Definitive Guide to Hiring in Australia

Hiring Employees in Australia

It is essential to understand Australia’s labor laws when hiring employees. Setting up a legal entity can be a good option if you’re looking to hire a large team and establish a presence in the Australian market.

However, it can be a legal minefield without a good Australian partner to help you. It will take a significant amount of time to properly set up, and if your team isn’t experts in labor law, you’ll run the risk of non-compliance.

Alternatively, you can leverage an Employer of Record (EOR). Our Employer of Record Australia solution includes local Australian experts who will take care of HR, payroll, taxes, and employee benefits for you. They will also handle the complexities of local labor laws and handle all risks associated with non-compliance. By employing expert EOR Solutions, it's possible to navigate employment in Australia easier than ever before.

Global Expansion also provides a comprehensive EOR and international PEO platform that expedites the hiring process, so you can focus on establishing an Australian workforce. Additionally, the GX team will keep you updated on changes to Australian employment laws and other need-to-know factors.

Labor Laws in Australia

Employment laws in Australia are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Australian employment laws and Australian policies here.

Employment Law Australia

This employment market is one of the strongest in the world, with many business opportunities in Australia for international corporations. However, before you expand to Australia, you should be aware of some basic facts about hiring conditions. Employment laws in Australia vary depending on the territory in which you work. However, read on for a general guide to Australia's employment landscape.

The Fair Work Act of 2009 entitles all Australian nationals and foreign employees to receive fundamental worker rights and protection from their employers. Under the Work and Healthy Safety Act of 2011, employers must provide health insurance, paid leaves, medical allowance, and worker compensation for work-related illnesses and injuries.

Administered and enforced by the Australian Human Rights Association, the State and Federal Anti-Discrimination Laws protect employees from workplace racial, gender, age, disability, or religious prejudices.

Employment Contracts

Different Types of Employment

There are five (5) types of employment contracts in Australia:

1. Full-time employees

   work on an ongoing employment basis for a maximum of 38 hours weekly. Work hours may vary if the employee is under industrial instrument coverage.

2. Part-time employees

   work less than the standard 38 hours on an ongoing employment basis. They receive employee entitlements similar to full-time staff, but these benefits are on a “pro-rata” basis.

3. Casual employees

   work on a “demand-only” basis, receiving pay only for their work hours.

4. Fixed-term contract employees

   are employed within a set timeframe or until the completion of a particular project.

5. Independent contractors

   are self-employed workers who outsource their services to companies. The employee negotiates their rates and work arrangements and is free to work for multiple companies simultaneously.

Employee Probation Period

• The maximum probationary period allowed in Australia is 90 days (two terms of 45 days).
• If the initial trial period is 45 days, it may be renewed but only for an additional term of 45 days.

Annual Leave in Australia

• All full-time workers are guaranteed a minimum of 4 weeks paid annual leave.
• If you're a shift worker, you may be entitled to 5 weeks.

Holidays in Australia

Here is the full list of public holidays in Australia:

Maternity Leave Australia

• Eligible employees who are the primary caregiver of a newborn or newly adopted child get up to 20 weeks' Parental Leave Pay (PLP), which is paid at the National Minimum Wage.
• From July 1, 2023, employees are entitled to a PLP payment for up to 100 days, or 20 weeks.

Paternity Leave Australia

• Eligible employees who are the primary caregiver of a newborn or newly adopted child get up to 20 weeks' Parental Leave Pay (PLP), which is paid at the National Minimum Wage.
• From July 1, 2023, employees are entitled to a PLP payment for up to 100 days, or 20 weeks.

Sick and Caregiver's Leave in Australia

• Sick and caregiver's leave fall under the same leave entitlement, with full-time employees entitled to 10 days of leave each year.
• The balance of leave acquired each year also carries over into the next year.
• Part-time employees get a pro-rata of 10 days each year based on how many hours they work.

Working Hours in Australia

Working hours in Australia are up to 38 hours per week or 7.6 hours daily. The standard working week is Monday to Friday. Employee dismissal without prior notice or under unlawful circumstances is illegal.

An employer will be liable to pay compensation if they dismiss an employee without proper notice or if they dismiss an employee unlawfully (i.e. without just cause).

