Employer of Record (EOR) Australia
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An Employer of Record (EOR) in Australia acts as the official employer for workers, often referred to as a Global Professional Employer Organization (Global PEO). This role encompasses a broad range of employment functions, ensuring full compliance with local labor laws and regulations, managing payroll, administering taxes, providing legally required benefits, and handling employment contracts.
Key Responsibilities of an Employer of Record (EOR) in Australia:
- Ensuring employment terms are fully compliant with Australian labor laws.
- Overseeing and processing local payroll.
- Managing the filing of employment-related taxes and required documentation.
- Issuing payslips to employees.
- Disbursing salary payments in accordance with Australian standards.
With our Employer of Record (EOR) services, expanding your business globally becomes easier and more efficient. Our solution eliminates the need for setting up a local entity, providing a seamless path to establish a legal presence in Australia. We ensure full legal compliance, manage payroll, protect your intellectual property, and handle work visas, so you can focus on growing your business and building an international workforce.
Employment Contracts in Australia
An employment contract is a formal agreement between an employer and an employee that outlines the terms and conditions of their employment. These contracts can be either written or verbal. However, regardless of the form, the contract must comply with legal requirements.
Legal Minimum Entitlements in Employment Contracts
Employment contracts must not offer less than the legal minimum entitlements set by Australian labor laws. These minimum entitlements include:
The National Employment Standards (NES).
The National Employment Standards (NES) represent the basic minimum rights and entitlements that must be granted to all employees in Australia, ensuring fair treatment in the workplace. These standards cover essential areas such as leave, pay, work hours, and other conditions of employment.
Pay Secrecy and Employment Contracts
Australian law prohibits employers from including pay secrecy clauses in employment contracts. Employers cannot require employees to keep their salary or wage details confidential. This is to promote transparency and fairness in the workplace.
Any applicable awards, enterprise agreements, or other registered agreements.
Any relevant awards, enterprise agreements, or other registered agreements that apply to the employee’s role or workplace. These agreements set out the specific employment conditions and entitlements.
All employees are automatically covered by the NES, even if they have not signed a contract. It’s important to note that a contract cannot provide terms that are less favorable than what employees are legally entitled to under the NES or other applicable agreements.
Fixed-Term Contracts
A fixed-term contract specifies a set period of employment, either ending on a particular date or after a defined duration (e.g., a seasonal role or project-based work). There are specific rules governing fixed-term contracts:
- Employees on a fixed-term contract must be provided with a Fixed Term Contract Information Statement.
- Fixed-term contracts cannot exceed a reasonable duration and must be used appropriately.
Working Hours
In Australia, the typical workweek is 38 hours, broken down into 7.6 hours per day (or 7 hours and 36 minutes). This is regarded as the standard working time. Hours worked beyond this may be eligible for overtime pay, penalty rates, or time off in lieu (TOIL), which can be taken at a later date.
13th Month Salary
In Australia, there is no legal requirement for a 13th-month salary. However, employers may choose to offer employees a Christmas bonus or other forms of bonuses at their discretion.
It is important to note that while a bonus is not mandatory or expected, if offered, it is considered part of an employee’s ordinary time earnings and is subject to tax. This means that any bonus payments made to employees are included in their taxable income and must be reported accordingly.
Key Points on Working Hours
Any hours worked beyond the standard limits may qualify for overtime pay, penalty rates, or additional leave entitlements.
Termination and Severance Pay
In Australia, notice of termination and redundancy pay are key components of the National Employment Standards (NES), which apply to all employees covered by the national workplace relations system. These entitlements ensure fair treatment when an employee’s employment ends, whether through termination or redundancy, and they are not dependent on awards, agreements, or individual contracts.
Notice of Termination
Under the NES, employers must provide written notice when ending an employee’s employment, with some exceptions. Notice can be delivered in person, posted to the employee’s last known address, or sent electronically (with the employee’s consent).
If the employer doesn’t give the required notice, they must pay the employee for the period of notice, at the employee’s full pay rate. This includes base salary, bonuses, allowances, overtime, and penalty rates.
Minimum Notice Periods
The minimum notice periods depend on the employee’s continuous service with the employer:
| Service Period | Minimum Notice |
|---|---|
| 1 year or less | 1 week |
| More than 1 year but less than 3 years | 2 weeks |
| More than 3 years but less than 5 years | 3 weeks |
| More than 5 years | 4 weeks |
Employees over 45 years old with at least 2 years of service are entitled to an additional week of notice.
