Before hiring a new employee, it is important to know your legal responsibilities and obligations relating to pay, tax, superannuation, hours, entitlements, etc. Employees have different entitlements depending on their type of employment: full-time, part-time, or casual. These entitlements can be found in detail on the Fair Work website.
However, as an employer there are certain responsibilities you must fulfil when you employ someone.
The Australian Government provides a basic checklist of compliance obligations for all employees.
Your Obligations When Hiring a New Employee
Fair Work Information Statement
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
Tax File Number (TFN) and PAYG
Your new employee must complete a tax file number (TFN) declaration. This provides information which enables 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). The form can be downloaded from the ATO website. https://www.ato.gov.au/assets/0/104/2244/2335/3c4347e5-f117-48af-9349-43e9f72ea811.pdf
If they do 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. https://www.ato.gov.au
You need to pay contributions to a super fund for eligible employees at least quarterly.
Fringe Benefits Tax – if required
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:
- be registered for FBT
- lodge an FBT return if you’re liable to pay FBT during an FBT year (1 April to 31 March)
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. Awards and agreements can be found on the Fair Work Commission website.
You are required by the ATO to keep employee financial records for 5 years which 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. https://www.ato.gov.au
Employee payment records must include:
- salaries and wages (including bonuses
- allowances or other kinds of payments, including
- tips and gratuities
- termination payments
- redundancy payments
- leave payments.
You must also keep records that adequately explain your super transactions for your employees. You must be able to show:
- how you worked out the amount of super you contributed for each employee
- factors that affect the amount of super you must contribute
- salary sacrifice amounts, including information about how they’re calculated and employee’s choice
For employees eligible to choose which super fund they want you to pay into, you will need to keep records:
- showing you have offered eligible employees the choice
- of the written information provided by an employee nominating their chosen fund or RSA
PAYGW information must include the amounts you withheld from payments to employees:
- salary, wages, commissions, bonuses and allowances paid
- retirement payments, termination of employment payments, annuities and benefit or compensation payments
Under the Fair Work Act 2009 you are legally required to keep some other employment records for 7 years. These include:
- pay, leave, dates and hours of work
- employment start and end date or their contract end date
- reimbursements of work-related expenses
- workers compensation insurance for each employee
- superannuation contribution amounts
- the award, workplace agreement or contract that covers their employment
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.