For many of our clients, especially those in hospitality, restaurants/cafe and retail, the summer months and especially the Christmas/New Year period is extra busy.
If you are seeking to hire extra workers for this busy holiday season, it is important to get a few things straight first so you are not left with any costly surprises in the new year.
Employee or contractor?
You need to determine if your workers are employees or contractors to make sure you correctly meet your tax and super obligations. Don’t rely on what other businesses are doing and assume it must be correct.
The fact is both employees and contractors can be hired for:
- casual, temporary, on call and infrequent work
- busy periods
- short-term jobs, specific tasks and projects.
The distinction is important because it dictates your PAYG, superannuation and workers’ compensation obligations and penalties and charges may apply if you get it wrong.
To check if your worker is an employee or contractor, you need to review the whole working arrangement. The easiest way is to use the ATO decision tool (link below).
All you are required to do is answer a few questions about the working arrangements and a report will generate that you can keep on file for each person hired. If you answer the questions accurately and honestly, the ATO have advised that you can rely on the results.
Link – https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=ECDTSGET&anchor=ECDTSGET#ECDTSGET
Some workers are always employees
Any of the following types of workers are always treated as employees:
- apprentices
- trainees
- labourers
- trades assistants.
Apprentices and trainees do a combination of work and recognised training to get a qualification, certificate or diploma. They can be full-time, part-time or school-based and usually have a formal training agreement with the business they work for, which is registered through a state or territory training authority or completed under a relevant law.
In most cases they are paid under an award and receive specific pay and conditions. The work arrangement for apprentices and trainees is employment. You must meet the same tax and super obligations as you do for any other employees of your business.
Companies, trusts and partnerships are always contractors
An employee must be a person. If you’ve hired a company, trust or partnership to do the work, then it is a contracting relationship for tax and super purposes. The people who actually do the work may be directors, partners or employees of the contractor but they are not your employees.
Labour hire or on-hire arrangements
If you have obtained your worker through a labour hire (or on-hire) firm and pay that firm for the work undertaken in your business, then your business has a contract with the labour hire firm and they are responsible for the PAYG withholding, super and FBT obligations. Labour hire firms can be called different names including recruitment services and group training organisations (where your business is referred to as the ‘host employer’).
Hiring working holiday makers
If your workers are here on a working holiday visa (subclass 417 or 462) you’ll need to:
- register with the ATO as an employer of working holiday makers first, then
- tax the employees at 15% from the first dollar earned, regardless of their residency status.
Below is a link to download the TFN declaration form and instructions. This needs to be completed for all new employees to your business.
Link – https://www.ato.gov.au/Forms/TFN-declaration/
If you are still not sure about your working arrangements with new hires, please contact us for assistance.
