It’s often said that if you want to grow your small business, you need to employ. But hiring someone to help run your business is a big step. There are so many things you need to consider when hiring your first employee:
– Can I trust them?
– How do I pay them?
– How much should I pay?
– What should I do if they don’t meet my standards?
If you’re looking at hiring someone, these 3 steps can help you answer the questions above.
Step 1: Know your bottom line
If you regularly review your cash flow, you may have the opportunity to take someone on board and have an indication of how much to pay them.
Step 2: Review expected revenue
If you plan to take on employees to make more money, consider how much additional revenue your new employee will help generate.
Step 3: Estimate costs
Estimate how much you’ll have to pay each employee you take on. Begin with researching comparable pay rates in your industry. Don’t forget indirect costs. These costs may include work cover insurance and must be paid for your employees.
Record keeping and paperwork
When you’ve made your decision to hire someone, you need to keep records for tax purposes. Keeping records is an essential part of running your business and helps you claim all your tax deductions. The ATO requires you to keep records in either print or electronic format for 5 years. General employment records must include:
– Employee’s name
– Employee’s commencement date
– The basis of the employee’s employment such as full-time, part-time or casual
– Employee’s leave taken and the balance remaining
– Employee’s pay rate
– The gross net amounts paid and any deductions from the gross amount
– The details of any incentive-based payment, bonus, loading penalty rate or other monetary allowance
– The amount and dates on which superannuation contributions were made
– The name of the superannuation fund to which a superannuation contribution was made
– Whether the employment was terminated by consent, by notice or in some other manner
– The name of the person who terminated the employment
As an employer, you may need to withhold certain payments for your employees, and other businesses who fail to supply their ABN. You will need to inform the ATO and pay your PAYG withholding amounts either monthly or quarterly when you lodge your Business Activity Statement (BAS).
To meet your PAYG withholding obligations, you must:
- Provide payment summaries to all your employees and other payees that show how much you paid them and the tax withheld no later than 14 July.
- Send your payment summary report to the ATO no later than 14 August and ensure it includes all payments to your employees and other payees, and the total amounts withheld.
This may be a lot to take in. But the good news is that being an employer becomes almost hassle free if you have payroll software that meets the ATO specifications. Preparing your payroll using MYOB Essentials saves you a lot of time. It has all the smarts you need to complete your pay run and more.
The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’ circumstance will vary for end of financial year.