Overtime in Australia

• All time worked beyond 38 hours per week is overtime. In most cases, it attracts a premium of 1.5 times the ordinary rate of pay for the first 3 hours (2 hours in some industries) and double time thereafter.
• Employees receive 150% of their minimum hourly rate for the first 2 hours, and 200% of their minimum hourly rate for the hours worked after that.

Termination of Employment in Australia

Employees can quit at any time, but many modern employment agreements require a minimum period of notice. If you do not need the employee to work their notice period, you can pay them for that time and let them leave early.

A job becomes redundant when an employer either: no longer has any use for the work done by a particular employee or goes out of business. Employees who have been with a company for many years and are laid off may be eligible to receive benefits under the federal government's redundancy compensation scheme.

Employees can be dismissed if they breach the terms of their contract, engage in inappropriate behavior, fail to do their jobs adequately, or become surplus to requirements because of changes in demand for a company's products.

Notice Period in Australia

When an employer dismisses an employee, they have to give them notice. The notice period starts the day after the employer tells the employee that they want to end the employment and ends on the last working day.

An employer has to give the following minimum notice periods when dismissing an employee:

• 1 week if an employee has worked for 1 year or less
• 2 weeks if an employee has worked for a period between 1 to 3 years
• 3 weeks if an employee has worked for a period between 3 to 5 years
• 4 weeks if an employee has worked for more than 5 years

It is worth noting that an employee has to get an extra week of notice if they’re over 45 years old and have worked for the employer for at least 2 years.

Severance in Australia

• An employee is to be paid redundancy pay by the employer if the employee's employment is terminated:
  • at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labor; or because of the insolvency or bankruptcy of the employer
• The amount of the redundancy pay varies according to the employee's period of continuous service as follows:

Australia Salary and Wages

Average Salary

The average salary for an Australian employee is AUD 68,198 (USD 44,062.05) annually.

Australia Salary Ranges

• Below average threshold: AUD 56,709 (USD 36,696.96) per year
• Average or median wage: AUD 68,198 (USD 44,150.02) per year
• Above average threshold: AUD 102,648 (USD 66,452.26) per year

Australia Salary Comparison

• Those with 2-5 years of experience earn 32% more than those fresh out of college or junior employees. Those with 10 or more years of experience have a salary increment of 21%, while workers who cross the 15-year mark get an additional 14%.
• Workers with a higher education degree get paid more for skills and knowledge. Those with a bachelor’s degree earn 24% more than those who only attained a certificate or diploma. Meanwhile, workers with a Ph.D. make 23% more than those with a Master’s degree, even if they do the same job.
• On average, male employees in Australia make 10% more reais than female employees in all industries.

13th Month Salary in Australia

The 13th month salary is optional. There is no statutory requirement to pay it, and there is no evidence, case law suggests however that an employer may determine in the contractual agreement to pay performance-based bonuses. The leave payment comes out of their base salary and there are generally no extra payments

Australia Minimum Wage

Australia doesn't have a national minimum wage. Instead, wages are determined by the Fair Work Commission, an independent body which makes sure that workers are paid fairly.

The Fair Work Commission determines the minimum wage on an annual basis and has done so since 2009. The current rate is $17.70 per hour, however, this will be reviewed again in 2022.

There is no set minimum number of working hours in australia per week or per year. However, workers must be paid at least $17.70 per hour for any work they do in Australia.

Resident tax rates 2022–23

Medicare Levy

Technically, Australia does not have a social security system. However, a Medicare Levy of 2% of taxable income is payable by resident individuals for health services (provided that they qualify for Medicare services).

This is the only levy imposed in Australia that is equivalent to a social security levy. An exemption from the Medicare Levy may apply if the individual is from a country that has not entered into a Reciprocal Health Care Agreement with Australia.

• No ceiling applies to the amount of income subject to the levy.
• However, relief is provided for certain low-income earners.
• High-income resident taxpayers who do not have adequate private health insurance in Australia may be subject to an additional 1% to 1.5% Medicare Levy surcharge.
• High-income taxpayers whose private hospital insurance carries an excess payment (amount for which the insured is responsible before the insurance begins to pay) of more than AUD500 for single individuals or AUD1,000 for couples or families are also subject to the Medicare Levy surcharge.

