We often get asked, typically by new business owners, what they need to do when they start hiring staff. The answer – a lot!
There is a wide range of great information on many reputable websites (such as FairWork, Business Victoria, the ATO, etc) that cover this topic. We aren’t reinventing the wheel here, but we are combining all of this information into one checklist plus giving a few hints and tips along the way.
Getting it wrong can be expensive. The various authorities aren’t afraid to bankrupt business owners (almost as if they don’t care), and we have seen scorned employees, with an axe to grind, dobbing their employer in.
Our advice. Do you research and get advice. A couple of hundred dollars now can save you tens of thousands later.
EMPLOYEE VS CONTRACTOR
The first item in the checklist is to ensure that your employee is categorised correctly between a contractor and an employee.We haven’t gone into detail on the checklist because it is such an expansive topic, but we’ll touch on it here.
The most important thing to know is IT IS NOT A CHOICE – whether a worker is a contractor or employee depends on the actual employment arrangement (i.e how the work is performed) and not what your handshake agreement is.
Factors like the following all determine the correct status of a worker:
- Who controls how and when the work is done?
- Does the worker quote jobs?
- Is the worker liable for defects?
- Who provides the tools?
- Who provides the materials?
- Can the worker choose to say no to work?
- Can the worker delegate and send someone else in to do that work for them?
It doesn’t matter that the worker gives you an ABN and invoice. It doesn’t matter that the agreement is “including super”. it doesn’t matter that the agreement states “the contractor is responsible for all taxes”… if they are deemed an employee by the ATO or the courts, then you as the business owner will end up paying super, taxes, unpaid leave, unpaid overtime, unpaid penalty rates, etc.
The only possible loser is you the business owner.
We have a brochure on this topic (“Is Your Contractor a Contractor?” below) which includes a flowchart to help you work through this, and the ATO’s employee vs contractor decision tool is also worth looking at.