Business Law Articles
By: Selwyn Black
Carroll & O'Dea
Employment practices in Australia are heavily affected by statutory provisions, tax, superannuation as well as market forces. With relatively low unemployment, it is also not uncommon for employers to provide more than statutory requirements.
For employers coming from a United States background, the common law position is also significantly different to the position in the United States. One of the most important differences is that the Californian concept of “at will” employment does not apply in Australia. In particular:
(a) in the absence of misconduct an employee is entitled to minimum notice periods under federal law;
(b) in addition to the minimum rights under federal law, whenever the contract of employment fails to specify the required period of notice, there is a common law requirement for the employer to give reasonable notice. The amount of reasonable notice varies with a number of factors, including the employee’s age, seniority and length of service. At the upper end, dismissing a CEO with 20 years service who is in their late 50s could require notice of a year or more; and
(c) there are unfair dismissal laws.
In summary, in Australia employment conditions will be governed by the following, the most important first (and with (a) to (d) given statutory force):
(a) National Employment Standards (NES), which apply to all employees;
(b) a minimum wage;
(c) for most employees, Awards. These set out more detailed conditions for the general workforce but will not apply in some cases such as to many senior executives. These are in the process of transition from prior state Awards to national Awards, and the result of this transition has been in many cases to push up cost to employers;
(d) enterprise agreements that may be entered into to change the application of some of the NES and Awards provisions, provided that the employees in the enterprise are better off overall;
(e) subject to the above, the individual contracts of employment; and
(f) terms implied into the contract of employment at common law.
The Australian laws include restrictions on dismissals (including process and prohibited grounds including discriminatory grounds), and more extensive redundancy obligations/payments. Those obligations can pass to succeeding businesses, along with accrued entitlements to annual leave, personal leave and long service leave.
Taxation is a significant influence – there is a tax on the employer on “fringe benefits”, being benefits provided to employees or their associates. There are some exemptions (in particular for superannuation contributions) and some concessions (certain car fringe benefits, laptop etc are on a concessional basis). Because of the extra paperwork involved in these matters, many employers prefer to effectively have no fringe benefits provided, so that all remuneration is provided by way of salary or superannuation.
It is not the practice in Australia for employers to provide any health insurance.
Employers are generally required to pay 9.5% of base salary as a superannuation contribution to a complying fund nominated by the employee. In default of a nomination by the employee, there are various industry and other funds. Employees can “salary sacrifice”, and request employers to reduce their base salary and increase their superannuation, up to a limit. Above the applicable limits, the employer will not obtain a tax deduction and the employee would receive a penalty. If the employer does not pay the required amounts into a complying superannuation fund, it is subject to a levy called a superannuation guarantee levy.
Employer on-costs include, in addition to leave entitlements, the cost of payroll tax and workers compensation.
Employers are required to make tax deductions for the remuneration of employees and remit those deductions to the Australian Taxation Office. There are also potential withholding obligations, and other regulations, in relation to many contractor relationships.
Employers often seek confidentiality obligations or restraint obligations from employees. These will not always be enforceable and care should be taken in considering/drafting such obligations, and in preparing employment agreements generally. In particular if it is proposed to obtain a post employment restraint, these should be drafted specifically for each employee to be bound where possible.
There are occupational heath and safety obligations, union rights, anti-discrimination laws and other matters to be considered.
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