INVEISS INSIGHTS on EMPLOYMENT
Introduction
As an employer, you have an obligation to keep yourself aware of industrial relations law and any upcoming changes. For instance, are you aware of your duties and rights under the Fair Work Act 2009? How about the 122 Modern Awards? The National Employment Standards? Or the various anti-discrimination acts, or the Fair Work Act? Together with all other applicable laws, regulations, awards and standards, these make up the National Workplace Relations system, which your employment contracts must adhere to.
If all that sounds like a lot, that’s because it is. But before anything else, it is worth checking whether they apply to you. Because the previous Acts have been legislated by the Federal Government, they only apply to ‘constitutional corporations’ as affirmed by New South Wales v Commonwealth.
Is my corporation a ‘constitutional corporation’?
Step 1: Is It A Corporation?
This seems like an obvious question, but it does exclude certain categories. Partnerships and individuals, for instance, do not pass under this test. Alternatively, most not-for-profit organisations will. Trustees on the other hand, may or may not be a corporation, depending on the way the trust has been set up.
Ultimately, any entity that has been incorporated will be a corporation.
Step 2: Is It A Foreign, Trading or Financial Corporation?
This might sound like a fairly stringent test. That non-for-profit organisation, or incorporated school, or the single-owner gardening business wouldn’t satisfy this question?
Indeed, the ‘foreign’ component is stringent. Any corporation not incorporated in Australia will not pass that portion. However, ‘trading’ has been defined extremely broadly, and it covers any activity that involves the notion of buying and selling and the generation of income. These include:
- Providing services in return for a fee or subscription;
- Selling goods;
- Providing, and charging for, a performance;
- Any fundraising that involves an exchange (e.g. raffles, lotteries, etc.);
- Deriving income from investments; and
- Renting property.
It is important to note that there is no concept in this test of either ‘profit’ or ‘predominant purpose’. Thus, even where a corporation only engages in one of the above activities to a limited extent (generally anything over 20% in terms of annual revenue in practice), and even if they do not make a profit from it, that corporation will pass this test.
Step 3: Did You Answer Yes To Steps 1 And 2?
If so, your business is a ‘constitutional corporation’.
So…What now?
If so, then you need to be aware of all your rights and obligations regarding such areas as:
- Hiring;
- Employees v. Contractors;
- Employer Obligations;
- Modern Awards;
- National Employment Standards;
- Leave;
- Casual Workers;
- Workplace Bullying and Anti-Discrimination;
- Termination; and
- Termination by Small Businesses
If you are unsure of any of the previous, then these guides are for you.
INVEISS INSIGHTS on EMPLOYMENT: Employees and Contractors
If you’re successful and your business continues to grow, eventually you will need to engage the services of others as the workload becomes too great to handle by yourself. Perhaps the very first thing you will need to decide is whether you want an employee or a contractor.
The differences between the two can be subtle, especially in the cases that make it to litigation, but they have important ramifications when it comes to your legal obligations as a business owner. In the end, the decision will probably depend on the type of business you are running, but the choice needs to be made clearly and from the beginning of the employment / contractor relationship. An uncertain demarcation between the two will almost always mean uncertain liabilities, which is the last thing you want in your employment contracts and relationships.
Nor is it enough to simply specify what the relationship is. If it looks like a duck and sounds like a duck, at the end of the day, the courts will always call it a duck, regardless of the label hanging around its neck. And if you use that label to deliberately attempt to avoid responsibilities, you may be liable for fines and other penalties imposed by the Independent Contractors Act 2006 and the Workplace Relations Amendment (Independent Contractors) Act 2006.
So what is the difference between employees and contractors?
As a business owner, one of the main differences between the two forms is that you owe significantly more responsibilities to employees. The employer bears the risk for their work, must provide insurance, usually has to pay tax on their behalf, make superannuation contributions and is usually paid regardless of the outcome of their efforts.
