Payroll: The Basics Explained

So you are thinking of employing someone but a little confused as to what information is required and how to go about doing this.  Contracts, award rates, leave and superannuation will vary depending on what basis you are employing them e.g. casual, part time, full time or having them as a contractor instead of an employee. Firstly let’s unpack the contractor.
The contractor is either an individual or business who has their own Australian Business Number (ABN) and enters into working with you by them getting you to sign a service agreement or contract. As they are a business they will advise the rates for their services, payment terms and hours that they will be able to work with you. Their rate will include everything and nothing else is to be added on to this. Some examples of contractors in business would be a bookkeeper if you did not need a full time accounts person a painter to assist a construction or building company if only required someone on an adhoc or job by job case.

A contractor will then send you an invoice on the completion of services and you will pay the invoice which may or may not include GST depending on whether the contractor is registered for GST or not. The invoice should clearly display this but you can also search the Australian Business Register (ABR) http://www.abr.business.gov.au/ and by either putting the Australian Business Number (ABN), Australian Company Number (ACN) or name it will then advise if they are registered for GST.

An employee is someone who works for your business and the pay rate, frequency of payroll and hours of employment are decided by you. Just a quick side note you will need to ensure that you are paying your employees the minimum award wage and this is a great link to assist with this http://www.fairwork.gov.au/pay/minimum-wages.

Ok so you have decided on which option to take and if employing someone as an employee is the way you have chosen you now find yourself asking what else do I need from them and where to from here.

Below is a checklist of things that you will need from a bookkeeping point of view:

1. TFN declaration form. This is to be filled in by employee, you as the employer needs to fill in your section and then a copy is to be sent to the ATO and a copy is to be saved to the employee file. This link gives you more information about TFN forms https://www.ato.gov.au/Forms/TFN-declaration/
2. Employee information:
   1. Full name (including middle name)
   2. Date of Birth
   3. Postal Address
   4. Superannuation Fund & employee number
   5. Bank details
   6. Email address

So if you are in the process of advertising for a job or just about to employ someone and not sure of what you are doing you can contact us today for us to ensure that you are setting everything up correctly from the get go.

Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net