Wages & Employment 2182GG

Employing Some One Two types of Employment a Direct Employee or Subcontractor Employee – Contract of Service Subcontractor – Contract for Service With either a valid contract is formed as discussed last semester. Offer, Acceptances & Consideration

Awards Many jobs are covered by a federal or state industrial award. Awards outline the rights and obligations of employers legally binding minimum wage rates and employment conditions for employees. The Award are the Terms & Conditions of the Employment Contract

Employment Subcontractors employment conditions will be the contract In may be a HIA, MBA or purpose written contract

Breach of Contract Breach of Contract in either case will result in penalties Breaches of Contract for Subcontractors will result in damages etc as per contract or common law

Breaches of Contract - Employee Employee can resign at any time Notice specified by Award If this breached Notice Period deducted from money owed. Termination given with notice Immediate Termination notice period has to be paid out. (Unless Award specifies different for things such as Misconduct)

Serious Breaches As a Contract is present, fraud etc by either party may result in damages Warman v Dwyer – Dwyer was Manager of Qld Division – Warman was exclusive distributor of product – While Dwyer was still employed he 1.Negotiated with supplier to not renew deal with Warmans 2.Induced experience Staff to leave Warmans 3.He then resigned, signed exclusive deal & employed staff as they resigned He was required to pay damages equal to loss of profit

Employment Any Business Structure can employ No matter what business structure, the requirements are the same Wages & Employments need to be kept

Records That Must Be Kept General records full name of employer and ABN full name of employee classification of the employee under any award or enterprise agreement whether the employee is employed full-time or part-time whether the employee is employed on a permanent, temporary or casual basis if the employee is an apprentice or trainee and the date the person started as an apprentice or trainee date on which the employee was first employed by the employer if the employee's employment has been terminated, the date of termination

Remuneration and hours worked number of hours to be worked per week, per day or other period, the employee's start and finishing times each day rate of pay per week, day, if piece work is prescribed, the number and description of pieces made by the employee and the rate per piece paid gross amount of money paid to the employee and any deductions made any other details to show that the requirements of the award or enterprise agreement relating to pay and hours worked are being met

Leave records any leave taken by the employee the employee's entitlement from time to time to that leave the accrual (buildup) of that leave

Superannuation amount of contributions made period over which contributions are made when the contributions are made name of the fund or funds to which the contributions are made

Long Service Leave Date of Commencement of Employment Copies of Forms Lodged with The Long Service Corporation

OH&S Employment Induction Records Site Induction Records Record of Training Record of Licenses

Employee Or SubContactor Common Law Employee – Control Test – Integration Test

Control Test Who is the Controller? – Who determines hours of work – Who determines sequence of work

Integration Test How does the person fit into the organisation Is the working relationship a continuing one Can the employee work for others Can the person profit from good business management

Common Law Will affect issues such management control – Vicarious Liability for employees actions for tortuous Acts such as Fraud Negligence – Breaches of Statutory Law such as EPA, Driving Laws etc – Employment Conditions, does the award apply – Remember Statutory Requirement from ATO, Workcover etc may deem Common Law Contractors Employees

Subcontractor or Employee -ATO ATO has test to determine if the arrangement is an Employee or Subcontractor This is called the Personal Services Income test Remember the ATO is only interested Tax Paid

Test 1- The Results Test You’ll pass the results test in the income year if you can answer ‘yes’ to all three of the following questions for at least 75% of your PSI:

Results Test Q1 Q1) Under your contract or arrangement, will you only receive payment when the work has been completed – that is, after producing the contracted result To answer ‘yes’, your contract must stipulate: you have to produce an outcome before being paid, which may include progressive payments, and you are paid this way.

Example of Q1 A carpenter enters into a contract to build five tables. The contract states the carpenter will not be paid until all five tables are completed. The carpenter is paid when he completes all five tables. This contract will pass this first condition of the results test as the payment is linked to producing a result (completing the five tables).

Notes to Test 1 If you’re paid on an hourly basis or daily rate for the services you provide, it’s unlikely you’ll pass the first condition of the results test as this payment would generally not be linked to producing a specific result or outcome

Results Test Q2 Question 2: Do you need to provide the equipment or tools necessary to do the work? To answer ‘yes’ to this question, you need to supply all the equipment or tools that are required to complete the contracted work.

Example Question 2 A painter is contracted to paint an office. As part of the contract, the painter has to provide their own tools and equipment including paint brushes, rollers and drop-sheets. As the painter has provided the necessary equipment to complete the work, they would pass the second condition of the results test

Note to Question 2 If no equipment or tools are needed to complete a job, you will pass this second condition of the results test

Results Test Q3 Do you have to rectify defects in the work, or are you liable for the cost of rectifying defects? An carpenter is contracted to complete a project. Under the contract, the carpenter is liable to rectify any defects in their work at their own expense, even if they have to pay someone else to rectify the defects. This contract would pass the third condition of the results test as the carpenter is liable for the cost of rectifying the defects.

