When running a small business, it’s important to ensure you’re taking advantage of all the tools and resources available. While your mind might immediately go to software or marketing automations, this also includes finding the right people to help your business grow.
A common question we get asked when our clients start building their team is, “What do we need to do when hiring employees?”
If you’re in the same boat and thinking about adding new members to your team, here is a handy ‘hiring an employee checklist’ to help ensure you’re complying with all your legal obligations, as well as your tax and super obligations.
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Hiring an Employee Checklist
When onboarding new employees, it’s best to have this hiring process checklist handy so that you’re not missing out on all the necessary steps.
Does the New Employee Have the Right to Work in Australia?
Beyond ID and employment authorization, you must confirm that your new employee candidate has the right to work in Australia before making a job offer or employment contract. This can be done by checking their visa status through the Department of Immigration’s Visa Entitlement Verification Online (VEVO) system.
If they’re not an Australian citizen or permanent resident, you’ll need to ensure they have a valid work visa. You should also check if their visa allows them to work in the specific role that you’re offering.
Once you have confirmed they satisfy the employment eligibility to work in Australia, you can proceed with the hiring process and make a job offer.
What Employment Type Does Your New Hire Fall Under?
When hiring a new employee in Australia, it’s important to determine what type of employment arrangement they will have to ensure they receive the correct entitlements. The main categories are full-time, part-time, and casual.
Full-time employees work 38 hours or more per week, are permanent employees, and receive leave entitlements like annual leave, personal/carer’s leave, and public holidays.
Part-time employees work less than 38 hours per week and also receive leave entitlements on a pro-rata basis.
A casual employee have no guaranteed hours, are employed on an hourly basis, and do not receive leave entitlements but are paid a casual loading to compensate.
There are also independent contractors who are self-employed and invoice for their services.
Being clear on the employment type from the beginning allows the employer to outline responsibilities and entitlements accurately in the employment contract.
Have You Identified Your Employee’s Minimum Wages?
Small business owners have a responsibility to ensure their employees are receiving the correct pay rates and other entitlements that they are owed to under the relevant award, registered agreement and or other industrial legislative document.
As of August 2023, the Federal government has set the national minimum pay rates to $882.80 per week for a 38 hour week, or $23.23 per hour. Casual workers are also entitled to casual leave loading, which is, broadly, 25% of the fixed hourly wage. However, depending on the award, enterprise agreement, or employment contract, this casual loading rate may change.
Note: The national minimum wage updates annual so make sure that you are complying with the relevant amount.
Consequently, this requires you to have a clear understanding of your employee’s classification and what modern award applies to them. For example, an administrative clerk must be classified according to the various levels under the Clerks’ Private Sector Award that describe their job description.
For example, the typical duties of a level 3 administrative clerk might include preparing cash payment summaries and banking reports. Based on that classification, your new employee would be entitled to certain minimum wages.
Although you may choose to remunerate your employees above the minimum pay rate as part of their employment contract, it’s crucial that you’re aware of the minimum entitlements, such as annual leave, allowances, minimum wage, and maximum weekly hours, so you can ensure that your employees are being fairly compensated.
Have You Confirmed Your Employee’s Tax Information as part of the Hiring Process?
Once the interview process is complete, it’s necessary to have your new employee complete all the necessary tax forms such as the TFN declaration to ensure that you’re calculating tax withholdings correctly. The declaration gives you the information you need to work out the amount of tax you need to withhold from the employee’s wages.
If your new employee doesn’t have a TFN (tax file number(, they can apply for one by visiting the Australian Taxation Office (ATO) website.
If your new employee doesn’t provide their TFN, you’ll need to withhold tax at the highest marginal rate. So it’s in both your and your employee’s interests to check this step off your hiring checklist.
Are You Registered for PAYG Withholding?
As discussed in the previous checklist item, you are responsible for withholding tax from your employee’s wages and paying that to the ATO. To do that, you need to set up a Pay As You Go (PAYG) withholding system.
The PAYG withholding system ensures the correct amounts of tax are paid and reduces the administrative burden on employers.
You would have had the opportunity to register for PAYG when applying for your Australian Business Number (ABN), but, if you weren’t employing anyone at the time, it may not have been necessary. So you can simply register online through the business registration service.
Alternatively, you can ask your tax agent or business accountant to register on your behalf.
Have You Calculated How Much Tax You Need to Withhold?
Once you’ve registered for PAYG withholding and collected your employee’s tax file information as part of the hiring process, you’ll be allowed to withhold the necessary federal income tax amount. The amount of tax you need to withhold will depend on several factors, including the employee’s individual tax circumstances, their salary, their Medicare entitlements, and their visa class.
The ATO provides tax tables to help you calculate the correct amount of tax to withhold based on the employee’s income and tax file number. Once you’ve calculated how much tax to withhold, you’ll need to include this amount in your payroll calculations.
However, at this point, you may want to consider setting up cloud payroll accounting software such as Xero, MYOB, or Quickbooks. A payroll system can automate this entire process and streamline your periodic administration after hiring employees.
Is Single Touch Payroll Set Up?
The ATO introduced Single Touch Payroll as a new way of reporting payroll taxes to the ATO. Under Single Touch Payroll, employers will send payroll information (including salaries and wages, PAYG withholding and super guarantee obligations) to the ATO each time they process their payroll.
This will ensure that the ATO has up-to-date information on employee salaries and wages and will help to streamline the reporting process for employers. It is a mandatory obligation for any employer who hires staff for their business.
There are a number of STP-enabled software solutions available, including both desktop and cloud-based solutions such as Xero, MYOB, or Quickbooks. Alternatively, you can use a third-party STP reporting solution, such as a bookkeeper or accountant, to report your payroll information to the ATO.
Whichever solution you choose, make sure that it is compatible with the ATO’s systems and meets your business’ needs.
Have You Configured Your SuperStream Payments?
SuperStream is a way for businesses to make superannuation guarantee payments electronically. This means that businesses will need to send employee contributions to their chosen fund using an ATO-approved electronic data and payment method.
The purpose of SuperStream is to streamline the process of making super payments, making it simpler and more efficient for both employers and employees.
There are a number of different ways to configure your SuperStream payments, including using SuperStream compliant payroll software (such as Xero, MYOB, and Quickbooks), paying directly into the chosen superannuation fund (although not all funds allow this), or via the ATO’s Small Business Super Clearing House.
Do You Have Workers’ Compensation Insurance?
Hiring staff is a big responsibility. Not only do you need to worry about finding the right people and training them up, but you also have a legal obligation to there is a level of workplace health and safety.
Part of this involves ensuring that you obtain Workers’ Compensation Insurance, which covers your employees in the event that they are injured at work. Workers’ Compensation Insurance protects both you and your employees, providing financial support in the event of an accident and ensuring that your business is not liable for any damages.
It is therefore a compulsory requirement if you employ staff for your business.
Key Takeaways
As the saying goes, “It takes a village to raise a child.” The same is true when it comes to starting and growing a business. While you may be the visionary and the driving force behind your company, you can’t do it all alone.
And hiring staff is no small feat.
While I’ve shared eight important things you need to add to your checklist when hiring employees, this is by no means an exhaustive list. You need to think about non-accounting aspects like the job description, recruitment process, background checks, and onboarding.
In addition to finding the right candidates and training new employees for their roles, you also need to consider the financial implications of bringing aboard new team members.
From calculating payroll tax to managing employee entitlements, there is a lot to keep track of. Fortunately, you don’t have to go it alone. Box Advisory Services can help you navigate the accounting and tax aspects of hiring new staff.
Contact us today to learn more about how we can help you take your business to the next level.