Superannuation (pension)

• Australia also has a compulsory private superannuation (pension) contribution system.
• Under this system, employers must contribute a minimum percentage of the employee’s ordinary time earnings (OTE) base to a complying superannuation fund for the retirement benefit of its employees.
• The required superannuation guarantee percentage will progressively increase up to 12% as follows:
  
  • From July 1, 2023: 11%
  • From July 1, 2024: 11.5%
  • From July 1, 2025: 12%

Deductible Expenses in Australia

Employment Expenses

To the extent that expenses are not reimbursed, residents and non-residents can deduct properly substantiated expenses incurred in earning employment and other income, for example, business-connected travel expenses, automobile expenses, subscriptions to professional or trade organizations, and protective clothing.

Prepaid expenditures are generally only deductible over the period to which the expenditure relates, subject to certain limited exceptions.

Personal Deductions

You can claim deductions for losses and outgoings you incur in producing or gaining assessable income. Tax deductions are not available for expenses of a private or domestic nature, for example:

• the cost of personal medical expenses
• private health insurance premiums
• the costs of child care alimony
• life insurance premiums, or;
• interest incurred in respect of borrowings to fund the acquisition of an individual's place of residence.

Individuals can claim a deduction for contributions made to complying with superannuation funds, regardless of the extent of their employment-related activities. However, additional tax may apply to the extent that the total of all superannuation contributions made in a year for the individual (including contributions made by an employer) exceed the annual 'concessional contributions cap' of AUD 25,000.

Charitable contributions of AUD 2 or more are generally deductible where they are made to entities that are specifically named in the tax law or endorsed by the Commissioner of Taxation as deductible gift recipients. However, deductions for such gifts cannot generate tax losses.

Personal Allowances

Residents receive the first AUD 18,200 of taxable income tax-free. Non-residents generally do not benefit from a tax-free threshold, nor do they qualify for the various tax rebates and tax offsets.

Provided family income is below certain thresholds, resident individuals (or individuals in Australia with a special category visa or an approved visa for family tax benefit purposes) may be entitled to Family Tax Benefit payments if they have a dependent child or a secondary school student under the age of 20 (who is not receiving a pension, payment, or other government allowance) for whom one cares for at least 35% of the time.

Immigration Australia

Learn about immigration requirements, Australia work visa requirements, Australia work permits and more.

An individual wishing to enter Australia for employment reasons may apply for a temporary work short stay specialist (subclass 400) visa, temporary activity (subclass 408) visa or temporary skill shortage (subclass 482) visa.

Temporary work short-stay specialist visas

• Individuals who need to enter Australia to perform short-term, highly specialized work that is not ongoing, or to assist in a national emergency can apply for a subclass 400 visa.
• The subclass 400 visa can be granted for a period of up to three months.
• If a period of up to a maximum of six months is requested, a strong business case must be demonstrated.
• After the grant, applicants have up to six months to make their first entry into Australia on this visa.

Temporary work permits and process

The Department of Immigration and Border Protection (DIBP) processes all applications for permanent and temporary immigration to Australia, including applications for relocation of employees. Temporary work permits are a special immigration category that allows foreigners to visit or live in Australia for specific purposes. Subclass 408 temporary activity visa is one of these options.

The Subclass 408 temporary activity visa is a special immigration category that allows foreigners to visit or live in Australia for specific purposes. It can be used for those who want to:

• participate in a reciprocal staff exchange program
• participate in a high-level sports competition
• participate in an event at the invitation of an Australian organization
• perform work in relation to an Australian government-endorsed event
• perform as an entertainer or work in a production or technical role for a production
• undertake academic research at a tertiary or research institution
• be a full-time religious worker
• work full time in the household of certain foreign senior executives
• work in Australia as a crew member of a superyacht. 

The requirements vary between streams and include sponsorship or support by an approved organization.

This visa has a maximum stay period of 4 years for the Australian government-endorsed event stream and a maximum stay period of 12 months for the superyacht and special program streams. A maximum stay period of two years is available for the other streams.

Visa requirements Australia overview

Learn about the visa policy in Australia and all the ways to obtain a regular or a work visa for Australia.