As a sensible employer, you’re probably wondering why there aren’t more contractors, given the time, effort and liabilities employees attract. Contractors, however, have their downside. Contractors have almost complete freedom in the way they carry out their tasks, including the ability to delegate, and they usually work as their own business. These are often considerable detractors for a corporation looking to fill a position.
So how do you choose between the two? Generally, contractors fill service roles: the building industry, cleaning services, and trades such as plumbers or electricians often work under contracting agreements. For all other roles, employees are usually the most appropriate.
How do I ensure the relationship is set up correctly?
It is vital to note that there is no set test for determining whether a worker is an employee or a contractor. Instead, a range of indicia are used to determine the relationship as a whole. As such, the best policy is to ensure the parties satisfy as many of the criteria as possible.
The following is a list of some of the criteria used to distinguish between employees and contractors. The existence of one or more of the following cannot be relied upon to independently guarantee the existence of a particular relationship, and in many respects, the specification of ‘employee’ or ‘contractor’ in the employment contract is the least determinative characteristic.
| Employee |
Contractor |
| Contract |
The contract is for continuing work, as dictated by the employer. |
The contract is for a given result. |
| Authority and control |
The employer has the right to tell the employee what work is to be done. |
The contract is the sole authority over the contractor. |
| Independence |
The employee has a duty to perform work as directed. |
The contractor decides when and how tasks are to be performed. |
| Risk |
The employer bears risk for the employee’s actions. |
The contractor bears the risk, and likewise, the opportunity for profit, in the relationship. |
| Hours |
The employee works for a set number of hours per time period. |
The contractor may work at any point, for any length of time. |
| Pay |
The employee is paid by the hour / day / week. |
Contractors are paid for the completion of a single task. |
| Entitlements |
Employees receive leave entitlements, and other benefits, allowances and expenses. |
Contractors generally do not receive entitlements, and they are responsible for their own expenses. |
| Delegation |
Employees usually may not delegate. |
Contractors usually may delegate. |
| Expectation of work |
Employees can expect a continuation of work. |
Contractors expect the work relationship to end at the completion of the task. |
| Other work |
A full time employee usually only has one employer. |
Contractors may work for as many people as they wish. |
| Taxation |
Employers are usually responsible for PAYG tax for their employees. |
Contractors are usually responsible for tax. |
INVEISS INSIGHTS on EMPLOYMENT: Hiring
If your business is relatively small, there is a good chance your first employee or even employees might be previously known to you. The job might have been directly offered to them because they’re your neighbour, daughter-in-law or acquaintance from university. If so, that’s fine. Legal issues arise, however, when you begin to advertise positions and you have to choose from multiple candidates.
Advertisement and Hiring
You’re probably aware of it, but it’s worth mentioning that it is against the law to target a job or service towards any particular group. Similarly, it is illegal to withhold a job or service from any particular group.
Thus, when writing an advertisement for a job position, you cannot mention (either as a condition to, or an exclusion from, the job) any of the following:
. Gender, transgender status, or sexual preference;
. Marital status, pregnancy or family responsibilities;
. Age;
. Criminal record;
. Trade union activity;
. Race, ethnic, or religious background; or
. Disability.
In choosing from several potential employees, it is similarly illegal to choose between applicants on the basis of the same criteria. A failure to adhere to these rules in either instance may result in a claim being brought against you by employees or potential employees. Thus, as an employer, it is usually best not to ask any question relating to the above criteria in an interview: it may be used against you later.
In some situations, and for some reasons, however, it can be legal to discriminate on these grounds. For instance, disabilities need only be accommodated to a reasonable extent. Only where accommodations would impose an unjustifiable hardship on the employer, may they discriminate against employees.
Likewise, where a person cannot meet a genuine and reasonable requirement of the job because of one of the above criteria, discrimination is lawful.
For more information, see Inveiss Guide to Employment: Anti-Discrimination.
