What obligations do SMEs owe employees?

Staff obligations

Starting up and successfully running a small business can certainly be overwhelming at times and it is of the utmost importance that you get things right from the very beginning. Your employees are one of your greatest assets, vital in the growth and prosperity of your business. To make the most of this valuable resource you must ensure that you are fulfilling your legal responsibilities and moral obligations as an employer. With much to consider, including a myriad of statutory and reporting regulations, it can certainly seem like a minefield at times.

To avoid any issues arising with the Fair Work Ombudsman, here is a brief guide to get you on the right track.

National Employment Standards (NES)

The National Employment Standards (NES) are standards set forward by the Fair Work Act 2009. From 1 January 2010, the NES has provided a safety net for all employees covered by the National Workplace Relations System.  Basically, NES is a guide that underpins modern awards, enterprise agreements (EAs) and employment contracts. You can add extra terms or entitlements to awards and EAs, but you cannot remove or reduce an employee’s rights under the NES.

(NB. Some NES don’t apply to casual employees).

There are 10 NES which include:

  • Maximum weekly hours of work – 38 hours per week, plus reasonable additional hours.
  • Requests for flexible working arrangements.
  • Unpaid parental leave and related entitlements.
  • Annual leave – 4 weeks paid leave per year, plus an extra week for some shift workers.
  • Personal / carer’s leave and compassionate leave.
  • Community service leave – unpaid leave for voluntary activities and jury service.
  • Long service leave (LSL).
  • Public holidays – a paid day off on public holiday, except where reasonably requested to work.
  • Notice of termination of employment and redundancy pay.
  • Ensuring you provide the Fair work information statement

It is also important you also look at the relevant, modern awards, which also commenced 1 January 2010 and cover most workplaces.  These can be found at: https://www.fairwork.gov.au/awards-and-agreements/awards

Recently we have found some great accounting program add-ons which allow you to seamlessly integrate your accounting software with the relevant award, rostering, times clocks and payroll. As a small business owner, it’s certainly worth looking into these programs, to make your life easier and allow you to focus on growing your business.

Superannuation Guarantee

Superannuation has been getting more than its’ fair share of media lately and we don’t expect this to abate any time soon. As an employer your obligations are simple.

  • All employers regardless of size must contribute 9.5% superannuation on behalf of their employees.
  • Super obligations should be paid on a quarterly basis
  • Super contributions must now be processed through a registered clearing house such as the Small Business Superannuation Clearing House (SBSCH), to ensure compulsory and voluntary contributions are allocated accordingly.
Accounting for Entitlements

You now know what your responsibilities are but remember that it is of equal importance that your Balance Sheet reflects your true obligations. It is important pay templates are setup immaculately, so that all leave types accrue correctly from the moment you hire each employee.

These days small businesses have the benefit of a choice of wonderful cloud based programs which you to track your leave and superannuation obligations with ease. For many business owners, it’s easy to fall into the trap of believing you have a relatively healthy cash flow, that is until you suddenly realise that last quarters super is outstanding and your manager is taking 4 weeks holidays and you will have to pay overtime or employ an addition staff member!

By allocating entitlements correctly from day one you will not find yourself in trouble down the track. Ideally, businesses may benefit from opening up a separate account so that money can be put aside for obligations and although this may not always be possible during your set up phase, it’s certainly something to keep in mind.

Positive Vibes

Finally, remember to look after your staff and check in with them on a regular basis. Although employees essentially go to work for the financial benefits, don’t underestimate the intrinsic rewards that your staff will respond to. Being treated well, a pat on the back or even an early mark can go a long way to keeping your staff motivated and engaged. Ultimately, a positive working environment will be reflected in the level of service provided to your customers and your bottom line.


About the author

John Corias is a Senior Partner at m.a.s accountants, which has has been servicing Australian small business accounting needs for over 50 years.