Hiring your first employee can be an exciting yet daunting challenge for a business owner. However, you may wonder what you should pay your workers and which employee benefits you owe them. You should be aware of and comply with your obligations under Australian employment law, specifically the Fair Work Act 2009 (Cth) (‘Fair Work Act’), the National Employment Standards (NES), and, where relevant, modern awards or enterprise agreements. You may also have obligations under superannuation legislation and state-based long-service leave legislation.
The first thing you should decide when hiring an employee, or consider when reviewing your current employees’ entitlements, is their employment status. Importantly, the entitlements owed to full-time or part-time employees and casual employees can differ substantially. This article will outline 5 employee benefits you must provide to your full-time and part-time employees. Specifically, it will explain how to work out your employees’ pay, superannuation entitlements and leave entitlements. It will also provide helpful tips to ensure you remain compliant with the law.
1. Salary
As an employer, you have a duty to pay your employees wages. However, the amount you must pay may not always be clear and will depend on several legal and commercial factors. You cannot pay your employees less than the minimum wage.
Firstly, consider whether your employees are covered under a modern award or enterprise agreement. A modern award is a document setting out the minimum terms and conditions of your employees’ employment, and coverage is generally determined on an industry and occupational basis. There are over 120 modern awards, so figuring out which award applies to your employees may not always be straightforward. An employment lawyer can assist you in this process.
Classification System
If you determine that your employees are covered by a modern award, you must pay them at least the minimum pay rates for their classification level in the relevant award. Additional loadings apply for casual employees, and there are certain penalty rates and allowances that may become payable under each award (for example, meal allowances or tool allowances).
If you determine that a particular employee will be covered by an award, you should note down the:
- details of the award;
- awards classification;
- minimum wage you must pay;
- applicable penalty rates and overtime rates; and
- applicable allowances.
If your employees are not award covered, their minimum wage will be prescribed by the National Minimum Wage Order. As of 1 July 2023, the National Minimum Wage is $23.23 per hour for an adult employee. Importantly, these rates are regularly assessed and are likely to increase each financial year.
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2. Superannuation
In addition to wages, you must make superannuation contributions for your eligible employees in accordance with the Superannuation Guarantee Legislation. Superannuation eligibility is one of the most important employee benefits. Superannuation is money set aside during an employee’s working life and invested by a superannuation fund in preparation for retirement. The law requires you to pay a minimum amount based on the superannuation guarantee rate (currently 11% as of 1 July 2023) of your employee’s ordinary time earnings into super. When offering employment to a new employee, you should request the details of their superannuation fund via the Australian Taxation Office’s (‘ATO’) Superannuation Standard Choice Form. If an employee does not nominate a fund or provide the details of their existing fund, you must request details of a new employee’s ‘stapled’ (already existing) super fund from the ATO.
Continue reading this article below the form3. Statutory Leave Entitlements
Another important employee benefit your full-time and part-time employees are also entitled to is paid leave under the Fair Work Act. Specifically, you must provide:
- four weeks of paid annual leave for each year of service;
- ten days of personal/carer’s leave for each year of service; and
- two days of compassionate leave.
It is important to note that some employees (usually shift workers) are entitled to more than 4 weeks of annual leave. This entitlement will be proscribed by a modern award where applicable.
Both annual leave and personal/carer’s leave accumulate on a pro-rata basis over the course of your employee’s engagement with your business and in accordance with their ordinary work hours. Both leave types are cumulative, meaning any accrued but unused leave entitlement will carry over from year to year. Unlike annual leave, however, personal and carer’s leave does not need to be paid out on termination of employment.
There are also unpaid leave entitlements under the Fair Work Act.
Tip: Your employees may also be entitled to be paid an additional annual leave loading on top of their minimum hourly rate when on annual leave (generally around 17.5%). You must check the applicable modern awards to determine if this benefit is payable.
4. Parental Leave
Your eligible employees are entitled to unpaid parental leave when a child is born or adopted. Parental leave entitlements include:
- maternity leave for mothers;
- paternity leave and partner leave for fathers and partners;
- adoption leave for both adoptive parents;
- special maternity leave; and
- a safe job and no safe job leave.
The benefit provided to employees is 12 months unpaid leave (with the ability to request a further 12 months) with a return to work guarantee. Eligible employees are those who:
- have worked with your business for at least 12 months before the date or expected date of birth or adoption; and
- have responsibility for the care of the child.
Your casual employees will also be eligible if they meet the above criteria and have been working on a regular and systematic basis for the period, with a reasonable expectation of ongoing work.
Your employees can apply for paid leave through the Department of Human Services (Centrelink). As an employer, you may also elect to provide an extra paid leave entitlement as a bonus or incentive. Many businesses elect to provide extra paid leave to attract or retain talent and remain competitive in their industry.
5. Long Service Leave
Your employees must also be granted long-service leave in accordance with the state or territory long-service leave legislation that applies to them in their employment. Long service leave is a period of paid leave that all employees are entitled to if they have been working for the same business for an extended period of time. For example, employees in NSW are entitled to 2 months of paid leave when they have been working with your business for 10 years. In Victoria, the entitlement to be paid long-service leave accrues over the course of employment and the right to take it arises after 7 years of continuous service. There are some differences between Australian states and territories regarding access and eligibility. You should speak to an employment lawyer to understand your obligations.
Key Takeaways
Providing your new and current employees with their correct benefits will ensure you comply with your obligations under employment law and mitigate the risk of an employment claim or penalties against your business. These obligations include providing or paying entitlements like;
- wages and allowances;
- superannuation;
- paid leave;
- parental leave; and
- long service leave.
If you need assistance understanding the entitlements you owe your employees, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Part-time or full-time employees are eligible to take and be paid for 4 weeks of annual leave each year. Annual leave accrues on a pro-rata basis throughout the year. You may find this leave calculator provided by the Fair Work Ombudsman helpful in understanding your employee’s annual leave entitlement from time to time.
A stapled superannuation fund is an existing superannuation fund belonging to your employee. As an employer, you must enquire with the ATO about a new employee’s stapled superannuation fund if they do not provide you details of their preferred fund on the commencement of employment.
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