Medical Tests
As an employer, you have a right to require a medical test prior to, or as a condition of continuing, employment. These tests may be especially important for jobs that require specific mental or physical abilities. You must, however, allow potential employees to take the test regardless of their personal characteristics (unless they do not meet the job requirements) such as age or gender.
There are three things employers must take care of with medical tests:
1. The Test Must Relate Specifically To The Job Requirements
You must ensure that the test is not excluding participants on a basis other than what is reasonably required for the job. For instance, given today’s technology, a receptionist must still be able to answer and use a phone, but he or she does not need to be able to hold it.
2. Information Gathered Must Not Be Used Elsewhere
A medical test must only be used to determine competency at a particular necessary skill. As such, any information incidentally gathered that does not relate to the job competency (such as the number of claims made against previous employers for work-related injuries) must not be used to decide between employees.
3. The Duty of Confidentiality and Privacy
As always, you have a duty to protect confidential information you receive regarding your employees.
Induction
Once you select an employee, you must get them to fill out the following forms:
. Tax declaration form (sample only);
. Salary banking form;
. Superannuation contribution form; and (if so desired)
. Approval from the employee for deductions to be made from the employee’s salary.
INVEISS INSIGHTS on EMPLOYMENT: National Employment Standards
The National Employment Standards can be found in Part 2.2 of the Fair Work Act. In essence, they comprise the minimum standards employers must offer to all employees in their employment contracts. If you fail to at least match these conditions the law will simply read them into the contract. Of course, nothing stops you from offering incentives or conditions more favourable than these – indeed, this may be desirable, or even necessary, to attract the level of skill and expertise that the job requires.
The National Employment Standards are as follows:
Weekly hours
You may not ask employees to work more than 38 hours per week (averaged across a period of time not exceeding 26 weeks), unless the additional hours are reasonable. As is usual, ‘reasonable’ has a very broad definition, and at a minimum, the following factors will be taken into consideration:
. Whether the additional hours represent any risk to employee health or safety;
. The employee’s personal circumstances, including family responsibilities;
. The needs of the workplace;
. The usual patterns of work in the relevant industry;
. The nature of the employee’s role and their responsibilities; and
. Whether compensation is provided for the additional hours.
Flexible working arrangements
Employees have the right to request flexible working arrangements if their children are either not in school, or is a minor with a disability. Generally, these arrangements will revolve around a change in work hours, work patterns or work locations. However, these are not mandated: you may refuse the request if you have reasonable business grounds, but this must be done in writing, with reasons, within 21 days. This same right is also available to casual employees who have worked for 12 months or more.
Leave
The National Employment Standards look at eight different types of leave, not all of which apply to all employees. You must, however, be able to provide employees with a breakdown of their leave (if any) owing when asked. For more information, including specifics about the types of leave, see the Inveiss Guide to Employment: Leave.
Public holidays
Public holidays generally entitle your employees to be absent from work. You may, however, request them to stay, but they have the right to refuse if the request is not reasonable, or if the refusal is. The reasonableness of either will depend upon factors such as the nature of the work, the employee’s personal circumstances, compensation payable and the amount of notice.
Public holidays and pay
If your employees are entitled to be absent from work, are they also entitled to pay? The answer depends on the type of employee. The entitlement only accrues if their ordinary work hours fall on that day. As such, you generally don’t have to pay casuals for leave over public holidays. Full-time and part- time employees, however, must be paid.
Public holidays and leave
If a public holiday falls within the period in which an employee is taking leave, that public holiday does not constitute a day of leave.
Notice of termination and redundancy
Occasionally, you will be forced to bring an end to the employment relationship. This can be a particularly important time to ensure you comply with every aspect of the law, as ex-employees can be fertile ground for a claim against you. The employer must satisfy two requirements:
Notice of termination
You must provide written notice of the day of termination, which must be for the following day at a minimum. In addition, you must provide either the following period of notice, or payment in lieu, of:
. 1 week for employment of less than 1 year
. 2 weeks for employment of less than 3 years, but more than 1;
. 3 weeks for employment of less than 5 years, but more than 3; and
. 4 weeks for employment greater than 5 years.
