5 Employment Law Issues All Startups Must Consider

Jul 27, 2017
Reading Time: 4 minutes
Written by Fiona Lu

Is your dream to start your own business? Are you interested in joining Australia’s growing startup scene? There are a few important considerations that may influence your decision-making sooner or later. Besides looking at the financial aspect, you should think carefully about what issues can arise that relate to employment at the beginning of your startup journey.

If you have questions or need advice on employment matters in your business, LawPath recommends getting in touch with an employment lawyer.

Here are 5 considerations you must make before launching your startup

1. Do I Want To Hire Employees Or Contractors?

This is the first question every business owner should ask. The decision you make can have tax and super consequences. Generally, an employee works in your business and is part of your business. However, a contractor is running their own business. There are numerous differences that distinguish employees from contractors:


  1. Employees cannot subcontract or delegate work, nor pay someone else to do it.
  2. Employees are entitled to an ongoing wage or salary.
  3. Employees have entitlements such as annual leave.
  4. Employees can provide all or most of the equipment, tools and other assets required to complete. Be aware if your employee provides them, you have to pay them an allowance or reimbursement for the costs incurred.
  5. Your business is legally responsible for work done by your employees. This includes paying for the cost of rectifying any defect in their work.
  6. As business owner, you have greater control in how your employees do their work.


  1. Contractors can subcontract or delegate the work, or pay someone else to do it.
  2. Are paid based on the work they achieved in a quote.
  3. Contracts can provide all or most of the equipment, tools and other assets required. You do not have to pay them an allowance or reimbursement for the costs incurred.
  4. You are not legally responsible for the cost of rectifying any defect in their work.
  5. You do not have control over a contractor’s work, but you can force them to adhere to specific terms in the contract or agreement.
  6. Contractors can choose to accept or refuse your request for completion of additional work.

If you are interested in learning about the advantages and disadvantages of choosing to hire employees or contractors.

For more information about employees and contractors, check out the Australian Taxation Office (ATO)’s resources.

2. Do I Need An Employment Agreement Or A Contractor Agreement?

The type of agreement you will need will depend on whether you choose to employ employees or contractors. Whichever agreement you choose, it is beneficial to think about what issues you will need to cover, in order to ensure you meet your business needs.

An employment agreement between an employer and employee. It sets out rights and duties on top of minimum conditions imposed in the National Employment Standards. Agreements will vary depending on the nature of your business, the number of employees you employ and the frequency with which staff join and leave. If you have full time, casual and part-time employees, you will need them to a sign an agreement that is appropriate to their employment status. LawPath has customisable and ready to use Employment Agreements.

In contrast, contractor agreements allow you to engage a contractor that is either an individual or a registered company. LawPath has customisable and ready for use Contractor Agreement (Individual) and Contractor Agreement (Company) that can be made in under 5 minutes.

3. What Clauses Will I Need To Draft?

If you choose to put in place either agreements, it is recommended you contact an employment lawyer who can draft a clause prohibiting the disclosure of confidential of information and specifying what needs to be protected. This will prevent current or former employees from confidential information. Otherwise, such information will not be protected.

Another important consideration that may relate to your business is intellectual property. Typically, if you hire an employee and during their employment intellectual property is created, the IP is owned by you. However, contractors will own any IP they create and will legally be able to disclose and re-use the IP. Therefore, you must draft clauses in your agreements that address IP ownership rights. If you fail to do so, your business interests will not be protected.

4. Should I Implement A System Of Record-Keeping?

Business owners have an obligation to keep accurate and complete employee records for seven years, and issue pay slips to each employee. Similarly, a number of business owners have prepared employee handbooks that set out the company’s codes of practice, policies and procedures, as well as company rules. Not only is a handbook helpful for employees to learn about your workplace, it helps employers manage staff more effectively and reinforces what standards are expected of them.

Moreover, the Fair Work Ombudsman (FWO) lists that employee records must:

  • Be in a form that is readily accessible to a Fair Work Inspector;
  • Be kept in a legible form and in English;
  • Not be altered if it is not for the purpose of correcting an error;
  • Not be false or misleading.

If you fail to meet your obligations, it is seen as a contravention. Fair Work Inspectors can issue you an infringement notice under the Fair Work Act 2009.. As a business owner you want to take preventative measures to avoid your business from losing money within its first year of operation.

If you are unfamiliar with how record-keeping and pay slips should be done, check out the FWO’s website.

5. Do I Know My Legal Obligations?

As an employer, you need to be careful about how you treat your employees. All employees have protected rights at work. These protected rights are:

  1. Workplace rights;
  2. Taking or not taking part in industrial activities or belong or not belonging to an industrial association;
  3. Being free from discrimination.

You should treat all employees fairly and equally unless you want to be subject to a claim for adverse action, coercion, undue influence or pressure, or discrimination. Your responsibilities are set out in federal and state anti-discrimination laws, and the Fair Work Act 2009 (Cth). Once you understand your legal obligations, you can implement policies or procedures that will assist you in preventing discrimination, harassment or bullying in the workplace.

For a comprehensive list of employee entitlements, check out the Fair Work Ombudsman’s Protections At Work.


Through careful research and preparation your business can succeed and thrive. So prepare yourself, and plan which route your business will take that will effectively bring to life your idea!

Still unsure of your obligations and as an employer? LawPath can connect you with an experienced employment lawyer.

Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 700+ expert lawyers or to get answers to your legal questions.

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