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Recently, there was news of harsh fines charged to a few small business owners in relation to not paying the right pay to their employees. Understanding your employee obligations as an employer is very important and is part of your responsibility as a small business owner.
So let’s get started and talk about the employee obligations and things you will need to consider when hiring a new employee.
Have they got the right to work?
Before you hire your new employee, you need to check if they have the right to work and what their work limits are. Hiring somebody without the permission to work can result in hefty fines issued by the Immigration Department.
Once you hire a new employee, they will need to fill in a tax file number declaration form which can be download from the Australian Tax Office (ATO) website. The signed original copy needs to be returned to the ATO as soon as possible, However, some accounting software will allow you to lodge it directly online.
On the money- knowing the minimum wage
The current before-tax minimum wage is $18.29 per hour or $694.90 per week (38 hours), with casual employees receiving an extra 25% loading. Special minimum wages also apply to trainees, apprentices, junior employees, employees to whom training arrangements apply and for employees with a disability. All the information can be found at: www.fairwork.gov.au
What to withhold?
Based on the individual employee’s situation, you need to withhold the correct amount of tax for them. Help with calculating the right amount of tax to be withheld, can be found on the ATO website by inputting the figures in the weekly (or fortnightly, monthly) tax table.
If this is the employee’s only job then the tax-free threshold can be claimed. If this is their second job then they cannot claim the tax-free threshold. Any regular bonuses and allowances should be included as part of the before-tax income. From the 1st of january 2017, the Working Holiday Visa 417 and 462 will be taxed 15% on the first 37k, with the balance taxed at ordinary rates.
The Super important 9.5%
Any employee who gets paid more than $450 per month will receive 9.5% super. It needs to be paid into their nominated super choice fund through superstream and is due 28 days after the end of each quarter. Any late payments cannot claim a tax deduction. More information can be found on the ATO website.
How many days away? Calculating sick leave and holiday pay
Both full-time and part-time employees are entitled to sick leave which is usually 8-10 days a year. The amount of annual leave for full-time employees is four weeks a year, and annual leave for part-time employees is calculated on a pro rata basis, based on days they work every week.
Sick leave cannot be accumulated, but annual leave can be accrued. Some industries also receive additional leave loading. You can contact Fair Work to find out the correct leave loading rate based on your individual business situation.
Termination and compensation
Before you dismiss an employee, you need to give them adequate notice. To calculate the correct amount you need to pay, you can use the Fairwork notice and redundancy calculator.
In regards to workers compensation, any small business paying more than $7000 in wages (including director fees) per year will need to purchase workers compensation through icare workers compensation.
Hiring a contractor
Finally, most small business owners think if they hire a contractor then they do not need to worry about worker’s compensation and super- this is actually incorrect. If the contractor earns the majority of their income from your business, then you will have to make sure they have their own insurance and pay super; otherwise, you will be liable to pay for them.
If ever in doubt, it is best to check on any issues, questions or concerns which you may have by contacting the relevant government agencies to make sure your small business is implementing the correct standards and obligations for your employees.
