In Short
- Classify workers correctly – Misclassifying employees as contractors can lead to legal and financial penalties.
- Use written agreements – Employment and contractor agreements clarify roles, rights, and obligations, reducing disputes.
- Follow employment laws – Ensure compliance with the National Employment Standards and implement workplace policies to protect your business and employees.
Tips for Businesses
Understanding employment law helps you avoid costly mistakes. Clearly define worker classifications and use written agreements to set expectations. Provide employees with their entitlements under the National Employment Standards and establish workplace policies for clarity and compliance. Seeking legal advice ensures your business stays on the right track.
As a small business owner, building a team is an exciting and challenging time. However, it is important to be aware of employment laws to ensure you provide your workers with the entitlements they are afforded under the law. This article outlines some important employment law considerations to help build your team and, ultimately, your business.
Employees vs Contractors
It is crucial to appropriately classify your workers as either employees or contractors to ensure you afford your workers the rights they are entitled to. An incorrect classification may subject you to an order from the Fair Work Commission or Federal Court. Here, you may have to pay fines, superannuation and other entitlements on top of what you may have already paid to your workers.
There are a number of factors to consider when determining what category your workers fall under, and some of these factors include:
- control over work;
- hours of work;
- the expectation of ongoing work;
- equipment;
- remuneration;
- superannuation;
- leave;
- income tax.
If you are unsure whether your workers should be employees or contractors, a lawyer can provide you with definitive results and advise you on your workers’ entitlements.
Contractor and Employment Agreements
Whether you are engaging workers as employees or independent contractors, you should have an appropriate agreement in place. Agreements between you and your workers not only define your relationship with them, but shape how your workers fit within your business. Having written agreements in place legally protects you as an employer as it provides you with a safety net if:
- you need to discuss rights, duties, promises and agreements with your workers; or
- a dispute arises with your worker.
Contractor Agreement
A contractor agreement outlines how you will engage a contractor and the key terms of your arrangement with them. Some key factors that the agreement should include:
- details of the services of the contractor. For example, such details should include timeframes, deliverables and how you will pay the contractor;
- the period of engagement. For example, you should consider whether you will engage the contractor on a project basis or ongoing basis; and
- obligations of the contractors. For example, you may require your contractor to have a specific licence or qualification.
Employment Agreement
An employment agreement clearly sets out the relationship and rights between your business and your workers as your employees. Having a written agreement in place shows your commitment to your workers while also minimising the risk of a future dispute. It is important to outline the key factors of the engagement within the employment agreement such as:
- payment terms;
- working hours;
- leave entitlements; and
- termination.
National Employment Standards
The National Employment Standards (NES) are 10 minimum employment entitlements that you must provide to all of your employees, although some standards differ slightly for casual employees. The NES addresses the following entitlements:
- maximum weekly hours that you can require your workers to work. For example, the maximum number of hours for full-time workers is 38 hours;
- requests for flexible working arrangements. Certain employees have a right to request changes to their working arrangement. For example, this may include a request to work from home;
- parental leave and related entitlements. If your employees have completed at least 12 months of continuous service with you, they may take up to 12 months unpaid parental leave and can ask for an additional 12 months;
- annual leave. Your employees are entitled to accrue a set number of weeks of leave per year. For example, full-time employees accrue four weeks per year of annual leave;
- personal carer’s leave and compassionate leave. Employees are entitled to 10 days per year of personal leave;
- community service leave. Your employees have a right to take leave for community-related work such as volunteer fire-fighting or jury duty;
- long service leave. Employees who have been with you for a long period of time accrue long service leave;
- public holidays. This addresses employees’ rights in relation to taking a paid day off on public holidays;
- notice of termination and redundancy pay. When making employees redundant, you must provide them with up to five weeks notice and up to 16 weeks redundancy pay, based on their length of service; and
- Fair Work Information Statement. As an employer, you must provide all new employees with this statement which contains information about employee entitlements.
Employee Handbook and Workplace Policies
An employee handbook plays a huge part in ensuring your business has the right framework in place to support your workers and business in succeeding. An employee handbook sets out the policies and procedures of your business, culture and expectations of your workers’ behaviour and work. While an employment agreement and contractor agreement governs the legal relationship with your workers, the handbook applies to all employees and contractors to an extent. Your employee handbook may include the following policies:
- workplace health and safety;
- IT;
- anti-discrimination, harassment and bullying;
- code of conduct and general office;
- pay and leave;
- grievances; and
- disciplinary.
Key Takeaways
When building your team and engaging workers, it is crucial to be aware of and to adhere to the relevant employment laws. To ensure the success of your business and adhere to employment laws, it is crucial to:
- appropriately classify your workers as either employees or contractors;
- formalise your arrangement with your workers in a contractor or employment agreement;
- provide your employees with the required entitlements under the NES; and
- have set policies and procedures in place.
If you are looking at engaging workers and need employment law assistance, fill out the form on this page or get in touch with LegalVision’s employment lawyers on 1300 544 755.
Frequently Asked Questions
Employees work under an employer’s control, have set hours, receive entitlements like leave and superannuation, and are taxed by their employer. Contractors operate independently, set their own hours, and manage their own tax and superannuation. Misclassifying workers can result in legal penalties.
Written agreements, such as employment or contractor agreements, clearly define roles, responsibilities, payment terms, and other conditions. This reduces disputes and protects both the business and the worker.
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