Exceptions to Notice of Termination
Notice requirements do not apply to the following employees:
- Casual employees
- Employees on fixed-term contracts or engaged for a season
- Employees terminated for serious misconduct (e.g., theft, fraud, or violence)
- Employees employed for training purposes (other than apprentices)
- Daily hire employees in certain industries (e.g., construction, meat processing)
Apprentices are entitled to notice unless they are dismissed for serious misconduct or employed for a set period.
Redundancy
Redundancy occurs when an employer decides that a role is no longer required, often due to business changes like new technology, downsizing, closure, or restructuring. Redundancy pay is compensation for the employee’s loss of employment, based on their continuous service with the employer.
Redundancy Pay Entitlements
The amount of redundancy pay depends on the employee’s years of service:
| Service Period | Redundancy Pay |
|---|---|
| 1–2 years | 4 weeks |
| 2–3 years | 6 weeks |
| 3–4 years | 7 weeks |
| 4–5 years | 8 weeks |
| 5–6 years | 10 weeks |
| 6–7 years | 11 weeks |
| 7–8 years | 13 weeks |
| 8–9 years | 14 weeks |
| 9–10 years | 16 weeks |
| 10 years+ | 12 weeks |
Note: There is a reduction in redundancy pay after 10 years of service (from 16 weeks to 12 weeks), as per the 2004 Redundancy Case decision.
Reducing Redundancy Pay
Employers can apply to the Fair Work Commission to reduce redundancy pay if:
- The employer finds alternative employment for the employee
- The employer cannot afford the full redundancy payment
Employees Who Are Not Entitled to Redundancy Pay
Certain employees are not entitled to redundancy pay, including those:
- With less than 12 months of continuous service
- Employed for a fixed period or seasonal work
- Dismissed for serious misconduct
- Casual employees
- Apprentices
- Employees of a small business (employers with fewer than 15 employees)
For small businesses, casual employees who are regular and systematic may be counted, and businesses that become small due to downsizing or insolvency may still be required to pay redundancy.
Employees vs Independent Contractors
The distinction between employees and independent contractors is crucial for both businesses and workers in Australia. While both play important roles, they are legally different in terms of rights, obligations, and the nature of their work relationship. Employees typically work within a business and are considered part of it, while independent contractors provide services to a business but remain separate entities.
Recent High Court rulings in CFMMEU v Personnel Contracting (2022) and ZG Operations v Jamsek (2022) have clarified how to assess whether a worker is an employee or an independent contractor. The key to determining the correct classification lies in analyzing the legal rights and obligations within the worker’s contract, not the label or title used in the contract.
This guide breaks down the main differences between employees and independent contractors, helping you understand what makes each status distinct.
Comparison Table: Employee vs Independent Contractor
| Factor | Employee | Independent Contractor |
|---|---|---|
| Control | Your business controls how, where, and when the work is done. | The worker has control over how, where, and when to perform their work, subject to reasonable direction. |
| Integration | The worker is integrated into your business and performs work as a representative of your business. | The worker provides services to your business but performs work to further their own business. |
| Mode of Remuneration | Paid for time worked, per item, or commission-based. | Paid for specific results or completion of a project, often for a fixed fee. |
| Ability to Subcontract | The worker must perform the work themselves; no right to subcontract. | The worker can delegate or subcontract work to others, provided it’s legally allowed in the contract. |
| Provision of Tools & Equipment | Your business provides most or all of the necessary tools and equipment, or reimburses the worker for expenses. | The worker provides their own tools and equipment and is not reimbursed by your business. |
| Risk | Your business bears commercial risk (costs arising from injury or defects). | The worker bears the risk for any costs arising from injury or defects in their work. |
| Generation of Goodwill | Any goodwill generated through the work benefits your business. | The worker’s business benefits from any goodwill generated by their work, not your business. |
In essence, employees work as part of your business and are subject to your direction and control, while independent contractors operate independently, typically managing their own tools and bearing the risks associated with their work. Understanding these differences is essential for ensuring compliance with employment laws and determining entitlements such as superannuation, leave, and tax obligations.
Social Security in Australia
While Australia does not impose social security taxes, it does levy a Medicare tax to fund the national healthcare system. The Medicare levy is currently set at 2% of taxable income and reportable fringe benefits for Australian residents. However, individuals earning below the established low-income threshold are exempt from this levy.
