As a start up, when you need to hire you typically need to hire NOW. But while it might cost more than you've budgeted to get legal advice, the costs of not doing so can be extreme...
Hiring employees creates a number of legal risks. You've got state and national laws to comply with, not to mention tax laws, superannuation and that's not even getting into intellectual property and discrimination laws. Make sure your business doesn't make one of these fatal errors and get stopped in its tracks before it even starts.
1. Thinking you've hired a contractor when they're actually an employee
As you're no doubt aware, employment law is complex and brings with it a myriad of employee entitlements. For this reason, you might be thinking to set them up as contractors, not employees. But doing so isn't as easy as just calling them a contractor. A number of factors are key to consider, including whether they have an ABN, the method of payment, whether they can sub-contract their work to third parties, whether they have liability to rectify defects in their work and the particular industry you're in. Get the contract wrong and they may commence legal proceedings against you for damages, or the regulator may pursue penalties of up to $660,000 per breach of the Fair Work Act 2009 (Cth) .
2. Failing to comply with your PAYG obligations
Companies are liable for a penalty if they fail to withhold or pay a PAYG withholding amount when required. The penalty is equal to the amount that you should have withheld or paid. In addition, company directors are legally responsible for their company meeting its PAYG withholding obligations. The director of a company that fails to meet a PAYG withholding obligation in full by the due date automatically becomes personally liable for a penalty equal to the unpaid amount.
3. Failing to protect your IP (Intellectual Property)
If you're hoping to IPO (Initial Public Offering) at some point, or even to continue with current structure, you need to ensure your IP is protected since it is typically your business' most valuable asset. This doesn't just mean a trade mark application here and there. Employee contracts are key, as are having appropriate structures in place. It's just another reason why it's fundamental to have a lawyer draft your agreements and advise on setting up any frameworks necessary to protect your business as you grow and innovate.
4. Failing to pay Super
Legislation was passed in December 2018 that gives the ATO (Australian Tax Office) the power to direct employers to pay unpaid superannuation. This means, following the implementation of single touch payroll, the ATO will now be more aware than ever of when a business is failing to meet its superannuation and PAYG tax obligations. Failure to abide by a direction to pay superannuation can result in a fine of up to $10,500 or 12 months imprisonment which puts it squarely in the not-worth-the-risk category.
There are no shortcuts to success when it comes to hiring your team. Seek proper legal advice so you can focus more on what really matters - growing your business and not battling employment disputes or negative PR. Let Essia Law help your business get the legal advice it needs!