Preparing for new employees

You have conducted your recruitment process and chosen your ideal candidate. These are the fundamental things you need to know when hiring employees for your small business.

1. Type of working arrangement

You must first consider which employment type will meet the requirements of the job, whether it be:

· full time

· part time

· casual

· fixed term

Independent contractors (often referred to as “consultants” or “contractors”) have an entirely separate legal relationship to an employee. We will cover off these arrangements in a separate article.

Full-time employment involves the employee working an average of at least 38 hours per week on a permanent “open ended” basis or a fixed-term contract.

A part-time employee works less than 38 hours on average per week on a regular roster of days/hours and is also a permanent employee or a fixed-term contract.

Casual employees have no guaranteed hours of work, do not get paid sick leave, annual leave or other permanent employee entitlements, and can have their employment terminated without notice, unless it is required by an award, enterprise agreement or employment contract.

Fixed-term employees are employed for a specific period or task, and shift workers work shifts and get an extra payment for working shift hours. The specific entitlements of shift workers are governed by any applicable award or enterprise agreement.

The chosen employment type will impact your obligations to the employee and the government.

2. Pay rate

Once you have chosen the type of working arrangement, you must ensure that you pay your employee the right amount required under the law. This will either be the minimum wage (for employees not covered by an award) or the applicable minimum pay rate for the employee’s classification as set out in any applicable award or enterprise agreement. Locating minimum pay rates and conditions under the award which may be relevant to your employee is crucial as getting this wrong can be an expensive mistake.

Whether an employee is covered by an award will depend on either the type of job (e.g. clerical) or the industry in which the employee works (e.g. health, mining, hospitality). Sometimes larger businesses are covered by enterprise agreements instead of an award, which are industrial instruments negotiated by an employer with their staff and must be at least as favourable as the underlying award. To determine which award may apply to your new employee, you can use the Fair Work Ombudsman’s (FWO) find my award tool or review the Fair Work Commission’s (FWC) list of awards. Approved enterprise agreements can also be accessed on the FWC website.

Pay requirements under the relevant award can also be calculated using the FWO’s Pay Calculator. Keep in mind that while some employees are not covered by an award or enterprise agreement, all employees in Australia are entitled to a minimum wage and certain minimum entitlements.

Employers may also consider paying “annualised salaries” to their employees instead of paying the minimum pay rate and other monetary entitlements under the applicable award or agreement. Annualised salaries are “all-inclusive” annual rates of pay, intended to compensate employees for all entitlements such as:

· minimum rates

· allowances

· overtime

· penalty rates; and

· annual leave loading.

However, there are specific requirements you need to include in your employment contract if using an annualised salary. These can be tricky so please get advice.

You must take reasonable steps to provide your new employee with a healthy and safe working environment. That includes having a work health and safety policy as well as consulting with your staff about matters which relate to workplace safety. Importantly, you must monitor the health of workers and the conditions of the workplace. All employers must also have workers’ compensation insurance for their staff. It is important to keep in mind that not paying workers’ compensation insurance is a common reason for small businesses going into insolvency.

3. Taxation and superannuation

It is essential to understand the company’s tax and super obligations for the new employee before they start working. First, confirm that they are legally allowed to work in Australia. You should then request that the employee complete a Tax file number (TFN) declaration. Make sure you register for pay as you go (PAYG) withholding to withhold tax from your employees’ wages.

If your employee is entitled to a superannuation guarantee, check whether they are eligible to choose a superannuation fund. If they are entitled to make that choice, a Standard Choice Form must be completed within 28 days of the employee starting work. You should provide default super fund details to the employee where they have not chosen their own superannuation fund. You must provide the employee’s TFN to their superannuation fund when a payment is made, or within 14 days. Single Touch Payroll (STP) may also need to be set up to report payroll information.

Finally, ensure you keep records about the employee so you can meet your tax and super obligations. You must also keep detailed records about pay, leave, hours (and other details), as well as provide employees with compliant payslips, as required by the Fair Work Regulations.

4. Preparing for a new employ to start working

It is always best to prepare and use a written employment contract.

It is essential that you provide all new employees with information about their entitlements. The Fair Work Information Statement (FWIS) must be provided as soon as it is practical to do so, which will inform them about their minimum conditions of employment, including the National Employment Standards (NES). Casual employees must be provided both the FWIS and the Casual Employment Information Statement.

If your employee is covered by an award, ensure that it is easily accessible by the employee. You might consider keeping a hard copy version of the award in a frequented place like the lunchroom or on a noticeboard. The employee should be aware of their award, award classification and employment type before they begin working. As referred to above, the correct award can be worked out using the FWO’s find my award tool

It is essential that you and your employee agree on the hours of work and rostering before they start work. This is especially the case if they are full-time or part-time. Based on the relevant award, there may be additional rules, including how much notice must be given to an employee if you alter their roster or hours.

Finally, provide your employee with any relevant company policies (such as relating to work health and safety, grievances, discrimination, harassment & bullying).

With thanks to Nick Noonan, employment law specialist, of Henry William Lawyers for his assistance in preparing this article.