As an employer, you have specific legal responsibilities when engaging a contractor. For example, your superannuation, taxation and other government obligations are different for contractors than employees. Therefore, you or your company may face penalties and charges if you incorrectly treat an employee as a contractor and do not meet your obligations. This article will take you through when you are required to pay your new worker superannuation and what rates you must pay.
When Am I Required to Pay Superannuation?
If your worker is an employee by law, you must pay their superannuation. The current minimum contribution is 10%, although this percentage increases each year. Several criteria must be met when determining whether you must pay the superannuation of your workers. This criterion requires that the employee:
- earns more than $450 in a single month of work before tax;
- is older than 18 years (or less than 18 years but works more than 30 hours a week); and
- is employed full-time, part-time or casually.
In contrast, you do not have to pay your employees superannuation where an employee:
- is under 18 and works less than 30 hours a week;
- is over 65 years of age and has worked less than 40 hours in the past 40 days;
- is paid according in line with the Remote Jobs and Communities program;
- earns less than $450 a month before tax; and
- is doing domestic work for less than 30 hours a week.
Other Superannuation Requirements
In addition to paying your employees their minimum superannuation entitlements, there are several vital things you must ensure. This includes you:
- offering your employees the choice of their super fund;
- paying super contributions four times per year at a minimum by the quarterly due dates;
- paying and reporting your superannuation payments electronically;
- advising employees of your default fund, which all super is to be paid into unless the employee nominates their fund;
- providing the employee’s tax file number (TFN) to their super fund within 14 days of receiving their TFN declaration form;
- keeping records of super contribution payments; and
- keeping evidence that you offered your employees a choice of super fund.
Contractors and Superannuation
If you hire contractors, you must pay them superannuation if:
- you pay them for their labour; and
- they earn more than $450 per month before tax.
The requirement to pay contractors superannuation exists irrespective of whether you pay them via their Australian Business Number (ABN).
Foreign Workers
Workers are entitled to superannuation payments even if they are temporary residents in Australia. Similarly, if you have an employee working overseas temporarily, you must continue to pay their superannuation in Australia.
In certain circumstances, you do not have to pay the superannuation contributions of foreign employees. This includes if you have:
- a non-resident employee working outside of Australia; or
- an employee is temporarily working in Australia, covered by a bilateral agreement.
Self Employed Workers
If you are self-employed, such as working as a sole trader or in a partnership, you do not have to pay yourself superannuation. However, it is generally recommended that you choose to make personal super contributions if you are in this situation to save for retirement.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
You have specific legal responsibilities as an employer or business engaging a contractor. Superannuation, taxation and other government obligations are different for contractors than employees, and you must stay on top of these differences. Some key things to remember about superannuation include:
- who you must pay super to;
- how much super you must pay;
- other procedures relating to superannuation, such as how often you must make contributions; and
- different requirements for certain workers, such as foreign nationals and contractors.
If you need assistance understanding your requirements to pay your new worker superannuation, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Several criteria must be met when determining whether you must pay your workers’ superannuation. To qualify for super, the employee must earn more than $450 in a single month of work before tax, be older than 18 years (or less than 18 years but works more than 30 hours a week) and work full-time, part-time or casually.
If your worker is an employee by law, you must pay their superannuation. The current minimum contribution is 10%, with this percentage increasing each year.
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