. In addition, an additional week is required for employers older than 45 who have been working for you for at least two consecutive years.
Redundancy Pay
The National Employment Standards provide that, except for ordinary turnover of labour, employees are entitled to redundancy pay if they are terminated because the employer is insolvent or the position is no longer needed. Employees in this situation are entitled to a minimum of 4 weeks of their base rate of pay and may be entitled to a maximum of 16 weeks of redundancy pay, depending on the number of years of service. After 10 years of service, this is capped.
Exceptions to the requirements of termination and redundancy
If you are a ‘small business employer’ (if you employ fewer than 15 people), you do not need to comply with these obligations. Nor do they apply if the contract was for a set period of time or where they were an apprentice. Finally, in the event of serious misconduct, the employment relationship may be terminated without consequence. Serious misconduct includes:
. Behaviour that caused serious risk to another’s health or safety, or to the business’ profitability;
. Theft, fraud or assault;
. Being intoxicated at work; or
. Refusing to carry out lawful and reasonable requests consistent with the employment contract.
Finally, you – as the employer – must provide the Fair Work Information Statement to all new employees, preferably along with their employment contract. This statement contains information regarding the National Employment Standards, modern awards, agreements, the rights regarding termination, flexibility arrangements, entry, transfer of business and the respective roles of Fair Work Australia and the Fair Work Ombudsman.
INVEISS INSIGHTS on EMPLOYMENT: Leave
Employee entitlements to leave can be particularly varied. Some types must be used before others; others accrue across years; whilst others expire at the end of the year. Still yet, some employees do not receive some leave, but do receive others. Not only do you have to be able to provide the appropriate type of leave to your employees, you must also be able to provide them with a list of how much leave they have owing when they ask.
Leave can be broken into several categories: Parental Leave, Annual Leave, Long Service Leave, Personal Leave, Compassionate Leave and Community Service Leave. Again, the figures in each section are minimum requirements. Nothing stops you offering an employment contract with better leave conditions.
Parental leave
Paid parental leave
Following the implementation of the Paid Parental Leave Act 2010, employers must provide up to 18 weeks of paid parental leave at the national minimum wage. Although the Federal Government funds this payment, you are responsible for administering the payments.
There are several restrictions on who may claim the leave. Section 31 of the Paid Parental Leave Act sets out the full requirements, but amongst other things, they must be the primary carer, have worked for a set ‘qualifying period’, and have not received the Baby Bonus.
Unpaid parental leave
After working for at least 12 months, employees are entitled to 12 months of unpaid parental leave. This applies whether the infant is born or adopted into the family. In addition, employees may request an additional 12 months unpaid leave. After this period, the employee’s job, or a substantially similar job, must be returned to them.
Full-time, part-time and casual employees are covered by this right, but the latter must have also had a reasonable expectation of their job continuing, but for the birth of their child.
Annual leave
As a minimum, you must provide four weeks of paid leave to employees for every year they work. This entitlement accrues progressively across the year and accumulates from year to year. This entitlement does not apply to casual employees.
Long service leave
Generally, long service leave accrues in accordance with the individual award or contract governing the employment relationship. Where the award or contract does not cover this provision, long service leave provides for two months of paid leave after 10 years of service, and an additional month for every subsequent five years of service. This benefit accrues for full-time, part-time and casual workers.
Personal leave
Paid personal leave
Employees receive 10 days of paid personal leave to be taken if they are unfit for work, or because a member of their immediate family or their household is ill, injured or in an unexpected emergency. You have the right to request for appropriate documentation of this event. This leave must be taken before unpaid carer’s leave is taken.
Unpaid carer’s leave
For every occasion where an employee’s immediate family member, or member of their household, requires care due to injury, illness or unexpected emergency, they are entitled to two days’ unpaid carer’s leave. This cannot be taken whilst paid leave is still outstanding.
Casual employees are only entitled to unpaid carer’s leave.
