One of the first hurdles a first-time entrepreneur would face is the whole process of employment. Hiring employees can be costly, time-consuming, and stressful if you do it incorrectly. Before hiring a new employee, it is important to know your legal responsibilities and obligations relating to pay, tax, superannuation, hours, entitlements, etc.
A variety of employment types exist in Australia. You can mix and match these until you find the correct combination that will help your business run smoothly.
This type of employment requires employees to work on a regular basis. This can be daily, weekly or monthly, except for holidays, leave, and emergencies. This arrangement lasts until the contract is terminated by the employer or the employee choses to resign and look for another job.
Their role and benefits are the same as full-time employees, however, their working time is less than a full time employee’s standard working hours.
Casual employees work on an irregular basis, most likely on terms and hours stipulated between them and their employer. This nature of employment tends to be used for special business occasions such as warehouse sales, when the business may need an extra helping hand to accommodate increased customer traffic.
Contract employees work for a fixed term, as agreed between them and the employer, usually for a special project. They enjoy the same benefits as full-time employees, albeit proportional for the duration of their work.
You can find the entitlements for each employee type in detail on the Fair Work website. The Australian Government also provides a basic checklist of compliance obligations for all employees.
Want help organising the bookkeeping side of managing your employees? Darcy Bookkeeping & Business Services can sort you out. Give us a call at 1300 728 875 or fill out a contact form to get started.
Under the national workplace relations system, you must provide all new employees with a copy of the current Fair Work Information Statement (FWIS).
The statement provides basic information for workers on their employee rights and where they can find out more on terms and conditions of employment
After hiring employees, you must get them to complete a tax file number (TFN) declaration. The information submitted will enable you to work out how much tax you need to take out of their pay. You must pay withhold tax (PAYG withholding) from their wages and report and pay the withheld amounts to the Australian Tax Office (ATO). You can download the form from the ATO website.
If the employee does not provide a TFN declaration, their pay will be subject to the top tax rate.
A new employee may select either the default super fund you offer or their own super fund. If your employee is eligible for a super fund but does not select one, as from 1 November 2021, employers are required to check with the ATO if the employee has an existing super account, known as a 'stapled super fund', to pay the employee's super guarantee into. You can learn more about this on the ATO website.
You need to pay contributions to a super fund for eligible employees at least quarterly.
Fringe benefits tax (FBT) is a tax you need to pay if you provide certain types of fringe benefits to your employee. It is separate to salary or wages and includes things like entertainment, car parking, car leasing, living away from home, etc.
If you provide any fringe benefits to your employees, you must:
It is your obligation to keep up with minimum wages, including penalty rates and overtime rates, set out in the relevant award or enterprise agreement. The national minimum wage is reviewed each year. Changes usually take effect around 1 July. Read more about awards and agreements on the Fair Work Commission website.
The ATO requires that businesses keep employee financial records for 5 years. These must include information about employment, payments, superannuation, PAYGW, and fringe benefits (if applicable). Below are the main records which must be kept. See the ATO website for full details.
Employee payment records must include:
You must also keep records that adequately explain your super transactions for your employees. You must be able to show:
For employees eligible to choose which super fund they want you to pay into, you will need to keep records:
PAYG information must include the amounts you withheld from payments to employees:
The Fair Work Act 2009 legally requires you to keep some other employment records for 7 years. These include:
Complying with your obligations when hiring employees and keeping your documentation up-to-date will protect both you and your employees. Your employees will feel comfortable knowing you are doing things correctly and you will feel comfortable knowing you have everything at hand if the ATO ever asks.
Need someone to set up your employer requirements, such as payroll, superannuation, and more? Darcy Bookkeeping & Business Services is here to help. Give us a call at 1300 728 875 or fill out a contact form to get started.
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