In addition to the standard Medicare levy, a Medicare levy surcharge applies to higher-income earners who do not have adequate private health insurance. This surcharge ranges from 1% to 1.5%, and it only applies if the taxpayer and their dependents are not covered by a registered private health fund that provides at least basic hospital coverage.
For both employers and foreign nationals working in Australia, selecting the right health insurance policy is crucial. It’s important to ensure that the health insurance plan not only provides sufficient coverage but also qualifies for the Medicare levy surcharge exemption. Some health insurance policies may offer comprehensive coverage but fail to meet the criteria for the surcharge exemption, while others may exempt you from the surcharge but not provide adequate healthcare cover. To navigate these complexities, it’s advisable to consult a tax expert to ensure that your health insurance meets both the coverage and exemption requirements.
Payroll in Australia
Minimum Wages
In Australia, all workers are guaranteed a minimum wage, which sets the lowest pay an employer can legally offer. As of 1 July 2024, the national minimum wage is $24.10 per hour or $915.90 per week based on a 38-hour workweek.
Payroll Cycle
In Australia, employers must adhere to specific guidelines when paying their employees, ensuring that compensation is timely and compliant with the law. The payroll cycle, including when and how employees should be paid, is typically outlined in employment agreements, awards, or enterprise agreements. If not specified, there are minimum requirements that employers must follow.
When Should Employees Be Paid?
The frequency of payments is usually determined by the relevant award or agreement and may be set as:
- Weekly
- Fortnightly (every two weeks)
- Monthly
If the payment cycle is not mentioned in the agreement, employees are entitled to receive payment at least once a month.
Overtime Pay
Overtime pay is provided when you work beyond your standard hours, as defined in your employment contract or award. The rate of overtime pay depends on factors like the day you worked and how many hours you exceeded your regular shift. For example, overtime on a public holiday or Sunday often carries a higher pay rate than overtime on a regular weekday.
Overtime Pay on Regular Work Days
For most employees, the standard overtime rates are as follows:
- Monday to Saturday: The first two hours of overtime are paid at 150% (time and a half) of your regular hourly rate.
- After the first two hours, the rate increases to 200% (double time) for any additional overtime hours.
Typically, overtime pay applies to hourly workers. Salaried employees may not receive overtime unless specifically stated in their employment contract.
Overtime Pay on Public Holidays
When you work on a public holiday, you are usually entitled to receive 250% of your normal hourly rate, commonly referred to as “double time and a half.”
For salaried employees, instead of overtime pay, time off in lieu (TOIL) is often offered as compensation for work done on public holidays.
Who Is Eligible for Overtime Pay?
Eligibility for overtime pay depends on your industry, award, and employment contract. The National Employment Standards (NES) set out the legal framework for overtime in Australia, detailing the conditions under which overtime applies.
Overtime pay rules can vary depending on your sector or the specific award or enterprise agreement you are covered by. For example, some workers, such as nurses, may also receive shift loading and qualify for overtime pay even if there is less than 10 hours between shifts.
Mercans’ payroll capabilities
Personal Income Tax in Australia
The Australian Tax Office (ATO) is responsible for collecting income tax from all working Australians each financial year. In Australia, the financial year runs from 1 July to 30 June the following year, and we are currently in the 2024–25 financial year (1 July 2024 to 30 June 2025).
Income Tax Rates for Australian Residents (2024–25)
The income tax rates for the 2024–25 financial year are as follows:
| Income Threshold | Tax Rate | Tax Payable |
|---|---|---|
| $0 – $18,200 | 0% | Nil |
| $18,201 – $45,000 | 16% | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | 30% | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | 37% | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and over | 45% | $51,638 plus 45c for each $1 over $190,000 |
Tax Cuts from 1 July 2024
Starting from 1 July 2024, many Australian taxpayers will benefit from a reduction in income tax rates. Below is a comparison of tax payments for various income levels between the 2023–24 and 2024–25 financial years:
| Income | 2023-24 Tax Paid | 2024-25 Tax Paid | Tax Cut |
|---|---|---|---|
| $20,000 | $342 | $288 | $54 |
| $30,000 | $2,242 | $1,888 | $354 |
| $40,000 | $4,142 | $3,488 | $654 |
| $50,000 | $6,717 | $5,788 | $929 |
| $60,000 | $9,967 | $8,788 | $1,179 |
| $70,000 | $13,217 | $11,788 | $1,429 |
| $80,000 | $16,467 | $14,788 | $1,679 |
| $90,000 | $19,717 | $17,788 | $1,929 |
| $100,000 | $22,967 | $20,788 | $2,179 |
| $110,000 | $26,217 | $23,788 | $2,429 |
| $120,000 | $29,467 | $26,788 | $2,679 |
| $130,000 | $33,167 | $29,788 | $3,379 |
| $140,000 | $36,867 | $33,138 | $3,729 |
| $150,000 | $40,567 | $36,838 | $3,729 |
| $160,000 | $44,267 | $40,538 | $3,729 |
| $170,000 | $47,967 | $44,238 | $3,729 |
| $180,000 | $51,667 | $47,938 | $3,729 |
| $190,000 | $56,167 | $51,638 | $4,529 |
| $200,000 | $60,667 | $56,138 | $4,529 |
These tax cuts are part of the government’s ongoing efforts to reduce the tax burden on working Australians, providing more disposable income across various income levels.
