Australian employment law appears complex and confusing when looking from outside view although in some ways there are many similarities to other countries. Other factors that complicate matters include the differences between states in payroll administration. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Australia.
Employment Law in Australia multiple levels of influence: aside from its foundation in common law principles, there is minimum standards defined by legislation (primarily the “Fair Work Act”). However if the employment falls under a statutory “Award” it may have differing or extra conditions on top of the legislation. Collective agreements such as “Enterprise Bargaining Agreements”, can apply specific conditions on the top legislation or Award.
While employment law was mostly unified with the introduction of the Fair Work Act, the state of Western Australia did not fully acquiesce to referral of power to the federal government. Most types of employers are covered by the federal government, and employment law in general in Western Australia remains highly similar, but as a warning, there may be variations in obligations and standards.
Exceptions include State employees working in public sector agencies from New South Wales, Queensland, South Australia and Tasmania, local council workers in New South Wales, Queensland and South Australia, and in Western Australia where the Fair Work Act legislation only covers workers employed by a “constitutional corporation”, which includes trading and financial corporations, corporations formed outside of Australia, and federal government agencies.
For these reason the following is a very general guide, mainly based on the minimum obligations set out in the federal legislation.
There are several key areas to be aware of within Australia’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
All employees in Australia will have a common law contract of employment that specifies the terms and conditions of employment.
Probation period is also known as “minimum employment period”. According to IHR Australia, the maximum period in Australia is six months, or up to twelve months for small business employers (businesses with fewer than fifteen staff).
A. Notice Period
The Fair Work Australia website reports that an employer must provide a minimum period of notice, as follows:
Less than 1 year 1 week
Between 1 and 3 years 2 weeks
Between 3 and 5 years 3 weeks
Over 5 years 4 weeks
If the employee is over 45 years old, and has completed at least two years of service, additional one week’s notice is required.
The Fair Work Australia website explains the termination procedure in Australia. The employer must have cause for termination, and in particular it must not be unlawful (e.g. discriminatory on grounds of race, gender, etc) and not be “harsh, unjust or unreasonable”. Generally the employer must show they took reasonable steps, such as performance reviews and several formal warnings, and counselling the employee to give them a proper opportunity to understand and rectify any performance issues. Employees can be dismissed under the context of a redundancy so long as the redundancy is genuine.
Fixed-term contracts can allow the relationship to expire at the end of the term specified in the contract.
C. Severance pay
The Fair Work Australia website reports that for any wages and holiday time owed, the employer must also pay a severance if the employee is made redundant. If the employee has at least one year of continuous service and the employer employs 15 (i.e. does not fall under the ‘Small Business’ code) can be entitled to a maximum of 16 weeks pay).
There are laws that regulate leave periods based on time of service and the type of leave requested, including:
An employee (other than a casual employee) is entitled to four weeks of paid annual leave for each year of service with the employer. An employee classified as a ‘shiftworker’ they are entitled to five.
B. Pregnancy/Paternity Leave
Employees in Australia are eligible for unpaid parental leave if they have completed at least 12 month of service with the employer.
The employee should inform their employer of their intention to take unpaid parental leave by giving at least 10 weeks written notice. Each eligible member of an employee couple may take a separate period of up to 12 months of unpaid parental leave. If only one person is taking leave, that employee may request up to 12 months.
For a pregnant employee, leave can start up to six weeks before the expected date of birth. If the employee is not giving birth to the child, leave starts on the date of birth or placement of the child.
C. Personal Leave / Sick Leave
As reported by FindLaw.com, all full-time employees except casuals are entitled to a minimum of 10 days paid personal leave each year. These days can be used for time off for sickness, for example. The employee can take personal leave if they or an immediate family member is sick, injured or has an unexpected emergency. In addition, employees may take up to two days of unpaid leave under ‘compassionate’ grounds – such as due to the death of a family member.
A. Statutory Pension
Employers are required to pay 9.5% of an employee’s salary into a “superannuation” fund, as of 1 July 2014.
According to Towers Watson Global News Briefs, this obligation was reportedly set to gradually increase from 9% to 12% stepping annually from 2013. However, an article on the Australian Payroll Association reported that this changed due to a decision by Federal Parliament August 2014, now setting the superannuation rate to remain at 9.5% until 2021
B. Workers Compensation
Employers are also required have Workers’ Compensation if employing people. The company is obligated to maintain a current accident and sickness insurance, generally referred to as “Workers’ Compensation Insurance”. The registration authority, requirements, process, price and timeframes of registering vary greatly between states. However, as in the example reported by Work Safe Victoria, costs are generally based on an employer’s health and safety performance, and the safety ranking of the industry. A comparison guide by Safe Work Australia reports that in some states, the actual insurance is covered by a private insurance company that the company must engage, and only overseen by the Worker’s Compensation body, while sometimes it is covered directly.
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Australia. For companies which intend to employ their staff directly through their incorporated Australian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Australia.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Australia.
The Shield GEO solution is an attractive alternative where:
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Australia
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Australia
– the company needs help with tax, employment, immigration and payroll compliance in Australia
Shield GEO can contract directly with the company to employ and payroll their staff in Australia. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.