US companies entering the Australian market will need to staff their operation either with US workers on assignment, or by hiring locals. In both cases, Australian payroll, immigration and tax rules must be followed to be in compliance and avoid issues with authorities. This includes employing through a legal Australian entity.
Because the details and terminology of Australian employment laws may be new to US HR professionals, we have compiled a reference guide comparing key terms between the two countries, as well as some similarities and differences for each item.
One distinction that will be stand out to US employers is that many employment benefits that are optional in the US have statutory minimums in Australia. The US has a pro-business employment policy, which needs to be adapted in countries like Australia that have more worker and labor protections in place.
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1. Labor Laws vs. National Employment Standards (NES)
US employers are used to various labor laws against discrimination, harassment or unfair hiring practices. However, Australia goes far beyond that with the NES, which sets out 10 minimum standards of employment, including maximum hours per week, annual minimum leave, holidays and termination rules.
2. 401K vs. Superannuation
The Australian term for retirement savings plans is ‘superannuation’ or just ‘super’ and the employer contribution is a minimum fixed 9.5% of income. This statutory guarantee is paid directly into the employee’s super fund, with some restrictions on access. Employees may also make their own contributions to their super fund, and this can actually reduce the amount of the employer’s super guarantee contribution.
This differs from the US 401K which is not a mandatory benefit and the amounts of employer contribution may only be ‘matched’ to employee contributions. However, the annual contribution and withdrawal limits are set by IRS tax statutes.
3. Paid Time Off vs Annual Leave
Paid time off is termed ‘annual leave’ in Australia, and there is a minimum number of leave days required for all employees. This includes public holidays, vacation time sick leave and maternity leave. Minimum paid holiday leave in Australia is four weeks per year that may be accrued and paid out on termination.
Paid time off in the US is up to the employer, with two weeks being standard for vacation plus public holidays. Other types of leave time are negotiated in the employment contract or set by company policy.
4. Tax Withholding in Australia: ATO vs. IRS
The Australian Taxation Office (ATO) is the government entity that enforces tax withholding and payment, just like the Internal Revenue Service (IRS) in the US.
The Australian Tax File Number (TFN) is similar to the Social Security number in the US. The Pay As You Go (PAYG) works the same as the system in the US, where taxes are withheld each month from the paycheck, based on compensation levels and standard tax tables.
5. Payroll Tax vs. FICA
There is a payroll tax in Australia where the rate depends on the state and region of employment and is paid solely by the employer. This is slightly different than the national FICA payroll tax in the US which is fixed at 15.4% and paid in equal shares by the employer and employee.
6. Redundancy Pay vs. Severance Pay
Another difference that may be new to US employers is what is known as redundancy pay, where the worker receives payment if their position is no longer necessary. The amount will depend on how long they have been continuously employed and is set by the Fair Work Commission.
Severance pay in the US is not statutory and is usually a part of the employment agreement if offered at all. Any termination in Australia requires a notice period and some reasonable cause, which is different than the ‘at will’ employment policy in the US.
7. TSS (457) Work Visa vs. H1B Visa
If a US employer is sending an employee on assignment to Australia, they will need a TSS (457) work visa. This non-immigrant visa is similar to the H1B visa in the US and was recently changed to be more restrictive for certain types of workers. The TSS is valid for four years, compared to three years for an H1B visa.
8. Collective Bargaining Agreements vs. Enterprise Agreements
Just as in the US, certain trades and professions may have union bargaining representatives, that negotiate some terms of employment for union members. These are referred to as enterprise agreements in Australia.
9. Employment Contracts vs. Modern Awards
A new concept for US employers may be that of ‘modern awards’ which set many of the terms and conditions for employment is different industries. While employment contracts are often the sole document for terms in the US, modern awards will need to be considered when employing in Australia. It is like a statutory contract, that cannot be altered unless there is some exception such as with high paid executives.
Shield GEO in Australia
Given the differences between US and Australian employment terms, rules and procedures, there is a real advantage in using Shield GEO to employ your staff on assignment in Australia. With our principal office in the country, we can offer a local account manager to assist with every stage of employment. Shield GEO becomes the actual, legal employer of record in Australia, saving your company the time and expense of setting up a legal corporate entity to run payroll.
We can employ both local citizens and foreign nationals, assist with work visas and make all required statutory withholding from pay. If you need an experienced and dedicated employment resource in Australia, then Shield GEO can meet the needs of any size company for one or more employees on assignment.
Need help employing in Australia? Get in touch