Australia Employee Hiring Cost
When hiring an employee in Australia, the employer must consider not only the employee’s gross salary but also additional costs such as superannuation contributions, payroll tax, and workers’ compensation insurance. For instance, if an employee has a gross annual salary of AUD 100,000, the employer must contribute 11% (AUD 11,000) to the employee’s superannuation fund. Other costs, such as payroll tax and insurance, vary depending on the state and industry but typically add around AUD 8,494.00. Therefore, the total annual cost to the employer for a gross salary of AUD 100,000 would be approximately AUD 119,494.
| Salary Details | Amount (AUD) |
|---|---|
| Gross Annual Salary | 100,000.00 |
| Annual Employer Costs | 19,494.00 |
| Total Annual Cost | 119,494.00 |
Employee Benefits in Australia
In Australia, employee benefits are a mix of mandatory and supplementary offerings that help to support the financial security and wellbeing of workers. Mandatory benefits include superannuation, paid time off (PTO), and leave entitlements such as long service leave and sick leave. Supplementary benefits, while not required by law, are increasingly offered by employers to enhance employee satisfaction and retention. These may include health insurance, education benefits, flexible working arrangements, and wellness programs. Below is a breakdown of the key benefits:
- Superannuation: Employers must contribute 11% of an employee’s salary to a superannuation fund, with this rate set to rise to 12% by 2025. Employees can also opt to make additional pre-tax contributions through salary sacrifice.
- Paid Time Off (PTO): Full- and part-time employees are entitled to 20 days of paid leave each year. Casual employees do not receive PTO, but they are compensated with a casual loading. Employees may also salary sacrifice for additional leave days.
- Long Service Leave: Employees accrue long service leave after completing 10 years of continuous service, with 8.67 weeks of leave granted after this period. The leave entitlement starts accruing after 5 years of service.
- Maternity/Paternity Leave: While paid parental leave is not legally required, many employers offer paid parental leave in addition to government-funded parental leave schemes.
- Sick Leave: Employers generally offer between 5-10 days of paid sick leave per year. Bereavement leave is also common, typically providing 3-5 days.
- Group Insurances: Employers may offer group life insurance, disability, and salary continuance insurance as part of their benefits package.
- Health Insurance: Many companies, particularly in higher-paying industries, provide employees with subsidized health insurance or full coverage plans.
- Education and Professional Development: Some companies offer financial assistance for continuing education, such as tuition reimbursement or funding for professional development courses.
- Company Cars/Allowances: In some roles, particularly for higher-level positions, employers may provide company vehicles or a car allowance.
- Childcare Support: Some large employers provide childcare subsidies or even on-site childcare facilities for employees with young children.
- Flexible Work Options: Employers are increasingly offering flexible working hours, the ability to work from home, or additional unpaid leave to support employees’ work-life balance.
- Workplace Wellness Programs: Companies are enhancing the workplace experience by offering wellness initiatives, such as mental health support, stress-relief activities, and communal spaces for relaxation.
- On-Site Canteens or Subsidized Meals: Larger employers may provide on-site canteens or meal subsidies to ensure employees have access to healthy food options during work hours.
- Gym Memberships or On-Site Facilities: Many businesses offer subsidized gym memberships or on-site fitness centers to promote physical health and wellbeing among employees.
- Relaxation Spaces: Employers are introducing more spaces for employees to unwind, such as lounges, massage rooms, or areas for team-building activities and games.
- Discount Programs: Some companies offer group discounts on shopping, fuel, travel, and leisure activities, providing employees with a range of benefits at reduced rates.
