A guide to employing staff and payroll procedures
As an employer you have certain procedures and legal obligations to follow when employing staff. Much of the information you will need and helpful templates are available through Government and industry websites and we have linked some of them below.
As a guide, we suggest the following processes. However, we stress that the following is not a comprehensive, all-encompassing listing as many industries have their own peculiarities and legal obligations frequently change – but we hope it helps.
A) Firstly, the employer must provide certain forms that the new employee completes:
- TFN Declaration Form – ATO ref NAT 3092. Form is available online from the ATO (www.ato.gov.au) or some newsagencies hold stocks (free). Employee completes top section, employer the bottom section. Top copy goes to the Tax Office, copy is kept by the employer and you will need information from this to correctly assess the tax to be withheld from the employee’s pay.
- ATO Choice of Superannuation Fund Form ref NAT13080 from ATO website. The employer must have a default fund in case the employee does not have a Super Fund of their own. Your choice of default fund may be determined by the Award under which you employ staff. See www.industrysuper.com for initial guidance. The choice of super fund form is retained by the employer. The employee’s TFN has to be supplied to the nominated super fund - this can be done when registering the employee through the “superannuation clearing house” – see later.
- Employee details form (see template on www.fairwork.gov.au). This is useful to the employer too as it provides a checklist of items to cover.
- The National Employment Standards Fair Work Information Statement must be provided to the employee (available from www.fairwork.gov.au website)
- It is highly recommended to have a contract or agreement in writing with the employee. The Fairwork Commission website www.fwc.gov.au is a good place to start as that site can also help in deciding whether an Award applies to the employee position. Some Awards contain specific obligations regarding many aspects of work so read them carefully. If you need help preparing an Employment Contract Ascent can help in detailing what is required and through our lawyers help prepare the contracts.
- A timesheet (or time clock system) for recording employee work hours. See www.fairwork.gov.au for a template. This is a legal requirement and records must be kept for 7 years. More information on the same website.
You will need the following to prepare their wages:
- PAYG Tax Tables (either weekly, fortnightly, monthly). This can be obtained from the Tax Office and lists the amount that should be withheld from the gross wage.
- HELP liabilities – You need to know if the employee has a HELP or Financial Supplement debt so you can adjust the PAYG withheld based on the HELP table. The employee will have signified any liability on the TFN declaration form.
B) You must record the following information on your employee:
- Employee Name
- Employee DOB
- Award Rates
- Date of Commencement
- Recording of each Pay
- Annual Leave / Carers / Sick Leave (dates taken)
- Deductions taken from employee must have signed written authority
C) For each pay period you must record in your payroll system you are using, and on the employees pay advice slip which you give to them:
- Full Name
- Date of pay period
A) 1. Normal Earnings Paid
2. Overtime & Other Earnings Paid
3. Allowances Paid
Add 1 + 2 + 3 to get Total Gross wage paid for the pay period
B) Calculate the tax on the Total Gross by looking at the PAYG Tax Table Record this amount under tax withheld.
C) If you make any other deductions for the employee record under Other Deductions
Subtract B & C from A to give Nett Pay that is actually paid to the employee. This is the amount you transfer to their account.
D) A pay slip must be supplied to your employee after each pay period detailing the above and the SGC Superannuation.
D) If an employee earns more than $450.00 in a calendar month and is at least 18 years old you must pay the prevailing rate of SGC Superannuation on the “Ordinary Time Earnings” wages. The definition of OTE is on www.ato.gov.au. It is important to get this correct or you may pay too much or too little SGC.
The Superannuation should be recorded in your payroll system. You must pay the SGC Superannuation into the employees Super Fund at the end of each quarter. It must be paid by the 28th of the following month (ie July – Sept quarters Super must be paid by 28th Oct). There are large penalties if you do not pay the Super by the due date. If you prefer the Super can be paid monthly, instead of quarterly. Check the Award as that may specify monthly.
From 1st July 2015 all superannuation payments are to be effected through a “clearing house” electronic system. Most default funds operate a free facility. Alternatively for businesses under 20 employees you can use the ATO Small Business Superannuation Clearing House (free).
From 1st July 2019, all employers must report employees' payroll information – such as salaries and wages, pay as you go (PAYG) withholding and super – to the ATO each time they pay them through an STP-enabled software. STP works by sending tax and super information from the STP-enabled payroll or accounting software to the ATO as the employer runs the payroll each week/fortnight or month.
E) The following are important dates when paying wages:
- PAYG tax withheld from wages must be paid monthly or quarterly to ATO (20th of the following month). It will be included on your businesses BAS or IAS
- Super Guarantee contributions to be paid monthly or quarterly (28th of following month)
- Payment summaries to be issued to employees at the financial year end by the 14th July
- Payment summary year end to ATO by the 14th August (they will send you a copy)
F) Workers Compensation Insurance – MOST IMPORTANT
It is a legal requirement to have workers compensation in place to protect your workforce. See www.workplaceinfo.com.au or www.workcover.wa.gov.au for guidance. Penalties for failure to have this insurance can be substantial and potentially could destroy a business so it is imperative to have this in place at all times when employing staff.
G) More Information / Help
Ascent’s services include:
- Can provide payroll systems (Manual or Computerised)
- Can provide training on payroll systems and procedures to pay wages
- Offer a complete payroll service, including preparation of forms and making payments
The following contacts are available if you require more information or need to discuss the awards further: