When you start hiring staff, there’s no shortage of red tape. PAYG, FBT,
OH&S — the list goes on. To help, we’ve prepared a checklist with some
further information on the various requirements you will need to consider,
including the various taxes and insurances you’re required to provide for
them.
For further help when hiring new staff, also take a look at our handy new hire
checklist.
If you answered "no" to any of these questions or you want to be sure that
you're sticking to the letter of the law, then read on …
1. Super
Most of your employees, whether full-time, part-time or casual, will be
covered by the superannuation guarantee legislation. Generally, you have to pay
super for your employees if they are:
- between 18 and 69 years of age.
- paid $450 or more before tax in a calendar month; and
- work full-time, part-time or on a casual basis.
Eligible contractors are also entitled to super guarantee
payments, even if they have their own Australian Business Number
(ABN).
As an employer, you are required to make superannuation guarantee
contributions on behalf of your eligible employees at least four times a year,
totalling 9% of each worker’s wage over the year. If you don't make
contributions by the cut-off dates for each quarter, you'll face hefty
penalties. You also need to offer your employees a choice of superannuation
fund using a standard super choice form (unless they fall into one of a
limited number of exceptions)
If you are self-employed, you don't have to make super contributions to a
super fund for yourself. However, you may wish to consider super as a way of
saving for your retirement. Most self-employed people can claim a full
deduction for contributions they make to their super until age 75.
2. Fringe Benefits Tax
Fringe benefits tax (FBT) is a tax paid by employers on certain benefits
provided to their employees. FBT is separate from income tax and is based on
the taxable value of the fringe benefits you provide.
If your business provides fringe benefits to employees then you need to:
- Register for FBT.
- Understand which benefits are subject to FBT and which are exempt.
- Keep the necessary FBT records.
- Calculate how much FBT you have to pay.
- Lodge a return and pay FBT to the Tax Office.
- Report fringe benefits on your employees' payment summaries.
3. Withholding Income Tax
Under the Pay As You Go (PAYG) system, you're legally required to withhold
income tax from your employees’ salaries.
If you have employees, you generally have to withhold an amount from their
wages and send the withheld amount to the Tax Office. As a new employer,
you must register with the Tax Office before you withhold tax from payments to
your employees.
You do not need to withhold tax from payments to contractors. But again,
just because a worker quotes an ABN, it doesn't mean that they're a contractor.
Whether a worker is an employee or a contractor depends on all the facts and
circumstances of how you engage them, and how the work is performed. The ATO
has a useful checklist to help you decide if someone is an employee or
contractor.
4. Workers' compensation insurance
Workers' compensation insures employees against injury or death caused in the
workplace. Through workers' compensation, injured workers can receive weekly
payments to cover loss of earning capacity, payment of medical expenses and
vocational rehabilitation, and assistance in returning to work.
It is your responsibility as an employer to:
- Maintain a safe workplace.
- Maintain workers' compensation insurance.
- Protect yourself and your workers from financial hardship in the event of a
workplace injury.
An employer who does not have a current policy may be prosecuted and be
liable for steep fines, if found guilty of an offence. If a worker is injured,
uninsured employers may be held responsible to pay the full cost of
compensation — so make sure you have insurance!
You should also have an occupational health and safety policy in place, and
all employees should read it before they start working for you. Employers and
staff alike have obligations to ensure a workplace is safe, so it's important
to make sure your employees are informed.
5. Payroll tax
Payroll tax is a state tax on the wages paid by employers. It is calculated as
a percentage of the wages you pay each month.
You must pay payroll tax if your total Australian wages bill exceeds the
exemption threshold that applies in your state or territory. Your local revenue
office can give you more information about the payroll tax rate and threshold
that applies to you.
6. Payslips
Your payslips must specify each worker's gross pay, the tax withheld and
compulsory superannuation contributions. The requirements for payslips vary
depending on state or territory legislation or the award you pay your employees
under, so you'll need to check with the relevant government authority in your
state or territory.
7. Buying a business
Where you buy a business and you keep the existing employees, you may become
responsible for any employee liabilities which have accrued up until the date
of the sale. Your responsibilities regarding the reemployment of staff should
be outlined in the sale contract. It's a good idea to obtain a list of
employees from the seller, including their salary and entitlements and copies
of job descriptions, employment contracts, and other paperwork.
You may need to consult any relevant awards, agreements and legislation in
order to gain a full picture of accrued entitlements, such as annual leave,
sick leave and long service leave. You will also need to check whether
compulsory superannuation payments and workers' compensation premiums have been
paid.
8. Don't go it alone
If in doubt about your obligations, don't try to go it alone. Start by talking
to the relevant state or commonwealth authority, then get advice from an
industrial relations lawyer if you need more information. The penalties for
making a mistake can be significant, so it pays to be prepared.
Where to find more information