- Superannuation: Employers must contribute 11% of an employee’s salary to a superannuation fund, with this rate set to rise to 12% by 2025. Employees can also opt to make additional pre-tax contributions through salary sacrifice.
- Paid Time Off (PTO): Full- and part-time employees are entitled to 20 days of paid leave each year. Casual employees do not receive PTO, but they are compensated with a casual loading. Employees may also salary sacrifice for additional leave days.
- Long Service Leave: Employees accrue long service leave after completing 10 years of continuous service, with 8.67 weeks of leave granted after this period. The leave entitlement starts accruing after 5 years of service.
- Maternity/Paternity Leave: While paid parental leave is not legally required, many employers offer paid parental leave in addition to government-funded parental leave schemes.
- Sick Leave: Employers generally offer between 5-10 days of paid sick leave per year. Bereavement leave is also common, typically providing 3-5 days.
- Group Insurances: Employers may offer group life insurance, disability, and salary continuance insurance as part of their benefits package.
- Health Insurance: Many companies, particularly in higher-paying industries, provide employees with subsidized health insurance or full coverage plans.
- Education and Professional Development: Some companies offer financial assistance for continuing education, such as tuition reimbursement or funding for professional development courses.
- Company Cars/Allowances: In some roles, particularly for higher-level positions, employers may provide company vehicles or a car allowance.
- Childcare Support: Some large employers provide childcare subsidies or even on-site childcare facilities for employees with young children.
- Flexible Work Options: Employers are increasingly offering flexible working hours, the ability to work from home, or additional unpaid leave to support employees’ work-life balance.
- Workplace Wellness Programs: Companies are enhancing the workplace experience by offering wellness initiatives, such as mental health support, stress-relief activities, and communal spaces for relaxation.
- On-Site Canteens or Subsidized Meals: Larger employers may provide on-site canteens or meal subsidies to ensure employees have access to healthy food options during work hours.
- Gym Memberships or On-Site Facilities: Many businesses offer subsidized gym memberships or on-site fitness centers to promote physical health and wellbeing among employees.
- Relaxation Spaces: Employers are introducing more spaces for employees to unwind, such as lounges, massage rooms, or areas for team-building activities and games.
- Discount Programs: Some companies offer group discounts on shopping, fuel, travel, and leisure activities, providing employees with a range of benefits at reduced rates.
Work Permit in Australia
Australia offers various work visas that allow employers to sponsor skilled workers, either temporarily or permanently. These visa types are essential for foreign employers seeking to hire in compliance with Australian immigration laws.
Primary Visa Options for Hiring Skilled Workers
Employer Nomination Scheme (ENS) Visa (subclass 186)
Allows Australian employers to nominate skilled workers, providing a pathway to permanent residency. Ideal for long-term staffing needs.
Regional Sponsored Migration Scheme (RSMS) Visa (subclass 187)
For employers in regional Australia who wish to sponsor skilled workers to live and work in regional areas, also offering a route to permanent residency.
Temporary Skill Shortage (TSS) Visa (subclass 482)
Enables employers to sponsor skilled workers for short- or medium-term roles when local talent is unavailable. Applicants must be nominated for roles on Australia’s Skilled Occupation List.
Skilled Nominated Visa (subclass 190)
Provides permanent residency for skilled workers nominated by a state or territory government, helping meet regional employment needs.
Skilled Independent Visa (subclass 189)
A pathway to permanent residency for skilled workers selected based on qualifications and experience, without employer sponsorship.
Temporary Work (Short Stay Specialist) Visa
For specialized short-term roles, offering a solution for temporary, highly skilled work.
Important Considerations for Employers
Australia’s Points-Based System
Certain visa types operate within a points-based system, assessing factors like age, work experience, and English proficiency.
Compliance Requirements
Employers must adhere to Australian employment regulations, including labor market testing and fair compensation standards, to ensure visa compliance.
Understanding these visa options and their compliance requirements can streamline the hiring process, allowing employers to bring skilled talent into their Australian-based operations effectively.
EOR Solutions in Australia
Best Employer of Record Australia
Conclusion
In conclusion, Mercans provides unparalleled Employer of Record (EOR) services in Australia, ensuring accuracy, compliance, and efficiency in managing your workforce. Our end-to-end solutions simplify payroll and employment processes, making us a trusted partner for businesses navigating the complexities of the Australian labor market. With Mercans by your side, your expansion into Australia will be smooth, compliant, and successful, allowing you to focus on growing your business with confidence.