Note to Q3 If you are entitled to invoice your payer for the hours you spend in rectifying any defects in your work, you will not pass this third condition of the results test.

Personal Services Income If you answered ‘yes’ to all three questions in the results test, you have passed this test and the PSI rules do not apply to this income and will be considered a Sub-Contractor for tax purpose If you do not pass you need to asses for Step 2

80/20 Rule For the 80% rule, you need to work out whether any of your clients, or their associates, provides 80% or more of your PSI in an income year

80/20 Rule If you receive PSI from a client and one or more of the client’s associates (for example, a company and a subsidiary of that company), this PSI is considered to come from one source

80/20 Rule - Example Sasha is an IT consultant who designs software for two different clients in an income year. The income Sasha receives is PSI as the majority of the income is a reward for her knowledge, skill and expertise. Sasha charges the first client $90,000 and the second $10,000 for the work she completes. This means 80% or more of her PSI comes from one client, as the first client has provided 90%

80/20 Rule If you fail this test you must apply for a determination from the ATO if you want to be classed as a sub-contractor If you pass this test you must asses Step 3

Step 3 You must pass at least one of the following tests – Unrelated Clients Test – Employment Test – Business Premises Test

Unrelated Clients Test Question 1: Do you receive PSI from two or more unrelated clients To answer ‘yes’ to this question, you need to receive PSI from at least two clients who are not related or controlled by the same individuals or entities

Example Bryce is a Carpenter who works for 3 different companies in equal amounts (33%). One Director is Common to all three Companies These Companies would be deemed related and Bryce would not considered a Subcontractor for Tax Purposes

Unrelated Clients Test Question 2: Do you provide your services as a direct result of making offers or invitations (such as by advertising) to the public? To answer ‘yes’ to this question, there must be a definite connection between the offer to the public and the engagement for the work. Making offers to the public includes advertising in a newspaper or business directory, maintaining a website, and word-of- mouth referrals

Employment Test Question 1: Do you get employees, partners (in a partnership) or other contractors to perform at least 20% (by market value) of the principal work? Gareth is a truck driver. He contracts: – another truck driver to drive the truck on long- haul trips – a bookkeeper to help with invoicing. The truck driver is helping in the principal work while the bookkeeper is not.

Employment Test Question 2: Do you have one or more apprentices for at least half of the income year? To answer ‘yes’ to this question, you don’t have to have the same apprentice for the entire six months. Also, your apprentices don’t have to work with you for six months continuously

Business premises test You’ll pass the business premises test in an income year if you answer ‘yes’ to all parts of the following question. At all times in the income year, were your business premises: owned or leased by you used for personal services work more than 50% of the time used exclusively by you physically separate from your residence and your associates’ residences physically separate from the business addresses of clients and their associates

Business Premises Test Two common examples that don’t pass the business premises test are: a home office as this not considered physically separate from your residence an office jointly leased with another person/business entity, as neither lessees have exclusive use of the premises.

Workers Compensation (Work Cover) Who are deemed Employees?

Workers Compensation (Work Cover) Who are deemed Employees?

Workers Compensation (Work Cover) Who are deemed Employees?

Workers Compensation (Work Cover) Who are deemed Employees?

Superannuation Guarantee

Eligible Employees Aged 18 to 69 Earn more than $450 per month If $450 works > 30 hours per week

Self Employed No legal requirements to pay superannuation for yourself If you work for your own company, you are an employee of that company and must pay yourself superannuation.

Payroll Systems In house systems – Purpose Made (These are Suited to large Companies) Chris 21 Oracle SAP Micropay

Payroll Systems Combination Accounting & Payroll – Purpose Made (These are Suited small business) MYOB Quickbooks

Payroll Systems Outsourced Payroll – Subcontracted Out to Specialist Companies ADP Employer Services Talent 2

Payroll Systems Paper Systems – From Officeworks etc Provide a written format to record Payroll information

Payroll Items Earnings – Reward for Effort – Eg Carpenter pay rate is $21 for Carpentry Work

Payroll Items Entitlements – Benefits that are derived because employment – Annual leave – Sick Pay – Bereavement Leave – Public Holidays – Superannuation – Redundacy

Payroll Items Allowance – Payment above Earnings to accommodate for special or harsh conditions – Height Allowance – Site Allowance – Living Away From Home Allowance – Confined Space – See Hand Out

Payroll Items Deductions – Moneys subtracted from Gross Pay to determine Nett pay – Taxation – Salary Sacrifice Superannuation – Union Fees – Child Support – Allotments

Definition - On Costs Entitlements & Allowances will be On Costs

Employees Wages & Conditions Normal working hours will be determined by the award Cl 27.1 Work out of these hours is considered overtime Cl 29.1

Method of Wage Payments Cash Direct Deposit Cheque – Most Awards Require that paid time be allowed to deposit the cheque to the Bank Account

Other Allowance See Payment Summary Sheet

Time Sheet

Wages Book