You may have been successfully running your business on your own for some time but now it’s time for growth. There’s more work than you can handle alone and it’s now time to hire an employee. It’s both exciting and daunting and there are some things you need to consider when hiring an employee for the first time.
We’ve put together this handy checklist to go through before you enter into a work agreement or contract with your new employee.
- You’ll need to confirm that they are legally allowed to work in Australia.
- If they are Australian citizens, permanent residents and New Zealand citizens they are legally allowed to work in Australia
- If they are a foreign national (except a New Zealand citizen) you need to confirm they have the necessary visa with permission to work in Australia
- It’s important to check whether they will work in your business as an employee or contractor
- You must get this right because it affects your tax, super and other obligations, getting it wrong can be very costly to your business and you could be penalised as a result
- Use the ATO’s employee/contractor decision tool if you are unsure
- Before paying the employee, you’ll need to check if you need to register for PAYG withholding to withhold tax from their wages or withhold tax from contractor payments if they don’t quote an ABN or have a voluntary PAYG withholding agreement with you
- When you hire someone on a working holiday visa (subclass 417 or 462) you’ll also have to register as an employer of working holiday makers
- Check too if they are eligible for super (some contractors are)
- select a default super fund
- set up to report and pay super electronically using the SuperStream standard
- Set up a system to manage payments and keep records of your workers. This is an essential part of running your business and is important when it comes to claiming your deductions
- If you will be providing fringe benefits, you’ll need to register for fringe benefits tax (FBT). Some common fringe benefits are private use of a work vehicle or paying private expenses such as school fees or health insurance
- It’s also encouraged to meet other obligations to promote diversity, respect human rights and prevent discrimination in your workplace
When making the decision to bring on an employee or employees it’s important to make sure you set things up correctly and keep accurate records too. This will ensure that you can claim your deductions at tax time, and you don’t run the risk of being exposed to penalties.
If you are unsure or have questions your tax agent should be able to advise you and in addition, the ATO provides comprehensive information on this and all related subjects.