Hire and Pay in Australia (A Guide for International Success)
Expanding to other countries usually requires an organization to develop their workforce in that region first. This begs the question; how do you hire and pay in Australia? When it comes to international hiring, things aren’t always straightforward – there are a host of complexities with local laws and regulations that create a unique set of challenges in each new jurisdiction. From navigating complex employment laws to maintaining annual compliance, it’s important to have realistic expectations when preparing to hire and pay in Australia.
In this article, we’ve gathered some of the most important guidelines and information you need to be aware of during the expansion process. This guide will provide all the information you need to hire and pay in Australia.
Australia boasts a diverse workforce with a wide range of skill sets. As is the cast in most countries, organizations doing business there will need to choose whether to hire independent contractors versus full- or part-time employees. Regardless of the classification you choose, each worker will need to comply with the guidelines of the designated classification.
Businesses preparing to hire and pay in Australia will need to decide between handling everything in-house, or outsourcing to an expert. While there are many benefits to both methods, it’s important to understand the pros and cons of each before making the final decision.
DIY Hire and Pay in Australia – Contractors
If you opt to hire and pay independent contractors in Australia, it’s important to know that this course of action has the most potential for errors. If left uncorrected, this can lead to expensive fines and penalties. Generally speaking, independent contractors need to qualify under a specific set employment laws. Most often these guidelines include the following:
- Contractors are allowed to work for multiple companies at the same time – they cannot be restricted to only working for your business.
- Contractors are responsible for their working status and schedule – the business cannot dictate specific hours of operation.
- Contractors must be project-based or they must work for shorter periods of time. If a contractor extends their time with a company, they run the risk of being classified as an employee.
The danger of misclassification is the fact that countries tend to side with employees during legal disputes. So if a contractor works for an extended period of time, they can then legally argue for benefits and other compensation.
U.S.-based companies paying international contractors in Australia should have them fill out , which certifies their foreign worker status in the eyes of the U.S. government. Although this step will resolve tax compliance for the employer in the U.S., the business will still need to abide by Australian employment law. If a worker is classified as an independent contractor but fails to adhere to the guidelines listed above, the worker can file suit for benefits, overtime and more. This is a problem because government historically side with employees if there are any disputes without proper documentation from the employer. As long as the above guidelines are met, hiring an independent contractor in Australia can be an efficient method of employment.
DIY Hire and Pay in Australia – Employees
If you are planning to hire and pay in Australia for full- or part-time employees, you will need to establish a legal entity there. Setting up a legal entity is typically a costly and time-consuming endeavor, which can take anywhere from three to six months to complete.
Legal entities are the foundation of all operations within a country, meaning they can impact every aspect of a business, including finance, accounting, IT, and other supply chain functions. If this is the route your business decides to pursue, it’s highly recommended that you work with an expert during this process so you can ensure that the structure isn’t inefficient or costly to maintain.
In general, there are three primary components to incorporating a business in Australia:
- Incorporation and Registration
- Prepare entity registration documents
- Prepare local entity articles of incorporation
- Advise on corporate governance structure – local director/shareholders requirements
- Apply for and obtain business license and entity registration approval
- Apply for and obtain tax ID
- Register the newly incorporated entity to be a local employer
- Post Incorporation
- Payroll setup
- Statutory benefits and social security registration
- Data protection registration
- Accounting setup, including bookkeeping and reporting
- Local bank account setup
- Local indirect tax – VAT | GST | HST
- Corporate Annual Compliance
- Preparation of group consolidated accounts and financial statements under IFRS, US GAAP, or other local GAAP and statutory audit support
- Tax, payroll, and statutory returns
- Handling of correspondence and other administrative duties
Outsource to a PEO Provider
If you want to hire and pay in Australia but hope to avoid the burden of DIY processes, consider using a Professional Employer Organization (PEO). Sometimes referred to as an Employer of Record (EOR), this option creates a partnership, where a PEO/EOR leases employees to a business while leveraging its own legal entity and operations in the designated jurisdiction of operation. Many businesses choose this route because the PEO reduces international risks and liabilities, while also enabling the business to continue managing the day-to-day responsibilities of their international workforce.
