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Recruiting and keeping the right people for your business can play a big role in achieving success, so it's important to plan ahead when taking on workers.
This module will help you to understand:
Things to consider before you hire someone
Before you hire someone, there are a few things you need to work out, including:
- the type of position/s you’re offering
- the entitlements, including wages, that you’ll need to pay your employee/s
- any paperwork you need to complete.
When looking at the position/s you’re hiring someone for, it’s important to consider which employment type you need. Each type of employment can mean a different set of responsibilities for you and the person you employ.
Depending on your requirements for the role, you might consider employing a:
- permanent (full-time or part-time) employee
- casual employee
- trainee or apprentice
- temporary employee (possibly through an employment agency)
- contractor (working for a fixed term and who have their own business).
Find out more about the different types of employment.
Employee or contractor
It’s important to make sure you are aware of the differences between employees and contractors when you hire someone, as there are different tax, super and other responsibilities.
The Australian Taxation Office (ATO) Employee/contractor decision tool can help you work out whether your worker is an employee or contractor for tax purposes.
If your worker is an employee you'll need to:
- withhold tax (PAYG withholding) from their wages and report and pay the withheld amounts to the ATO
- pay super contributions to their superfund at least four times a year by the quarterly due dates
- report and pay fringe benefits tax (FBT) to the ATO, if you provide your employee with fringe benefits.
If your worker is a contractor you:
- don't have to withhold tax from payments to them, unless they fail to quote a valid Australian Business Number (ABN) or you have a voluntary agreement with them
- don't have FBT obligations
- may still have to pay super for individual contractors if the contract is mainly for their labour.
Tip: You can use the Tax withheld calculator and the Super guarantee contributions calculator in the ATO app to work out how much tax to withhold or how much super to pay.
Find out more:
- See employee or contractor on the ATO website.
- Read more on independent contractors.
- When working out whether your worker is an employee or contractor, don't get caught out by common myths.
Video: Employee or contractor? Avoid the myths.
The right staff for your business will have the skills and knowledge you need to help you meet your business objectives.
You might be tempted to employ family or friends when you are starting a business. Before you do it’s important to consider if they’ll suit your business needs. Recruiting unsuitable staff can be costly, both financially and time-wise, which can be further complicated if you have an existing relationship with them.
Before you begin recruiting, you need to develop a job description of the type of worker you're looking for and the skills and knowledge they need to have.
You can recruit staff yourself, or you can use a recruitment agency. If you decide to use a recruitment agency, ask your colleagues and business partners to recommend a reputable one that has experience with your type of business.
The recruitment process
If you manage the recruitment process yourself, the steps to follow generally include:
- advertise the job
- evaluate the applications
- conduct interviews and reference checks
- select the best candidate.
Advertising the position
Before you advertise the position, think about the kind of worker you are looking for and the best way to target them, as well as any costs involved.
Some ways to advertise your position include:
- using online job sites such as Australian Jobsearch
- advertising in newspapers and industry publications
- placing an ad on your website or social media page
- through your business or industry contacts
- placing an ad on notice boards or shop windows
- using a recruitment agency.
Finding and selecting the right candidates
To find the right people for your position:
- prepare a job advertisement for the position listing the:
- skills and experience you are looking for
- location of where they will be working
- salary and benefits of the job.
- interview candidates and ask questions that focus on the skills and abilities needed for the role
- consider the qualities that would fit into your work environment
- shortlist candidates whose skills and experience best match the role.
Find out more:
- See our information:
- Use the Recruitment process checklist from Business Victoria to help you confidently employ staff for the first time.
- Check out these tools on the Austrade website to help you recruit local workers.
- Check out Australian Jobsearch to:
- Visit the Fair Work Ombudsman (FWO) website to complete online courses covering topics such as attracting the best people, shortlisting applicants and interviewing skills.
Hiring people from overseas
If you’re considering hiring workers from overseas, you must make sure they have the correct type of visa and are allowed to work in Australia.
Overseas workers can include:
- workers with professional or trade qualifications
- international students
- people on a working holiday
To check if an overseas worker has a visa which allows them to work in Australia, you can use the free online service Visa Entitlement Verification Online (VEVO).
Overseas workers are covered by the same entitlements and awards as Australian workers. These entitlements are outlined in the National Employment Standards (NES).
Australian citizens, Australian permanent residents and New Zealand citizens have unlimited permission to work in Australia.
Did you know?
- If you are hiring a working holiday maker who has a Working Holiday visa (subclass 417) or Work and Holiday visa (subclass 462) you will need to withhold tax from the first dollar they earn.
- The Department of Home Affairs has an online service called SkillSelect, which connects employers with overseas workers whom have essential skills and attributes needed to fill skill shortages.
Find out more:
- On the Department of Home Affairs website check out:
- Find out more about employing people from overseas.
- Check out these tools on the Austrade website to help you recruit overseas workers.
- Find out what employers of working holiday makers need to do on the ATO website.
When your worker starts
When you take on an employee, there are many different government responsibilities you’ll need to meet, including your obligations for tax and super.
It’s also a good idea to consider induction training for your new employees.
Tax file number (TFN) declaration
New employees need to complete a tax file number (TFN) declaration form. The information they provide in the form will help you to work out how much tax you need to take out of their pay.
You need to:
- give them a Tax file number declaration form to complete and return to you
- complete the payer section of the form with your business details
- keep a copy of the completed form for your records
- send the original completed form to the address on the form within 14 days (or if you already report online you can lodge TFN declaration data online).
Did you know?
An employee may also give you a Withholding declaration. To find out more read Tax file number and withholding declarations on the Australian Taxation Office website.
Superannuation (or ‘super’) is money you need to pay to a super fund for eligible employees and some contractors, to provide for their retirement. This is called super guarantee and it applies to full-time, part-time, and casual employees.
