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Payroll in Australia

Introduction

To get ahead in our modern global economy, more and more companies are relying on a geographically-diverse workforce. There’s a growing trend toward remote work, particularly post-2020. In fact, 61% of office workers surveyed prefer to be employed in a fully remote position.

While hiring overseas employees can be stressful in any circumstances, Australia is a whole new kettle of fish. 

The payroll system in Australia is heavy in rules and regulations. It protects workers (which is good!) but employers have a lot of boxes to check (which is annoying!). Hiring and onboarding in Australia can be painful, which is why many global companies opt to work with a payroll management company in Australia like Skuad. From start to finish, we make the whole process easier. 

So you can be completely on top of local laws and policy before diving into the hiring process, let’s go through some of the most important things to know about hiring remote employees based in Australia, including tax, leave, wages, and superannuation.

What does the payroll process in Australia involve?

If you’re unfamiliar with the payroll process in Australia — or even with international payroll as a whole — don’t stress. Here’s a quick summary to get us all on the same page. 

The components of a payroll workflow include:

  • Collecting data – Your new employees need to submit payroll information, including tax numbers, banking info, and citizenship status. 
  • Calculating net pay – Employers in Australia automatically deduct tax and superannuation (retirement pension) from employees’ wages. You’ll need to calculate their gross pay minus any withholdings.
  • Issuing payments – In Australia, wages are paid by direct deposits, rather than paper paychecks. 
  • Reporting and paying taxes – As an employer, you must report your tax withholdings in Australia and in the country where your business is based. Then you forward the taxes to the taxing authorities and superannuation funds. 

This is applicable whether you’re hiring a full-time employee, part-time worker, or bringing on a contractor.

A handy guide to payroll in Australia

Before beginning the process of hiring and onboarding Aussie employees, it’s helpful to understand the intricacies of a payroll system in Australia — and the payroll rules for employers.

Tax laws

Australia works on a pay-as-you-go tax system, similar to the one in the United States and Britain. Employers withhold employee taxes, which are then paid directly to the Australian Taxation Office (ATO). Companies must give employees a pay slip within one working day of getting paid, detailing gross pay, tax withheld, superannuation (more on that soon!), and net pay. 

Currency

Employees in Australia are paid in Australian dollars. The U.S. dollar is stronger than the Australian version, but wages Down Under are generally higher. Australia has one of the highest minimum wages in the world, thanks to the country’s higher cost of living. 

Holiday leave

Australian vacation leave laws are very generous in comparison to the U.S. Full-time employees are given a minimum of 4 weeks of paid leave every year. There are seven public holidays (which vary by state), which are also taken as non-working days. If an employee’s holiday leave isn’t all used in a calendar year, the days usually roll over to the next year – although some companies institute different rules. 

Other leave

Employees in Australia are also entitled to:

  • Parental leave
  • Personal/care leave and bereavement leave
  • Community service leave
  • Jury duty leave
  • Long service leave

These vary based on location and employee, but it’s good to have a general idea about how each one works.

Sick Pay

Full-time employees are entitled to ten sick leave days per year. These days don’t accrue year-on-year as holiday leave does. 

Pension and superannuation

Employers are mandated to contribute to their employees’ pension funds, which in Australia is called superannuation. When hiring, you will need to be clear whether an employee’s salary includes superannuation or whether it will be added to the base salary. Super rates are currently at a minimum rate of 9.5% of the employee’s wages.

Pay cycles

Most businesses in Australia pay their employees every two weeks, though there’s no set rule. You can pay weekly or monthly if that’s how your company already operates.

Severance pay

Australian workers are entitled to 16 weeks’ severance or redundancy pay once they’ve been employed for 12 months if their employer has 15 or more employees.

Regulations and payroll rules in Australia

Let’s be clear here: payroll compliance isn’t just about simply paying your workers fairly and on time.

Every single company that employs an Australian worker must comply with the local payroll laws, no matter where that company is based. If you run a manual payroll process, it’s more than likely that you’re not 100% compliant –– which is where Single Touch Payroll (STP) comes in. More on that in just a sec!

The regulations in Australia are pretty strict, and it’s up to every company to protect themselves from accidentally not complying. That’s why so many global start-ups and corporations have chosen to work with payroll service companies, like Skuad, to alleviate that extra stress.

We get it! Handing over a part of your business process to third-party management can be tricky, especially if you’re a small company. But there’s no doubt that it’s infinitely better than being charged with tax evasion, right?

What is Single Touch Payroll in Australia?

In 2018, the Australian Taxation Office introduced Single Touch Payroll (STP), which makes employers’ lives a lot easier. Rather than having to manually report every employees’ payroll information to the government, STP software does it automatically. 

STP is now a mandatory obligation, no matter the size of your business. The payroll info given to the ATO includes:

  • Salaries and wages
  • Pay-as-you-go tax withholdings
  • Superannuation.

It sounds like a lot to take in, but it doesn’t have to be a headache! Working with a global payroll company in Australia like Skuad takes the legal burden off your back, leaving you to focus on recruiting and growing your company. Chat with a member of the Skuad team to understand what's expected of your business and how we can give you a hand.

Outsourcing payroll in Australia: What are your options?

Yes, having a global business with talented and innovative remote workers around the world is an excellent choice for your business. 

But that being said, it’s not easy hiring employees from around the globe. Not only do you have to look after your local employees, but you also need to get your head around employment policies and tax laws around the world. 

Say, for example, you’ve found the perfect candidate for a role but they’re based in Sydney and your company is headquartered in Austin. In an ideal world, you’d hire them on the spot and breeze through all the paperwork and legal requirements. But in reality, it can often be a massive headache. Understanding the intricacies of Australian payroll requirements is time-consuming and confusing –– not to mention risky if you don’t follow all the rules. You don’t want to be hit with fines for accidentally doing the wrong thing. 

For small- and medium-sized companies, outsourcing payroll services in Australia is your best option. 

Here are some things to look out for when you’re trying to find a company that offers payroll services in Australia:

  • Does the company only cover Australian employees or can they help you out with other global hires?
  • Do they charge a one-off fee or an ongoing membership?
  • Is there an easy cancellation process if things don’t work out?
  • Are their charges and requirements very clear right from the beginning?
  • Are their services also equally clear?
  • Will they help manage employees past the onboarding process?
  • Does their contract protect your corporate interests, such as in the case of a breach of confidentiality and data security?
  • Do they cover the hiring of contractors as well as full-time employees?
  • Do they have other clients similar to your company, so they’ll understand your specific needs?
  • How long has the company been around? Do they have much experience?

When you work with a company like Skuad, we’ll manage all the red tape for you. 

If you’re hiring employees from multiple countries, you can forget about having to contract multiple payroll companies. We offer payment and withdrawal flexibility to companies and their teams, provide optimal exchange rates, take care of remote talent by providing statutory benefits and consolidate all payroll data on a single dashboard for easy viewing and analysis.

That leaves you free to do the most important things – scouting good talent and growing your company!

Keen to learn more and see what it’s all about? Reach out and book a demo with Skuad –– then start hiring and paying in Australia (and across the world!) today.