In Show 086 – Phase 4, Bringing on Employees originally broadcast on Facebook Live on Wednesday 2 May 2018 we explore this interesting topic. download the workbook here: 086 Worksheet
Today we start Phase 4 of the Business Legal Lifecycle. It’s subtitled Bringing on new employees. By the time you reach this phase you are ready to bring on some help to help your business to continue to grow.
Employees vs Contractors
This is an important distinction you need to understand before you hire additional help. An employee will usually work exclusively for you. They don’t need to provide their own tools. A contractor works for themselves and are expected to bring their own tools of the trade. You will be able to exert a much higher degree of control over an employee, a contractor less so. An employee is also not liable for the work they perform – you are. You are responsible for deducting tax and super annuation from paycheques of employees but not for contractors. This is an important part of making sure you are classifying your workers correctly. You don’ want to be penalized for not contributing to the tax pool. The Australian Government has an online tool that is very useful for business owners to make sure they get this right. You can find that tool here: https://www.ato.gov.au/Calculators-and-tools/Employee-or-contractor/
Different kinds of employees
Under Australian law there are five main kinds of employees. Each category has their own rights and responsibilities. Those categories are:
- Full time employees
This is a person that works at least 38 hours per week. A full-time employee can become a part-time employee but it’s quite difficult to make that transition.
- Part-time employees
Any employee that works less than 38 hours. There is no guaranteed amount of work each week.
- Casual employees
Similar to part-time but not entitled to holiday and sick days. Lots of employers make the mistake of miscategorizing there casual workers as part-time.
- Fixed-term employees
A worker that will work for only a set amount of time. Not guaranteed to a definite number of hours.
- Daily hire employees
In the construction and plumbing industries workers can be hired on a daily basis but they must be told they are daily hires from the start.
What you need for your staff
There are some basic things you need to provide your employees. Minimum wage is the most obvious. You can decide how often those payment will be made but they must be consistent. You also need to provide pay slips. You may have to reimburse employees for any work related costs. You also need to ensure a safe work environment for your workers. Payment of taxes are your responsibility. You are expected to deduct those taxes from workers cheques. Same goes for super annuation deductions.
There is a myth that employment agreements are worthless. That’s not true. As long as the agreement has been properly written they are extremely useful for business owners. They need to be a backstop for a number of eventualities. Putting the agreements in early will save you a lot of headaches in the future. You need to protect yourself. Some of the things you need to address are the term of the employment, the payment level and the duties of the employee. Workplace duties should be specifically laid out along with the hours of work. There should be a probationary period of three months, Bonus structures should also be clearly laid out. The grounds for termination need to be written in a very detailed manner.
These tie in with the employment agreement. The employer should be expected to conform to the policies laid out. The policy should be highly detailed. That includes dress codes, drug and alcohol policies and a harassment policy. There should also be a grievance policy so employees will know who to speak to about any problems they are experiencing. Most of these are common sense but if they are not detailed early you will end up with a lot of headaches.
Restraints of trade
People often think these restraints are not enforceable but that’s not true. As long as they are put in place to protect the legitimate business interests of the owner they are very useful. If a former employee begins to steal clients or other employees you will be able to seek a restraint of trade. They must be drafted carefully and be very detailed. You can’t craft an agreement that says a former employee can’t work on your industry for ten years it’s not enforceable. It must be reasonable.
Dismissal of employees
If an employee breaches your workplace policies you are able to dismiss an employee. It’s not something you want to rush into. You want to avoid the possibility of a wrongful dismissal suit. Redundancies is one legitimate reason to let an employee go. Termination can be inertaken for inappropriate behaviour, fraud or theft and poor performance. Warnings will have to be given for poor performance before they can be let go.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.