To determine if you have to pay super, read Working out if you have to pay super on the ATO website.
As an employer you’ll need to:
- determine a default super fund to use if your employee can't or doesn't choose their own fund (also called the employer nominated fund)
- give eligible employees a standard choice form to complete
- calculate the minimum contribution amount you will need to pay on ordinary time earnings
- pay the super guarantee amount:
- to your default super fund or to the super fund your employee has indicated on the standard choice form
- by the due date each quarter
- provide employee tax file numbers (TFNs) to their super fund within 14 days of receiving a TFN declaration form (or if you don't make contributions in those 14 days, you can provide the TFNs when you make the first contribution)
- keep records of super contribution payments and that a choice of super fund has been offered to eligible employees.
Did you know?
Under SuperStream you need to:
- pay super contributions for your employees electronically (through EFT or BPAY)
- send the associated data electronically in a standard format.
Use the ATOs Employer checklist: a step-by-step guide for help with choosing a SuperStream solution to suit your business.
Find out more:
You can also visit the ATO website for information on:
Video: Paying workers - Superannuation: Tax basics for small business
Fringe benefits tax (FBT)
Fringe benefits tax (FBT) is a tax you need to pay if you provide certain benefits to your employees outside of their salary.
There are various types of fringe benefits including:
- allowing your employee to use a work car for private purposes (this includes driving between work and home)
- providing car parking, even if the employee uses their own car to travel to work
- paying directly for non-business expenses such as school fees, child care, club memberships.
Video: Paying workers - Fringe benefits tax: Tax basics for small business
When your employee first starts working for you, it’s important to think about how you can best prepare them for working in your business. Taking the time to prepare a good induction will help you get the best out of your employees. It’ll also make sure that your employee feels informed, welcomed and ready to do their job.
You may want to:
- meet with your new employee to set goals and let them know your expectations
- work out their training needs and how you will provide training for them during the first few weeks
- schedule regular catch-ups to talk about how they’re going.
For more information on training employees, read our information on Training.
You can also check out Staff induction programs on the Business Queensland website.
There are a few things you need to know about when paying your employees:
- how much you need to pay – award rates
- how to take tax out of their pay with Pay as you go (PAYG) withholding.
How much you need to pay – award rates
There are rules around the minimum amount of pay you need to give your employees.
- Use the FWO's Pay Calculator to work out how much to pay your employees.
- Please note that in Western Australia (WA), sole traders and partnerships in the WA industrial relations system should refer to WA pay rates and WA hours of work, overtime and penalty rates.
You will also need to consider if your employees have entitlements to paid public holidays, annual or recreation leave, sick leave, long service leave, paid parental leave, overtime and penalty rates.
For more information on how much to pay your employees and the entitlements you will need to provide, visit:
- the FWO website's information on:
- our information on paying your employees.
Pay as you go (PAYG) withholding
When you pay employees and some businesses, you need to take tax out of their pay and send it to the ATO. This is called pay as you go (PAYG) withholding.
This applies to payments you make to:
- all employees
- workers that you have voluntary agreements with
- contractors or businesses that don't quote their Australian business number (ABN).
To begin, you will first need to register for PAYG withholding.
To work out how much you need to withhold use the ATO calculators.
Video: Paying workers - Pay as you go (PAYG) withholding: Tax basics for small business
If the total amount of wages you pay exceeds a certain amount, you might also have to pay a payroll tax. Find out more on the Payroll Tax Australia website.
Report tax and super payments electronically
If you’re an employer with 20 or more employees, you need to report payments directly to the ATO from your payroll solution at the same time you pay your employees. From 1 July 2019 this will extend to all employers. Payments include:
- salaries and wages
- pay as you go (PAYG) withholding
- super information.
Find out more about Single Touch Payroll and what it means for different employers on the ATO website.
Employee health and safety
As a business owner you have legal responsibilities to set up health and safety practices in your workplace as soon as you start your business. You need to ensure that your business doesn't create health and safety problems for your employees, contractors, volunteers, visitors, customers or the public.
You must also take out workers’ compensation insurance to cover yourself and your employees.
Workers' compensation is a form of insurance payment to employees if they are injured at work or become sick due to their work.
Workers' compensation includes payments to employees to cover their:
- wages while they're not fit for work
- medical expenses and rehabilitation.
You may also need to have workers’ compensation to cover contractors who work for you.
Find out more:
- Visit Safe Work Australia for more information on workplace health and safety.
- See our information on Workplace health and safety (WHS).
- The following state authorities have more information on workers’ compensation for contractors:
Understanding the laws that apply to employees
There are workplace laws that apply to all employees in the national workplace relations system. Before hiring a new employee make sure that you know about your responsibilities under the Fair Work Act 2009.
The FWO has information that can help you:
- Read more about hiring employees
- Download the Guide to hiring new employees (PDF, 308KB)
- Complete the hiring employees online learning course.
Find out more
- See our Hiring topic.
- Read the Taking on an employee checklist to find out more on federal and state requirements that can apply when you become an employer.
- Use the ATO’s Hiring workers for the first time – checklist to make sure you are ready to hire workers.
- Check out Business Queensland’s information on Employing people
- Register for a My account on the FWO website to get personalised workplace law information. Through My account, you can also:
- use webchat to contact the FWO for simple enquiries
- submit an enquiry to the FWO for help with complex questions or resolving workplace issues
- save your results after you use the Pay, Shift, Leave and Notice and redundancy calculators
- save your favourite pages from the FWO site.
If you run your business as a Western Australian (WA) sole trader or partnership in the WA industrial relations system, refer to types of employment arrangements from the WA Department of Mines, Industry Regulation and Safety.
Check out the FWO's best-practice-guides to help your small business and employees with a range of workplace issues.