Sole Trading
8. Employing People
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 23 Sep 2015
- When it comes to employing other people in your business you must be aware of your obligations to make various compulsory payments to employees and to pay employment related tax.
- As an employer you must be aware of your responsibilities to manage employee payroll tax and Pay As You Go (PAYG withholding) amounts. PAYG withholding refers to the process of withholding money from the payments you make to employees for their personal taxation. You must pay the money withheld to the Australian Taxation Office (ATO) who then considers that amount to have been paid by the employee. These amounts must also be recorded on your Business Activity Statement (BAS) and tax return.
- You must also ensure that you pay superannuation for employees who are eligible. Generally employees have a choice of superannuation fund that you must pay into. Engaging a lawyer can help you understand which employees are entitled to superannuation and how much must be paid.
- Some states have additional taxes which employers should be aware of. For example the State Revenue Office (SRO) in Victoria collects a payroll tax of around 4.8% that is calculated on wages. In Victoria you must register for this tax if wages exceed $45,833 per month or $550,000 for the financial year.
- You should also understand the differences between your obligations as a business owner when employing workers as compared to when engaging the services of an independent contractor.
- Independent contractors operate their own business and hire out their services. Such contractors:
- will set their own fees and working arrangements;
- are usually paid to achieve an agreed result;
- are free to refuse additional work;
- will usually advertise to the public; and
- generally do not have the right to employee entitlements such as sick pay or paid leave.
- Employees on the other hand are usually:
- directed to undertake certain work by their employer;
- generally under supervision by the employer;
- must be provided with a minimum award wage; and
- employee entitlements including standard work hours and leave entitlements such as sick leave and paid leave.
- The modern awards cover everyone in a certain industry or occupation with the exception of some managers and higher paid specialist roles.
- You should seek your own legal advice to ensure that you pay your employees, the ATO and any state regulatory body all of the required amounts because the responsibilities of employers change depending on:
- the type of workers you employ; and
- the specific industry in which your business operates.
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