Compassionate leave
For every occasion when an immediate family member, or member of the household, has an illness or injury that poses a serious risk to their life, or if they die, the employee is entitled to two days compassionate leave. All employees are entitled to this leave, but casual employees are only entitled to unpaid leave.
Community Service Leave
You must provide unpaid leave for reasonable voluntary emergency activities. This must account for both time taken to travel to and from the emergency site, and recuperation time upon arrival back home. In addition, all employees except casuals are entitled to 10 days paid leave for jury service.
INVEISS INSIGHTS on EMPLOYMENT: Casual Workers
The choice to employee casual workers usually revolves around the flexibility requirements of both the employer and the employee. If you employee, or plan to employee, high school or university students, you will probably have to engage them on a casual basis. This offers both you and the employee flexibility to suit each of your requirements.
If you’ve read some of our other guides, particularly those regarding the National Employment Standards and Leave, you will have noticed that casual employees generally receive fewer rights and benefits than full or part-time workers. To make up for this, casual pay is usually paid at a higher hourly rate: this is accounted for by the loading paid on top of the ordinary hourly rate to make up for the loss of benefits.
Benefits for employers
There are several benefits for employees in hiring casuals:
- There is no guarantee of providing any particular number of hours of work per week;
- There is no guarantee of a regular income; and
- Casual employees have no right to advance notice of termination of their employment. This means they are not subject to the usual rules of termination.
Disadvantages for employers
This is not to say that casuals are without their disadvantages, although much of what follows will depend on the individual award, if any, that the casual employee is employed under. First, casuals are paid a premium, often up to 20% more than the standard hourly base rate.
Second, there is often a minimum number of hours in a day that the casual must be employed for if they are to be employed at all.
Thirdly, under some awards, your casual employees may have the right to ask to be made permanent after six months of service.
When is a ‘casual employee’ not a casual employee?
It is very important to note that under some situations, an employee will not be a casual employee for the purposes of employment laws. Typically, the type of work a casual engages in is informal, uncertain and irregular. Yasmin Cetin v Ripon Pty Ltd suggests, however, that if the facts of the case demonstrate that these conditions are not met (for instance, if your employee always works during the day on Thursdays and Fridays), then your employee may be entitled to the standard rights of part-time and full- time employees against unfair dismissal. This is despite the fact they are termed a casual in their employment contract and are paid casual wages.
You must be very careful then in how you phrase employment contracts and the way you deal with your employees.
INVEISS INSIGHTS on EMPLOYMENT: Employer Obligations
As an employer, you have several obligations to uphold. These are in addition to the rights of employees to leave , in termination and equity.
Pay wages
As an employer, you have an obligation to pay your employees’ wages in full. This means you cannot deduct any money. There are, of course, several exceptions to this blanket rule. These include:
. If you are required to do so by law, such as for taxation (PAYG) purposes;
. Where the employee has previously agreed in writing and where the deduction is for their principle benefit. This would include additional personal superannuation contributions. If your employee is under the age of 18, you must also obtain the parent’s signature to the deduction; and
. Where the deduction is in accordance with an enterprise agreement or other award.
Pay slips
Interestingly, there is no requirement of when you have to pay employees (except that it must be ‘reasonable’, and the individual employment contract, award or enterprise agreement will usually specify this date), but you must provide a pay slip to every employee within one working day of the pay day.
These may, however, be given electronically or in a hard copy. You must contain the following details on each pay slip:
. The employer’s name and ABN;
. The employee’s name;
. The date, and the pay period;
. The gross and net amount of the pay, plus a breakdown of loadings, allowances, bonuses, incentive payments, penalty rates and / or any other entitlements which they are owed;
. Either the hourly or the annual rate of pay, whichever is applicable to the individual;
. The value of the deductions (if any) that were made, and for what reason they were deducted;
. The amount of any superannuation payment made by the employer.
