Hiring Staff: A checklist for legal compliance

25 July 2019
Posted by Sarah Luttrell

Hiring staff is an important step for any business. Being thoughtful and thorough at the start of the processes will prevent risks down the line.

Consider these points to ensure you are getting the legal processes right when engaging a new staff member to work in your business.

Is the individual an employee or contractor?

Determining whether the individual is an employee or an independent contractor can be a tricky assessment, but one you don’t want to get wrong. It is illegal to enter into a ‘sham-contract’, being a sub-contracting agreement with an individual who should actually be engaged as an employee. This assessment will depend on a number of factors and the circumstances. Click here to read our recent blog for further information.

What is the status of the employment?

Depending on the requirements of the job and the individual, you may take on an employee on a casual, part time, full time or fixed term basis. Consider how busy you think the job will be and for how long.

The basis of which the individual is hired means they may have different entitlements. For example, a casual employee is not usually entitled to paid sick or annual leave, and there is no guarantee of ongoing work. In accordance with the Fair Work Act and applicable awards, the casual employee may also be entitled to leave loading (an increase on their hourly rate) and penalty rates. Refer to the Fair Work website for further information.

Does an award apply to the employment?

In many industries, a modern award applies. A modern award is a document setting out the minimum terms and conditions of employment, and special terms such as penalty rates and overtime. It’s important your employment agreement properly reflects and coincides with the applicable award. To see if your staff are covered by an Award, you can use the Fair Work ‘Find My Award’ tool as a starting point.

Employees may not be covered by a modern award, and in the absence of an enterprise agreement in the particular workplace, their minimum entitlements will be set out in the National Employment Standards (NES).

Minimum entitlements for all employees

All employees in Australia, even those under an award, are owed the ten minimum employee standards under the NES. These include a minimum amount of paid and unpaid leave, entitlements to long service leave, a minimum period of notice if their employment is terminated, and redundancy pay. An employment contract cannot override, or lessen, the minimum entitlements under the NES.  You can read more about the NES here.

While awards generally set out minimum rates of pay, if an employee is not covered by an award, they are still entitled to the National Minimum Wage. As of 1 July 2019, the National Minimum Wage has increased to $740.80 per week or $19.49 per hour. As of this date, there is also a 3.0% increase to minimum wages for junior employees, trainees, employees with a disability, and piece rates under modern awards.

If you are found to not be affording employees their minimum entitlements, you may be liable to back-pay employees and be subject to penalties, not to mention the potential PR backlash. Celebrity chef and restaurateur, George Calombaris, recently learned this the hard way after the media reported relentlessly on the Fair Work Ombudsman’s four year investigation revealing Calombaris’s restaurants were underpaying over $7 million in staff wages.

Know your recording obligations

Employers must keep written records of hours worked and wages paid for each employee. Records must be kept for at least seven years. You are also required to give all employees a pay slip within one day of paying their wages, and these pay slips must include wages, pay-as-you-go tax withholding, and superannuation contributions. End of financial year payment summaries are also required to be provided to employees by the ATO.

Is your contract legally sound?

An employment contract can set out the specifics of the employment such as the duties in the role, the days, hours and location of work, travel allowances, etc. Importantly, the employment contract can also set out protections for your business, such as confidentiality obligations, ensuring all intellectual property created by the employee is transferred to the company, and placing restrictions on the employer for working for competitors.

Employers should be careful to ensure that the terms and conditions set out in an employment agreement are not in breach of the Fair Work Act, or unfair or unenforceable. If an award applies, it’s important the employment contract is compliant with your obligations under award, keeping in mind you may be able to ‘set off’ some entitlements under the award such as penalty rates.

If your business is looking to start employing staff, or you want to ensure your employment practices are compliant with employment laws, please give us a call on 03 9521 2128, or email us at hello@studiolegal.com.au.


The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.