How to prepare for your first hire
There are a few practical components you need to be aware of and organise prior to hiring your first employees to avoid unnecessary delays, costs and complications. Aside from knowing your legal obligations as an employer, here are the main areas you realistically need to have set up:
An employment contract is an agreement between an employer and employee, setting out the terms and conditions of employment. We recommend engaging a lawyer or HR consultant to assist with drafting the contract.
The basic components that will be included in the contract include the type of employment, remuneration and obligations of the employee in the role.
Keep in mind, the employment contract is not permitted to provide for less than the legal minimum entitlements set out in the National Employment Standards or entitlements under a relevant award, enterprise agreement or other registered agreements.
Setting up Single Touch Payroll (STP) enabled software
Most accounting software will have a payroll component or add-on, so it will be time to upgrade your subscription to include payroll. We can assist with setting up the employee in the system and providing demonstrations on how to process a pay-run.
Pay-runs will need to be processed as frequently as the pay period laid out in the employment contract. The pay-run will calculate the employee’s gross wage, PAYG withholding, superannuation guarantee entitlement, the net wage you need to pay the employee and also leave accrual entitlements.
Once the pay-run has been prepared, it will need to be submitted to the ATO in real-time. This is a relatively new requirement of the ATO under their Single Touch Payroll regime.
Register for Pay-As-You-Go Withholding (PAYGW)
PAYG Withholding refers to the process of withholding a portion of a wage payment as tax. It is mandatory to have each employee complete a Tax File Number (TFN) declaration form upon commencement of employment. This will determine your withholding obligation for each employee, which gets set up in the payroll software.
As mentioned above, the pay-run will automatically calculate the amount of PAYG Withholding you are required to withhold from the employees wage every pay-run based on the employees TFN declaration and the relevant marginal tax rates.
You will then be required to report and pay the withholding to the ATO in monthly or quarterly activity statements. This is a straightforward lodgment process which can be done via the Business Portal. If you haven’t already set-up the business portal, you can refer to Michael Lamont’s blog on how to do this or get in touch with us.
Superannuation guarantee obligations
Superannuation guarantee refers to the compulsory superannuation contributions that employers are obligated to pay on behalf of employees.
For the 2024 Financial Year, the superannuation guarantee rate is 11%. This will increase to 11.5% in the 2025 Financial Year and 12% the year after, where it plans to remain stationary. This means employers are required to pay 11% of an employee’s ordinary times earnings (salary and wages, most allowances, bonuses, leave payments but not overtime payments).
Employers should pay the superannuation component through your payroll software. This is a requirement of the ATO’s SuperStream regime which was introduced in 2016. It allows for Superannuation payments and data to be sent electronically in a standard format.
Superannuation payments are due to be paid 28 days after the quarter-end (e.g., for the September quarter, superannuation would be due on the 28th of October).
Another final consideration of hiring your first employee is obtaining a workers compensation policy.
Workers compensation is a State-based requirement, providing support for workers with a work-related injury. It is a legal requirement to have a policy if you pay wages of $7,500 or more during a financial year.
In NSW, most employers can only take out workers compensation insurance through iCare. The premium payable to iCare to obtain the policy is dependent on a handful of factors such as the amount of wage payments made during a 12-month period and the industry you operate in. The more risk employees are exposed to in particular industries, the higher the premium.
Finding the talent
Now what? You’re all set up and ready to go, now it’s time to find the talent!
Finding the right staff to hire isn’t an easy task. One of the major steps in this process is writing a good job advertisement, one that interests applicants. To make sure the job ad hits the mark with candidates, other considerations you need to make during this process include:
- What gap do you need to fill in the business? Will the position be administration and industry-related, does the candidate need to be qualified or have experience? Write a list of what the position will involve, the daily duties and responsibilities and any technical qualifications or soft skills required.
- What information is it important to include about your business? Now is a great time to reflect on your business’ vision and values. What does the business stand for and what type of culture do you want to promote? This is critical in ensuring the candidate will be the right fit.
- Consider why someone would want to work for you over another employer. Getting good staff can sometimes be really hard, so is there a way to make your business a more attractive employer, such as offering hybrid working models, regular training or performance bonuses? All of these incentives could be included in the job ad.
Once you’ve formalized the job ad, it’s time to go public! There are a few popular online employment marketplaces available such as Seek and LinkedIn. Hopefully you find that once the ad is live, you get a number of applicants submitting their resumes and after a few interviews, you find a successful applicant to join the team and help grow the business!
If you are thinking now is the right time to hire an employee, please reach out to us first! We will ensure you have everything set up and ready to go. While we are not employment lawyers, we can advise you on tax and super-related payroll queries, and put you in touch with the right people for employment contracts.
BLG Business Advisers are Wollongong Accountants who service all over Australia and our team are always ready to help you out. As always, don’t hesitate to reach out for a chat so that we can assist you in this important area of your business!