Maintain records
You also have an obligation to maintain records, in English, for the time, overtime, wage, superannuation and leave accrued and owing for each employee. These records must be kept for at least 7 years, even if the employee no longer works for you. As well, you must keep them in a readily accessible format. Not only will this help you manage your business, but it will also enable you to comply with inspectors if so required, and with requests from employees as to their entitlements, which they have a right to ask for.
In addition to the information already listed, you must also ensure the records include the additional following information:
. The employer’s name and ABN (if any);
. The employee’s name;
. The date when the employment began, and the type of employment they are engaged in (full or part-time, permanent, temporary or casual);
In addition, you must be able to make some of this information available to your employees upon any reasonable request. At a minimum, you must be able to provide the following information to your employees:
. the applicable Award or Enterprise Agreement your employees work under; and
. the amount of leave currently accrued.
Superannuation
All employers have an obligation to pay superannuation contributions for eligible employees. Although you have the right to suggest a superannuation fund to your employees, generally you must honour their eventual choice.
Who are ‘eligible employees’?
An employee is entitled to superannuation contributions if they are between the ages of 18 and 69 and they earn more than $450 a month. This figure is the gross wage payable to them. If you employ someone under the age of 18, you only have to contribute to their superannuation if they work more than 30 hours per week.
How much do I have to contribute?
There is no maximum contribution rate, but there is a minimum (subject to any applicable award or agreement) of 9% of their ‘ordinary time earnings’. You have to make these contributions at least four times a year, although there is no upper limit to this figure.
INVEISS INSIGHTS on EMPLOYMENT: OH&S, Workplace Harassment and Anti-Discrimination
Occupational Health and Safety legislation requirements
Workplace design
As an employer, you are responsible for ensuring that your employees operate in a safe environment. This means you must ensure there is appropriate evacuation systems in place, walkways are clear of trip-hazards, minimal noise levels, appropriate provision of toilets and functional lighting, air- conditioning and ventilation. These represent only a suggestion of what may be appropriate: ultimately it will depend on the individual requirements of the job as to what measures may need to be implemented.
You must also provide first aid facilities, and, if you employ more than 25 people, you must also provide trained first aid personnel.
WorkCover NSW has the right to inspect and assess any workplace without notice. For complete requirements, the individual chapters of the Occupational Health & Safety Regulations 2001 (NSW) can be checked.
Psychological harm
Your obligations as an employer insofar as Occupational Health & Safety are concerned, however, go beyond ensuring your employees have a physically safe environment to work that is reasonably free from threats to their body or health. Employers must also ensure employees are not unreasonably exposed to psychological illness or injury. These injuries are also ‘compensable’ as far as workers’ compensation is concerned and therefore represent a significant liability for you.
In particular, workplace stress and workplace harassment represent factors that must be addressed in each workplace. One situation where this commonly arises is in association with decisions to transfer, demote, dismiss or otherwise discipline a worker. Where this has not been undertaken in a reasonable manner given the circumstances, your worker may have a claim against you. This is especially so if you are seeking to dismiss an employee because of poor work performance due to a condition associated with work-related stress.
Anti-discrimination and workplace harassment
Obviously you cannot discriminate against or harass your employees, but you must also take all reasonable steps to ensure harassment does not occur in the workplace by others. This includes co- workers, clients and members of the public. At a minimum, you should have a clearly defined policy and procedures for addressing harassment, ensure your employees know of this policy and then ensure it is followed.
Harassment is any behaviour that is undesired, offends, humiliates or intimidates and creates a hostile environment. It is illegal to either harass or discriminate an employee on the basis of:
. sex or sexual orientation;
. pregnancy or breastfeeding;
. race;
. age;
. gender;
. marital status;
. mental or physical disability; or
. carers’ responsibilities.
These apply in all aspects of employment: applying for a job, performing the job, presence at work, and in leaving a job. Harassment is not objective: it is harassment if the recipient finds it offensive, humiliating or intimidating. It does not matter how anyone else perceives the behaviour. This makes your responsibility particularly onerous and it is not one that can be shirked.
