Employment and Payroll (Part 1)

Whether you are hiring your first employee or already have a large team working for you, navigating the minefield of employment in Australia is no mean feat. There are many legal obligations, employee rights and ATO compliance to remember and execute.

I’m sure you’ve seen the regular news story of a celebrity chef or large corporation in trouble for not paying their employees correctly (known as payroll theft). So how can you ensure you are doing the right thing for your employees and your business? How can you avoid large fines and back payments, and staying out of court for “stolen wages” and not meeting your obligations?

The first step is to do your research. Understand your legal obligations and what is required of you as an employer. This two-part blog will help with some basic steps for hiring, payroll and termination, and point out where further resources are available.

New hire – Onboarding

The first step is to check if your business can afford the new hire. You will need to work out the FULL cost of the employee. This includes not only their net salary, but also tax, superannuation, leave and Workcover. When hiring staff, it is important to familiarise yourself with the laws around discrimination – this will include questions you can and can’t ask during the selection process.

Next you need to decide on what type of employee you will hire – depending on the requirements of the job you may consider a full or part-time employee, fixed-term (non-ongoing) or casual employee or a trainee or apprentice. The type of worker you decide on will affect your obligations to your employee and the government. Learn more about types of employees and your obligations on the Fair Work Ombudsman website (Fair Work). You may also consider someone to provide services to you as a contractor (rather then an employee). Even if you decide to go with a contractor, you may still have some legal obligation. You can check the ATO website for  differences between contractors and employees as well as tax, super and other obligations to contractors.

Once you have decided on the position and selected a candidate, there are still a few hurdles to leap before they are ready to get to work.

• You are responsible for making sure they can legally work in Australia.
  • Check if their visa allows them to work in Australia – you can use the free online service Visa Entitlement Verification Online (VEVO).
• Depending on your industry or the position being filled, your employee may need specific licenses or qualifications to do their job.
  • Check your industry licence and permit requirements.
• You must provide your new employee with the Fair Work Information Statement and casual employees with Casual Employment Information Statement.
• You are also required to provide your employee with information of work health and safety (WHS) and their WHS obligations.
• You must decide on the employee’s wage. This may be based on the Industry Award or Registered Agreement.
  • For most employees, the minimum pay rates, terms, and conditions are outlined in the relevant award for your industry or occupation. You need to consider:
    • Type and classification
    • Age (junior)
    • Apprentice and trainees
    • Penalty and overtime rates
    • Allowances
    • Leave
    • Superannuation

Use Fair Work’s Find my award tool for more information.

• Certain minimum entitlements that include maximum working hours, leave entitlements and requirements around termination can be found at the National Employment Standards (NES). You must always meet the obligations to your employee under the relevant award and the NES.

Payments, Payslips and Records

Now you’ve hired your new employee with due diligence and to the requirements of the law. Don’t drop the ball now and leave yourself vulnerable. There are many legal requirements surrounding ongoing employment from payments, tax, superannuation, reporting, and recording keeping.

Using a cloud-based software will assist with many of the obligation required for payroll. It will allow for easy and efficient recording, calculations, reporting and payments to name a few.

At Pacific Accounting we use Xero Accounting Software that can assist with:

• STP (Single Touch Payroll) Reporting – it is mandated employers report employees’ payroll information to the ATO each time a payment is made to them. STP reporting information includes, Salaries and Wages, PAYG Withholding and Superannuation.
• PAYGW (Pay as you go withholding) – You must collect PAYGW tax from employee payments. Your payroll software can calculate this based on employee circumstances, pay-periods and gross amount. Ensure your employee is set-up with correct TAX criteria such as Working Holiday Visas and claiming the tax-free threshold.
• Superannuation – You must pay your employees superannuation on a minimum of a quarterly basis and report the lodgement to the ATO. Currently Super is 10% of the gross wages. But be careful, there are times when super may not be required depending on the age of your employee, how much they earn in a calendar month and if the gross payment is considered “ordinary hours”. You can learn more on the ATO website.
• Payslips – You must pay your employee at least monthly, but check your award as sometimes it will require you to pay more often or by a particular method. You are legally required to provide a payslip within 1 working day of payment and they require certain information to be included. You can learn more about payslips at Fair Work.
• Record keeping – You are required to make and keep employee records for 7 years including employment details, payment amounts, hours worked, leave and super amounts. Both Fair Work and the ATO have information regarding record keeping.

There is a lot to learn regarding employment and payroll legislation – and there are still more to come. In part 2, we will cover different types of leave and ending employment. There are many resources to be found at Fair Work, Business.gov and the ATO. Being well informed and keeping up to date will help to keep you compliant with your employment and payroll responsibilities. Payroll Accounting Services should assist you with setting-up, processing and maintaining your payroll.

Pacific Accounting process payroll for 100’s of employees across Australia every week. We provide payroll accounting services across many industries, keeping up to date with changes in legislation to ensure you are always doing the right thing by your employees and for your business. You can book a free Virtual Chief Financial Officer (VCFO) consultation or just call us at 1800-1800-98 so we can serve you better.