Put differently, the PEO handles the administrative burden related to hiring and paying international employees, which in turn allows the business to focus on other important growth initiatives. Because PEOs use their existing legal entity network for hiring and taxes, companies can hire much faster without sacrificing compliance. Here are a few of the administrative services a PEO provides:
- Fast international hiring
- Global payroll management
- In-country compliance
- Reduced risks with international contractors
- Global talent acquisition
- Best-in-class HR technology for international workforces
- Australian employment contracts
Australian Employment Contracts
Although a written employment contract is not a statutory requirement for businesses that hire and pay in Australia, it’s good practice to have one in place, as it helps reduce the risks involved with managing the employment relationship, and can be referred to if there are any disputes.
Although a written employment contract is not required in Australia, there are still a few obligations employers need to be aware of as they enter an employment relationship there. For example, the Australian Fair Work Act requires all employers to provide new employees with a copy of the Federal Government’s Fair Work Information Statement. New casual employees must also be provided with a copy of the Casual Employment Information Statement.
In Australia, Collective Agreements are referred to as Enterprise Agreements, and they fall under the
If this applies to your hiring situation, your business may be subject to certain procedural steps to enter into a collective agreement, including:
- Providing employees with a notice of their right to be represented during bargaining for the agreement.
- Providing a copy of the proposed agreement to employees and explaining the terms of the agreement and the effect of those terms to employees, considering the circumstances and needs of the relevant employees.
- Notifying employees of the date and place at which voting is to occur and the voting method to be used.
These agreements must be approved by the Fair Work Commission. They will ultimately be the organization that determines if all the statutory requirements were met during the bargaining process.
The national minimum wage for hourly employees is AUD 20.33 (about $15 per hour) and AUD 772.60 per week (about $566 per week). This applies to any employees that aren’t covered by an enterprise agreement or modern awards, which are legal documents that outline the minimum pay rates and conditions of employment. Minimum wages are generally lower for junior employees, apprentices and those receiving a disability support pension.
It’s common for businesses in Australia to implement performance-based discretionary bonus schemes, or long-term incentive structures for executives. Businesses that hire and pay in Australia don’t have any statutory restrictions when it comes to bonus arrangements, which means employers have liberties regarding the rules of any bonuses they implement. However, bonus schemes must be created with clarity to avoid any confusion or uncertainty. This is crucial, as lack of clarity around a specific bonus structure could cause unnecessary risk to the employer if there are any disputes. Generally speaking, employers should make it clear that they have the right to alter or withdraw a bonus scheme at their discretion.
According to the National Employment Standards (NES) in Australia, individuals have a maximum working week of 38 hours. It is possible to exceed this number, but only if it’s agreed to by both the employee and employer, where overtime could be a justified resolution. Working hours can be established and defined by modern awards or enterprise agreements, which typically contain details regarding working hours, such as:
- The span of ordinary hours of work
- Maximum number of ordinary hours that can be worked in a day or shift
- Minimum number of rest breaks between finishing and starting work
- Additional pay rates for overtime, shift work, weekend, or public holiday work
It’s important to note that businesses are rarely allowed to opt out of these provisions on an individual basis. It almost always must be done through an enterprise agreement.
The NES requires that full-time employees receive four weeks of paid annual leave per year. This is pro-rated for part-time employees and increased for shift workers (which is defined in modern awards). Casual employees do not have any annual leave requirements. Additionally, annual leave accrues each year and must be paid out upon termination. In some instances, companies can require employees to use their annual leave, instead of having it accrue each year.
In addition to annual leave, Australia has eight national paid public holidays and other state and territory paid public holidays. As you prepare to hire and pay in Australia, it’s important to take note of these dates:
- New Year’s Day
- Australia Day
- Good Friday
- Easter Monday
- Anzac Day
- Boxing Day
Growing globally can be an exciting time for an organization. There are always going to be risks and challenges during global expansion, but Global PEO Services (GPS) can help mitigate these risks, while still giving you control over your day-to-day operations. With laws and regulations frequently changing, hiring and paying in Australia can be challenging when keeping track of compliance, legal and tax requirements. We manage all the legal requirements and payroll, while the business manages the international team on their daily tasks. For companies hoping to hire and pay in Australia, GPS can help you grow and remain compliant.