Finally, there are particular exceptions regarding disabilities incurred whilst at work, including workplace stress. In these circumstances, you must take every reasonable step to provide rehabilitation or a replacement role for that employee. This means they must have the same opportunities for promotion, transfer or training as any other employee in their role.
As a final point, it is also illegal to victimise an employee because they have lodged a complaint regarding harassment or anti-discrimination.
INVEISS INSIGHTS on EMPLOYMENT: Awards and Enterprise Agreements
In addition to the National Employment Standards (NES), there is now a national system of 122 awards that regulate the minimum standards across industries. As an employer, it is your exclusive responsibility to ensure you know which award and employment conditions apply to your employees.
What is an award?
The Modern Awards deliver a single (almost) national system for the private sector that sets specific minimum requirements for (almost) all employees within specific industries. They concern the terms, conditions, wages, benefits and allowances of employees. These rights are in addition to any delivered by the NES.
To this extent they replace (almost) all previous national system awards. They don’t override individual or enterprise agreements, but the base rate of pay under these may not be less than that under the relevant modern award.
Do I need to use an award?
The answer is almost certainly yes. An award will cover your employees if you are any of the following:
. A registered company (essentially, Pty Ltd or Limited liability companies);
. An employer in Victoria, the Northern Territory or the Australian Capital Territory; or
. A sole trader, partnership or trust in New South Wales, Queensland, South Australia or Tasmania.
Essentially, the sole exception is an employer in Western Australia which is not a registered company. In that case, they will still be bound by the relevant Western Australian state awards.
Which employees don’t require an award?
Not every employee needs an award, however. Anyone earning a guaranteed annual amount of $113,800 or more (indexed to inflation) will not be covered by a modern award. They also do not apply to your employees if you have an enterprise agreement, or a pre-registered agreement with the appropriate statutory regulatory authority.
However, just because your employees are not covered by a modern award does not mean they fall outside the scope of the NES or national minimum wage laws.
How do I find out what award to use?
There are two options:
. Call the Fair Work Infoline on 13 13 94; or
. Access the Fair Work Ombudsman’s website to browse the different individual awards.
Once you’ve done this, you must ensure that the conditions and pay offered to your employees at least match the minimum requirements of the award. However, these are minimum obligations only, and nothing prevents you, as an employer, from offering greater incentives.
INVEISS INSIGHTS on EMPLOYMENT: Termination
Unfortunately, occasionally the employment relationship between a corporation and employees ends. Generally, this will usually be because the employee resigns, a fixed term contract is completed or the employer is dismissed due to their conduct or because of redundancy in the organisation.
Under what circumstances can I dismiss an employee?
You cannot dismiss an employee without a valid reason. Generally, there are only three scenarios that constitute a valid reason: the conduct of the employee; their poor job performance; and redundancy, however, even if one of these applies, there are certain procedures that must be followed. These shall be examined in turn below
It should be noted that you may not act in such a way so as to force an employee to resign, thereby circumventing unfair dismissal laws.
In either case, you must provide them with written notice with the reason why they are being dismissed. As a matter of practicality, it is best if each party has a witness during all meetings and minutes are kept.
Employee Conduct
As mentioned before, serious misconduct on behalf of the employee may be used as grounds for immediate dismissal. Nonetheless, due to the complexity of the issue, it is recommended that you receive legal advice and gather evidence regarding the conduct of the employee, prior to doing so. Serious misconduct may include:
. Behaviour that caused serious risk to another’s health or safety, or to the business’ profitability;
. Theft, fraud or assault, especially if reported to the police;
. Being intoxicated at work; or
. Refusing to carry out lawful and reasonable requests consistent with the employment contract.
