problems with your other employees.

Regardless of your choice of employee or contractor, getting legal advice and having a good quality worker agreement drafted will set clear expectations and minimise disputes.

Leave your questions and comments below.

I wish you every success in your ventures!

Page [tcb_pagination_current_page] of [tcb_pagination_total_pages]

First

Last