The first thing you need to do is create a simple & generic engagement letter that clearly identifies the basics of the employment contract. An engagement letter can minimize misunderstandings & misinterpretations!
Trust us, this could save you money in the long run. (We’ll come back to this in more detail a little later on)
Once you’ve found your ideal new team member, there are two initial documents that have to be provided to them.
Both of these documents need to be completed by your new hire and returned (in time, to be able to set the employee up in your payroll system ahead of time).
As it's your responsibility to withhold the correct amount of tax from your employee and this tax amount can vary, (based on if the employee has a hecs, help, or student debt, a second job, is or is not an Australian resident for tax purposes, etc), its totally up to you to get this right.
You can protect yourself by ensuring the tax file declaration is completed and signed by your employee.
As for the Superannuation guarantee choice form, a lot has changed from the old days. Now, it has to be the employees choice of fund. To cover your business, getting this form filled in by the employee gives you clear instruction as to where to pay their superannuation. We wouldn’t rely on word of mouth.
Remember, superannuation obligations are super-strict. No matter what, it is your obligation to pay superannuation on time, every time.
Not having their details is not an excuse. The ATO impose heavy fines, interest and tax ramifications if your super obligation is not met.
Our 4th must have is an information sheet! Sounds basic, right? Well it is, but often gets overlooked. We get our employees to fill out an information sheet, outlining their next of kin, bank details, and a suitable email address for their payslip. This will make your accountant or bookkeepers job a whole lot easier when setting the staff member up in the payroll system. (Or yours if you handle that end of your business too.)
Our final must-have, and this one is probably the most required by law here in Australia is The fair work information statement.
Before your employee starts working for you, you must give them a copy of the fair work information statement. (it’s a good idea to retain proof that you’ve given this to them)
What is the Fairwork information statement?
The national employment standards are 11 minimum employment entitlements that have to be provided to all employees.
All employees in the national workplace relations system are covered by the nes, regardless of the award, registered agreement or employment contract that applies. This fair work information statement summarises these 11 employment entitlements in a precise and clear manner, that the employee can understand.
HANDY TIP : As casual employees only get some of the NES entitlements, casual employees must be given the casual employment information statement at the same time.
Okay lets recap!
You need,
1) An engagement letter
2) A signed tax file declaration
3) A signed Superannuation Guarantee choice form
4) An information sheet
5) Proof that you have provided your staff the employment information statement.
What should my engagement letter cover?
Your engagement letter should minimise any ‘grey areas’ and clarify specifics. This should include, but are not limited to :
- The applicable award that covers their employment
- Whether you ar
e employing the staff member on casual, permanent, pat-time, or permanent full-time basis
- Their expected working hours
- Their expected lunch and break times
- Their hourly rate and the payroll period
- Their number of annual leave and personal leave day entitlements
You can even use the engagement letter to declare the purpose and use of the company vehicle or mobile phone if those apply to you.
Just remember that grey areas create room for misinterpretation.
The lack of transparency will most likely always cost you, the employer.
As for the superannuation guarantee choice form, no matter how much you nag, (and lets be frank, this is a common pain point) if you don’t have the superannuation details, you can ask your accountant to find the employees STAPLED super fund on their ATO portal. Whilst not the first port of call, this can certainly ease the pain when trying to meet your obligations to pay super.
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This articles intention is to inform rather than advise and is based on legislation at the time. Each Taxpayer’s circumstances vary so we strongly recommend that you discuss this information with your Tax Agent, Accountant or Bas Agent before implementation. If you take, or do not take action as a result of reading this article, we accept no responsibility for any financial loss incurred. This is general advice only.
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