Employee poor performance
An employee may be dismissed for poor job performance, but you must take care to ensure it is not harsh, unjust or unreasonable. In determining whether a dismissal was harsh, the following factors must be taken into account:
. Was there a valid reason for dismissal relating to their capacity or conduct;
. Was that person notified of this reason, and given an opportunity to respond to it;
. Was the person allowed to bring a ‘support person’ present during the meeting;
. Was the person provided an opportunity to improve their performance;
. How much does the size of the business impact the procedures used to effect the dismissal; and . Anything else deemed necessary.
Business necessity (redundancy)
Where there are reasons of true redundancy (e.g. the job is no longer needed, it has been superseded by technology, etc.), you may use this as valid grounds for termination. That said, this does not give you free reign to terminate any employee you wish.
First, you have to check whether the employee is protected by an award or enterprise agreement that prevents or restricts redundancy. Even employees without one, however, may have certain rights owed to them.
Second, have you acted to avoid any perception of unfairly targeting a particular employee? If they have been selected because of work performance issues, but they haven’t been given an opportunity to respond to your concerns, then the dismissal may be harsh, unjust or unreasonable (the necessary grounds for bringing an unfair dismissal claim).
Third, have you consulted with the employee about the decision to retrench? It may be an alternative solution can be worked out, and in the contrary, it can’t hurt to have a meeting do discuss the options.
When can I not dismiss an employee?
Generally, any reason used to dismiss an employee beyond the three above will not be considered sufficient. Doing so on the basis of these points may result in claims for unfair dismissal. The following specific reasons are unlawful and may not be used to dismiss an employee:
. Temporary absence from work due to illness or injury;
. Absence of less than 12 months for a workplace injury;
. Activities within a union, either as a member or a leader;
. The filing of any legal proceedings against you or another person;
. Asks for, or takes, parental leave;
. Race, colour, gender, sexual preference, disability, marital status, age, ethnicity or religion.
What must I do after termination?
Regardless of the reason for the dissolution of the employment relationship, you must provide the following documents within fourteen days:
. A group certificate for taxation purposes;
. A written Statement of Service indicating, at a minimum, the period of employment, the job classification and the type of work involved; and
. If necessary, and upon request, you must also provide an Employment Separation Certificate to the ex-employee for the purposes of claiming social security benefits.
INVEISS INSIGHTS on EMPLOYMENT: Small Businesses and Termination
The government recognises that the realities of business are often different for small enterprises. As such, several of the obligations and requirements imposed on corporations are lightened or removed when it comes to small businesses.
It should be noted from the outset that ‘small business’ has a different definition for employment law than it does for taxation and corporate law. Please be aware that the following definition is only applicable when determining which laws apply to employers.
Am I a small business?
For the purposes of employment law, the size of a business is determined entirely by the number of employees. Up until 1 January 2011, this was calculated by determining the number of full-time equivalent employees. This involved adding up the number of man hours over the four weeks before the complaint or issue arise by 152.
After 1 January 2011, that is, from now onwards, this test has been done away with. Instead, it involves a simple head count. Where a business has fewer than 15 employees, it will be a small business.
Great! So what does this mean for me?
Essentially, the status of small business makes it easier to dismiss employees. First, employees must have worked for at least 12 months to be eligible to make a claim for unfair dismissal. Until that point, no claim can be made against you, the employer. Second, provided that the employer follows the Small Business Fair Dismissal Code and the dismissal is not harsh, unjust or unreasonable, the dismissal will be deemed to be fair.
The Small Business Fair Dismissal Code provides a checklist to verify it has been complied with, but in essence, it amounts to:
. Did you either:
o Dismiss them for genuine redundancy;
o Dismiss them for serious misconduct; or
o Dismiss them for theft, fraud or violence?
Or:
. Have you provided a warning, with a valid reason relating to their performance, that the employee is risking their job if they do not improve; and
. Have you offered the employee a reasonable opportunity to improve, including additional training if necessary?
Where either of these tests are satisfied, the dismissal will be deemed fair.
Would you like our lawyers to draft and prepare an Employment Contract for a fixed fee with no hourly rates?
Submit your enquiry via INVEISS CONTRACTS.
