Hiring new employees is an exciting step for an employer of any size and industry. It can also be a confusing and challenging process for an employer to navigate.
Below are some important questions for employers to think about when hiring new workers:
1. Is the worker an employee or an independent contractor?
An employee usually works within a business as directed by the employer with set hours of work. In contrast, a contractor usually runs their own business and works at their own direction and provides a particular service to a business. There are a number of factors which determine whether a worker is an employee or a contractor, such as:
who is paid to perform the work (is it an individual, company, sole trader or partnership etc)
whether the worker has their own ABN
whether the worker gets others to do the work for them
how the worker is paid for the work they perform – for example, are they paid an hourly rate or a salary or are they paid per activity completed or in accordance with a quote
It is important to classify a worker correctly. This is because it affects obligations such as the payment of tax and superannuation. Penalties, such as PAYG withholding penalties and interest charges can apply to a business if workers are incorrectly classified as employees or contractors.
2. If the worker is an employee, will they be a full time, part time or casual employee?
Full time employees usually work 38 hours per week and work regular, fixed hours. They are entitled to paid sick leave and annual leave and accrue long service leave.
Part time employees work less than 38 hours per week but also work regular fixed hours. They are entitled to paid sick leave, annual leave and long service leave which accrues on a pro rata basis.
Casual employees are offered and accept work on the basis their employer provides no firm advance commitment to ongoing work. This means their roster can change each week to suit an employer’s needs. Casuals are not entitled to paid sick leave or annual leave and are usually entitled to payment of a casual loading on top of their base rate of pay.
3. What pay rate is the worker entitled to?
The Fair Work Commission sets the minimum wage payable for many employees in Australia. The rate of pay will depend on the industry and occupation of the employee and whether the employee is covered by an award.
The minimum rates of pay for both award and award free employees are usually reviewed by the Fair Work Commission on an annual basis. We can assist in determining whether an award applies to your employee, the relevant award, the classification applicable to the employee’s role and the employee’s rate of pay.
Independent contractors set their own rates. Independent contractors may charge on an hourly rate basis or to complete a specific task. A contractor’s rate of pay is usually negotiated between the contractor and the person they are providing the services to.
4. Does the agreement with the worker need to be documented in writing?
While there is no legal requirement for a contract with a worker to be in writing, there are numerous benefits of doing so.
If you are employing an employee, a written employment contract enables an employer to document the standards expected of an employee when performing their duties. An employment contract can protect an employer’s commercial interests by imposing obligations on an employee, such as maintaining confidentiality and how intellectual property is to be dealt with. An employment contract can also include post-employment restraints of trade which apply to an employee following the termination of their employment. This can prevent an employee from poaching clients and customers of an employer, as well as working for a competitor.
If you are engaging a contractor, an independent contractor agreement will set out the type of services being performed by the contractor. It will usually deal with matters such as the payment terms, how the contractor’s services can be terminated, what insurance the contractor is required to have and any warranties and indemnities the contractor is providing in relation to the services.
If a contractor is dealing with your commercially sensitive information, it may be important to have them sign a non-disclosure or confidentiality agreement. This ensures a contractor does not use your confidential information for other purposes outside the services they have been contracted to provide. It can also prevent the contractor from disclosing your commercially sensitive information to third parties.
Ideally, an employment contract or independent contractor’s agreement should be issued to an employee or contractor at the start of their employment or engagement. However, an employment contract or independent contractor’s agreement can be issued to an employee or contractor at any stage of the working life cycle.
5. Has the worker completed and returned all the required paperwork?
An employer should issue the following paperwork to a new employee:
an employment agreement – this should be signed by the employee and returned to the employer
a Tax File Number Declaration – this should be completed by the employee and returned to the employer
a superannuation standard choice form – this should be completed by the employee and returned to the employer
a Fair Work Information Statement
a form requesting the employee’s contact details, emergency contact information and bank account details – this should be completed by the employee and returned to the employer
If you are engaging a contractor, you should ensure the contractor has provided you with the paperwork you require such as:
the contractor’s qualifications or licence number
details of the contractor’s personnel who may also be performing the services, if applicable
evidence of the relevant insurance policies held by the contractor
A copy of an employee or contractor’s paperwork should be kept by an employer or business. An employer is required to keep certain records relating to their employees, such as the time worked by employees and the wages paid to employees. These records must be kept for 7 years.
Key takeaways
Proper workforce planning is key to the success of any business. An employer who understands their legal obligations and has the right paperwork in place from the start can avoid unnecessary legal headaches, allowing them to focus on building a thriving business.
However, it is never too late for an employer to get their paperwork in order when it comes to employing or engaging staff.
If you have any questions about hiring a new employee, your legal obligations to your workers or require assistance in preparing an employment or independent contractor’s agreement, please contact a member of our employment law team:
John Sneddon, Director (07) 3307 4504 jsneddon@shandtaylor.com.au
Ruby Nielsen, Senior Associate (07) 3307 4551 rnielsen@shandtaylor.com.au
Emma Lewis, Lawyer (07) 3307 4546 elewis@shandtaylor.com.au