Hiring staff is a costly and time-consuming process. The average annual wage for an employee in Australia is $67,860, not to mention the on-costs. Plus, it can take at least a few months to find the right employee and then help them become productive in the workplace.
Today, we explore an overview of employer costs and obligations when hiring staff.
Before an Employee Starts
First and foremost, do you need to hire a new employee? Is there an effective way to get the additional work completed (or reduced) so hiring a new person is no longer necessary? In some cases, the problem can be solved by outsourcing, changing business structures, increasing prices, or changing suppliers.
If you do still need to hire someone, at a minimum, you will likely have hiring costs before an employee starts, either by using a recruiter or a paid advertising platform.
You may need to invest time in creating position descriptions and contracts, along with the tools they need to complete their work. Do you need a new computer, mobile phone, workshop tools etc.?
At this stage, it’s also important to understand there are other ongoing wages and related costs, such as:
– Awards set many pay rates, allowances, overtime, annual leave etc. You can check which Award applies to your business here.
– Superannuation of 10% (increasing to 12% in the coming years).
– Workers’ compensation is charged as a percentage of wage costs (including super), which in Queensland, on average, is $1.20 per $100.
– Large employers should also be aware of their Payroll Tax obligations, which varies between states. Will a new hire push your business wages over the threshold?
– If this is your first employee, you may need to upgrade accounting software systems to allow for payroll processing, including Single Touch Payroll obligations, and timesheet management.
When the Employee Commences
When new employees start work, they are usually less productive than their experienced colleagues. It’s to be expected, but it can come at a cost. On the job training is a meaningful
way to teach new hires, but it does disrupt everyone involved in the process. Make sure you’ve allocated enough time for everyone to complete their tasks effectively.
Many employers also set a percentage of their turnover to be allocated to training expenses. A training budget is a valuable tool to keep employees engaged and upskilled in their work.
Throughout their employment, you may find bonuses or profit-sharing to be another useful engagement tool. Again, create a strategy and budget to effectively manage these costs whilst getting an excellent result for that investment.
Wage increase obligations will also occur each year, usually on the 1st July for award wages and many agreements. How will you manage these cost increases when it comes to supplying your product or service?
If an Employee Leaves
An employee always fits and stays in the team for many years in a perfect world. Since that’s not always the case, you should always be aware of potential costs, such as unfair dismissal claims, annual leave payouts or significant workers’ compensation claims.
It doesn’t mean you shouldn’t hire people, just that having good processes for managing employees and an eventual termination process is a wise business practice.
For more information on managing employment obligations in your business, please, contact us ASAP.
At VBA we specialise in strategic tax advice, offering tax and financial reporting for individual income earners, family businesses, tradies and construction companies.
Victor Bimrose Accountancy Pty Ltd (ASIC No. 1259423) ABN 53 010 957 294 is a Corporate Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361.
Mark Foxley-Conolly (ASIC No. 1259421) is a Limited Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361
General Advice Warning: This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.