• As an employer, you have tax, superannuation, workplace health and safety and entitlement obligations in regards to your employees.
  • Employees’ rights to specific entitlements is dependant on their employment status. This is whether they are full-time, part-time or casual employees. It also depends on the length of employment and the applicability of any Award or Enterprise Agreement.
  • You must ensure that you provide the correct employee entitlements and provide the correct pay. This will assist in avoid financial and other penalties.

Entitlements to your Employees

The Fair Work Act 2009 (Cth) is Australia-wide legislation that governs the employee-employer relationship. Under this legislation, employers must provide certain minimum requirements to their employees. These minimum requirements are called the National Employment Standards (or “NES”). These laws aim to protect employees at work and to ensure their productivity. Employees can be covered by different:

  • awards;
  • enterprise agreements (EAs); and
  • other registered agreements.

However, these instruments cannot provide for entitlements less than the NES. As an employer, you must to comply with the national employment standards. A contravention of the NES can lead to financial and other penalties.

Key Issues

  • Are my employees casual, part time or full time? How long have they worked for me? What entitlements apply?
  • What are my obligations in regards to superannuation, pay and tax?
  • How can I comply with Workplace Health and Safety requirements?
  • Different entitlements apply for casual, part-time or full-time employees. Also, some entitlements are only accessible by employees once they reach a certain minimum period of employment with the same employer.

NES Entitlements

Maximum Weekly Hours of Work

As an employer, you must not request your employees to work additional hours unless this is reasonable. Here, you must take into account the:

  • employee’s safety during the additional hours;
  • employee’s personal circumstances; and
  • needs of the workplace involved.

For a full-time employee, any hours they work in addition to the 38 hours in the legislation are ‘additional hours’.

A part-time employee has ordinary hours of work that are less than 38 hours. Any hours they work in addition to their ordinary hours of work are their ‘additional hours’.

Flexible Working Arrangements

An employee can request a change to her/his working arrangements if certain circumstances apply. This includes if they have a child under school age or a child with a disability under 18. This applies to:

  • part time and full-time workers who have been employed for at least 12 months before the request was made; and
  • long term casual employees.

A long-term casual employee is someone who has worked for you on a regular and systematic basis for at least 12 months and has a reasonable expectation of continuing employment on a regular and systematic basis.

Parental, Annual, Personal and Carer’s Leave

Your part time and full-time employees are also entitled to unpaid parental and paid annual and personal leave if they fulfil certain conditions. To access the Australian Government’s paid parental leave scheme, an employee must have worked for you for a continuous period of 12 months immediately before they take leave. In contrast, an employee’s entitlement to annual leave begins when an employee starts work and accumulates according to the length of employment. What about paid personal leave? Employees other than casuals receive ten days’ personal leave for each year of service.

All of your employees are entitled to two days unpaid carer’s leave, which is where a member of your employee’s immediate family requires care because of illness, injury or an emergency affecting the member.

Casual Employees

However, your casual employees have entitlements too. Casual employees must receive:

  • casual loading on top of their base hourly rate of pay;
  • two days unpaid carer’s leave and two days unpaid compassionate leave per occasion; and
  • five days of unpaid family and domestic violence leave (over 12 months).

Importantly, regular and systematic casual employees who have an ongoing expectation of continuing employment must receive:

  • unpaid parental leave of 12 months if you have employed them on a regular and systematic basis for at least 12 months; and
  • claim unfair dismissal once they have served the minimum employment period of six months. This is unless you are a small business employer with fewer than 15 employees. Here, the minimum employment period is 12 months. 

A casual and systematic employee has generally worked for you for a long period of time and has a reasonable expectation of continuing employment with you. It is the employment itself which must be regular and systematic. This is in comparison to the hours your casual employee worked being regular and systematic.

Superannuation Obligations

What about the financial side of the relationship? Since the introduction of the compulsory superannuation guarantee in the Superannuation Guarantee (Administration) Act 1992 (Cth), employers must pay a percentage of an employee’s income into their nominated super fund. The current rate of 9.5% will remain until 30 June 2021. After this, it will incrementally increase 0.5% per year until it reaches 12% by July 2025.

