When bigger is better

Tick off the checklist when your business is ready to hang up the “positions vacant” sign

Small business is big business, accounting for nearly 98% of all the nation’s commercial enterprises. Among them, sole traders have the strength of numbers, comprising a whopping 62% of small businesses. That’s close to 800,000 businesses owned and operated by just one person.

Being a one-man-band provides absolute control plus plenty of agility. The downside can be capacity constraints. There’s only so much one person can do in a day, and suitably skilled contractors may not always be available when you need them (see breakout, “Talent on hand when it’s needed”).

Hiring employees can give your business the resources it needs to grow. But it also comes with a raft of responsibilities you may never have had to deal with before, and it’s important to get things right from the start.

“When hiring staff, regardless of whether they are casual or full-time, all small business owners need to know what is required under Fair Work Australia,” says Anne Nalder, founder and CEO of the Small Business Association of Australia (SBAA). She points to compliance requirements such as superannuation and correct wages. “This area alone is complex and fraught with danger for the small business owner. The penalties for failure to comply are harsh.”

A number of useful resources are available to help you work out pay rates, tax and super. Visit business.gov.au, select ‘People’ from the Business Information menu and then ‘Hiring’. The small business section of fairwork.gov.au and the tax office website both have pay calculators.

Nalder adds that small business owners should also have policies in place that address diversity in the workplace, sexual

harassment and training, and provide clear guidelines for staff if they have an issue or complaint.

Create a safe workplace

As an employer, you have primary responsibility for the health and safety of staff while they are at work, and creating a safe workplace is a must.

“All workers need suitable workstations and conditions. If you move to a commercial location, you need to ensure those premises accommodate not only the business needs but those of the employees,” says Nalder. “A bad or unhealthy work environment can bring on legal action.”

The issue of employee safety cannot be underestimated. Figures from Safe Work Australia show that in 2018-19, close to 115,000 serious workers compensation claims were made. In 2019, more than 180 employees were fatally injured on the job.

Erin Gaffney, senior employment relations adviser at Employsure, says it’s up to employers to ensure the workplace, the work environment, and the tools the worker uses are safe and without risks. “The workplace must have sufficient space to undertake the task, have adequate lighting and ventilation, and must be suitably designed to allow the work to be undertaken safely and without risks to the worker.”

You’ll also need to have suitable emergency response facilities and procedures in place. “These must be commensurate with the nature, size and complexity of the work being undertaken as well as the location of the work site itself,” says Gaffney.

Insurance cover is essential

As an employing business, taking out workers compensation insurance is essential. The rules can vary between states. In NSW, for instance, all employers who have an apprentice, or who expect to pay annual wages over $7500, must have a workers insurance policy. If you don’t, fines of up to $55,000 and/or sixmonth jail terms can apply.

Jason Thompson, managing director of Health & Injury Management Solutions, says the premium will be based on the wages you pay (generally including superannuemployee ation) and the industry you operate in. As a guide, a NSW-based marketing consultancy that hires an employee on a salary of $50,000, can be up for a workers compensation premium of $311 annually.

There is a twist in workers compensation cover. According to Thompson, sole traders don’t need it because the owner is also the employer. However, it’s common for sole traders to move to a company structure when they start to employ people, and this usually sees the owner receive a wage rather than just dipping into the business bank account.

“If you draw wages from the company, your workers compensation insurance premium will further be increased by your income as you now need to declare these wages – the reason being that the employer is no longer yourself – it is the company,” says Thompson.

It’s a no-brainer that you should let clients and customers know you’ve expanded your team. It’s a great way to show you’re more than a one-person-band and have a range of skills available.

Manage the risk

Beyond this, Nalder says your business must register the employee under the tax office’s single-touch payroll requirements. This may be something you can delegate to your bookkeeper or accountant.

“Staff also need to be registered for superannuation,” says Nalder. “If you are a small business with under 19 employees, you need to pay super via a clearing house. This can be done via the tax office’s portal MyGovID and relationship authorisation manager (RAM), which is free.”

Be sure also to let the insurance company know you’ve taken on an employee. Nalder says it could make a difference to the policy and premium.

A chat with a business insurance broker can help you understand the various types of protection that may be worth adding to your cover. “SME businesses are often the most vulnerable to employment claims,” says Thompson. “The nature of the size of these employers generally means that they do not have a legal division or a relevant

handbook outlining the organisation’s policies and procedures around recruiting, hiring, disciplinary action or termination of employees.

Employment practices liability cover, for example, may provide peace of mind. Thompson says this helps protect the employer against employee claims involving discrimination, wrongful termination and other employment-related issues, such as failure to promote.

The key is to balance the cost of cover with the risks your business faces so that you can maximise the extra capacity your employee brings while minimising any possible downsides.