Value Added Tax (VAT) in Australia

• The federal government levies goods and services tax (GST) i.e. VAT
• The current Australian VAT (Value Added Tax) is 10.00%.
• The VAT is a sales tax that applies to the purchase of most goods and services and must be collected and submitted by the merchant to the Australian governmental revenue department.
• Australia has one of the lowest VAT tax rates in the world, charging a maximum VAT rate of 10%.

Withholding Tax in Australia

Dividends

Dividends are subject to withholding tax in Australia, so be sure your employees declare them. Dividends paid by Australian-resident companies from profits already taxed at the corporate rate may carry franking credits for the tax paid.

Dividends are referred to as “fully franked,” “partially franked” or “unfranked,” depending on the extent to which a company has chosen to use its franking credits. To the extent distributions to foreign residents are unfranked distributions, they are subject to withholding tax at the statutory rate of 30%, which may be reduced under a tax treaty.

Interest

Interest paid by an Australian company to a foreign resident generally is subject to a 10% withholding tax. There are some exemptions, including for certain publicly offered debentures and limited no-debenture debt interests.

An interest withholding tax exemption applies for interest paid to unrelated foreign financial institutions or government bodies under specific tax treaties.

Royalties

Royalties are subject to a withholding tax of 30%, unless the rate is reduced under a tax treaty

Technical service fees

Australia does not levy withholding tax on payments of technical service fees that fall outside the definition of royalties.

Mandatory Benefits in Australia

It is important for businesses that hire employees abroad to understand the legal requirements of employing people (whether it’s remote or in-office) so that the work you do for your business in Australia remains compliant. As part of Global Expansion’s International PEO and Employer of Record (EOR) solution, we guarantee employees are registered with the appropriate government agency, and that they receive mandatory benefits such as minimum wage, workers’ compensation and paid time off (PTO).

Additionally, all tax deductions associated with the employee are processed at the source, meaning our in-country entity will be responsible for paying all taxes to the authorities on behalf of the new hire.

These are mandatory benefits as postulated by law. Including a probationary period, annual leave, public holidays, sick leave, parental leave, overtime pay, notice period, and severance pay. Mandatory benefits also include social security benefits.

Payroll In Australia

Returns for the tax year ended 30 June generally are due by 31 October. However, extensions may be available if the return is filed by a registered tax agent. Nonresidents are subject to the same filing requirements as residents.

No specific additional filing requirements are imposed on persons arriving in, or on persons preparing to depart from Australia. Visitors entering Australia for employment or to take up residence who have not previously applied for an Australian tax file number must apply with the Australian Taxation Office.

Married persons are taxed separately, not jointly, on all types of income. Joint filing of returns by spouses is not permitted. A tax assessment is issued by the Australian Taxation Office after a tax return is filed. For a timely filed tax return, taxpayers generally have 21 days after the date of assessment to pay the tax due and may be allowed a longer period.

Payroll Accrual in Australia

Country Accruals Additional Information

Description

There are no social security taxes in Australia. However, a levy is imposed on taxable income and reportable fringe benefits of residents for the funding of a National Health Scheme (Medicare). The Medicare levy is currently 2%.

No levy is payable by those with taxable income below the relevant low-income thresholds. A surcharge of between 1% and 1.5% applies to high-income taxpayers where the taxpayer and their dependents are not covered by a private health insurance fund registered in Australia that provides basic hospital cover.

Both employers and foreign nationals working in Australia should take care in choosing a health fund that both qualifies for the exemption from the Medicare levy surcharge and provides adequate cover because it is possible to have a policy that provides full coverage but does not also exempt the policyholder (and their family members) from the surcharge and vice versa.

Proper advice should be sought from a tax expert to ensure that the policy covers both aspects.

Payroll Accruals Additional information

Accrued Benefits in Australia

Why use Global Expansion to hire in Australia

Establishing a branch office or subsidiary in Australia can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Australian labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Australian law to maintain its good standing as an equal-opportunity employer.

Global Expansion makes it easy for you to expand into Australia. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Australian Global Professional Employer Organization (PEO) and Employer of Record (EOR) solutions provide you with peace of mind to focus on running your company and the security to enter new markets.

If you would like to discuss how Global Expansion could help your business hire employees in Australia, don't hesitate to contact us with the form available on our website.