Top 10 things to consider when employing new staff
Every now and then we get asked the question – “I want to hire someone to help with our business so I can have more time growing my business.” But before you put an ad up, or spread the word around, have you considered the following 10 things about finding the right staff, your business financial situation and understand the extra compliance work required?
- Who would you like to employ and what would they do? List out criteria for ideal staff member, detailing their required skills, knowledge, outlining their duties and responsibilities so it is easier when drafting a recruitment ad.
- What is the type of employment? Depending on your demand for staff, you may want to hire temporary or permanent, full time, part time or casual (seasonal) staff.
- Pay conditions & leave entitlement – how much and how often would they be paid? Visit Fair Work Ombudsman to find out their minimum payment conditions. Will they be entitled to any leave – personal leave, annual leave, parental leave, long service leave?
- Budget & cash flow – how much will the new staff generate in revenue? Will adding a new staff member in your business generate extra revenue and profits to your business? It is possible that the economies of scale decreases as you add staff member into the business, which means that hiring an extra person in your business “eats in” your business profits, instead of increasing your profits. Use a spreadsheet or the Budget Manager on Xero to help estimate your revenue and costs.
- The actual cost of employment – So you think hiring a new staff means paying wages for one more person only? Then you’re wrong! It is a little more involved here. The actual cost of employment also includes the following (list not exhaustive): recruitment cost, training cost for the new staff (or extra time for new staff to learn to do things), PAYG Withholding, superannuation, workers compensation insurance, fringe benefits tax (FBT) if applicable, sometimes upgraded subscription or additional logins into software, new tools, equipment, or furniture and hiring of more space to accommodate a new staff member and most importantly – your time to find the right person!
- Ensuring the new staff is a good fit to the business – ideally you would want to employ someone who has the right attitude, similar values and will fit into your business culture and work well with you and your other staff. Someone who has the qualifications to do the work is not necessarily the right person for the job. Going through their resumes will screen out most job seekers. You can then arrange a time to have an interview with the shortlisted job seekers to identify the one that would fit best. Ringing up their references will also give you a good idea of how well they do in their previous employment.
- Registrations – if your business have never employed anyone before, you may be required to contact the ATO to be registered for PAYG Withholding (PAYGW). This will mean that you will be required to withhold PAYGW from the wages and remit the PAYGW to the ATO periodically (usually quarterly). Depending on the type of staff you hire, or the industry you are in, you may need more registrations if you are employing apprentices.
- Work contracts will ideally be drafted and signed by both parties as soon as the staff commences work, detailing work and payment conditions, leave entitlements, confidentiality terms etc. This is to ensure both you and your staff are clear on the terms of the employment, avoiding any misunderstanding down the track. It would be a good idea for you and your staff to keep a signed copy. This page on Fair Work Ombudsman contains some useful templates for you to start with.
- Declarations and forms– When you employ a new staff member you and the new staff will need to fill out and the Tax File Number Declaration Form for you to submit to the ATO. Link to the form is found here. If link doesn’t work, Google “ATO TFN Declaration Form”. The form needs to be lodged with the ATO within 14 days of starting work.
- Software payroll support – does your current accounting software have a payroll function? Do you know if it is using an up to date tax table to work out PAYG Withholding or not? If not, how much will it cost for you to upgrade your current system? Most accounting software help generate a PAYG Summary to be provided to the employee and ATO. Some are compliant with SuperStream so you may be able to pay staff super directly from the accounting software, saving you valuable time while staying compliant with the legislations.
Still got questions? Contact us for help!