You must pay 9.5% of your employee’s ordinary time earnings (OTE) to a nominated super fund (subject to some qualifying factors outlined below). OTE can include commissions, loadings and allowances, but does not include overtime payments.

You must generally pay superannuation to an employee if they earn at least $450 before tax in a calendar month. Further, if your employee is under 18 or is a private or domestic worker, they must work at least 30 hours per week to qualify for superannuation payments.

If you fail to fulfil your superannuation obligations, your employees can report you to the Australian Tax Office (ATO), who will engage with you to address your debt.

Taxation Obligations

On the taxation side, you must determine the rate of tax to withhold from the payments you make to your employees so they can meet their taxation obligations. PAYG (Pay As You Go) is the withholding system you use to collect the appropriate tax payment from your employee’s income.

As an employer, you are also liable to pay Fringe Benefits Tax (FBT). FBT is the tax you pay on certain benefits you provide to employees, such as a company car, parking space, entertainment or living away from home fringe benefit. You should seek the advice of an accountant to ensure that you meet your employee taxation obligations.

Workplace Health and Safety

Unlike the NES, legislation which outlines your responsibility to provide a safe workplace for your employees is state and territory specific – for example the Occupational Safety and Health Act 1984 (WA) or the Work Health and Safety Act 2012 (SA). You should seek advice about how to meet your obligations under the relevant act.

Frequently Asked Questions about your Obligations as an Employer

Q: Are my employees covered by the NES?
A: Your employees are covered by the provisions of the NES, irrespective of whether they are employed under a modern award, enterprise agreement or other instrument. An award or enterprise agreement can have terms that are ancillary or incidental to the operation of entitlements but only to the extent that they are not detrimental in any way to the employee. For example, instead of an employee taking paid annual leave at their base rate of pay, an employee could take twice as much leave at half that rate of pay.

Q: How can I create a safe workplace for my employees?
A: Creating a safe workplace will help you comply with your work health and safety obligations as an employer. You should make sure your workplace is free of obstacles and employees can enter and exit the workplace safely. You should provide proper instruction to employees on how to avoid risk and you should record any incidents in the workplace.

Q: What is not a fringe benefit?
A: A fringe benefit is a benefit either your employee or employee’s associate, such as their spouse or children, receive because of their employment. A benefit is any right, privilege, service or facility received. An employee’s salary or wages or shares purchased under an approved employee share acquisition scheme, super contributions or employment termination payments are not fringe benefits.

Q: What is the difference between an independent contractor and an employee?
To determine whether a worker is an independent contractor or employee, you should look at the employment relationship as a whole. However, there are some indicators which can help you determine whether a worker is a contractor or an employee.

The degree of control – an employee usually performs work under the direction of their employer on an ongoing basis, whereas a contractor has a high level of control in determining how the work is completed.

Hours of work – employees usually work a standard set of hours (note that a casual employee’s hours can change week to week) whereas a contractor decides what hours to work to complete a specific task.

Risk – an employee usually does not bear the financial risk if their work is faulty. A contractor runs an independent business and, therefore, bears a risk of making a profit or loss for each task.

Tax – for employees, income tax is deducted by their employee and for a contractor, they pay their tax and GST to the Australian Taxation Office.

Tools and equipment – an independent contractor usually brings their tools whereas an employee’s tools are provided by the employer.

Q: Do my contractors get the same entitlements as my employees?
A: your employees are entitled to receive paid leave (annual leave, personal/carers’ leave, long service leave), however, independent contractors are not. Independent contractors may be entitled to unpaid leave if this is something you and your contractor agree upon.

How can LegalVision help me?

We have helped many businesses with ensuring they comply with their employee obligations, and it would be our pleasure to assist you. We provide fixed prices for your certainty and peace of mind. Call LegalVision today on 1300 544 755.

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