Operating as a sole trader can be great and gives you lots of flexibility; but, sometimes you may find yourself questioning; can a sole trader hire employees?
A sole trader is a person trading as an individual solely responsible for all aspects of the business. The best example of a sole trader is a freelancer. The degree of control they have over the business is high. It’s also a relatively inexpensive business structure to set up.
However, just because they are a sole trader does not necessarily mean that they have to go it alone. Sole traders are allowed to hire employees. This is provided they comply with the obligations of being an employer.
This post we will look at the requirements you have to meet when you are a sole trader employing staff.
What obligations do you have as an employer?
When thinking about how to employ someone as a sole trader, there are various obligations you adopt when hiring a new employee in Australia.
Essentially you are operating as self-employed small business, so you need to keep on top of your record keeping requirements for tax purposes. This will make your tax return much easier.
Similarly, there are certain legal obligations you will need to comply with in respect of your workers.
Entitlements of staff
As an employer, you will need to remain informed of the different entitlements of each type of worker. Employment entitlements can include minimum wage, leave entitlements and notice periods for termination. For example, if you hire full-time staff you will need to have an annual leave system in place.
As an employer, you are responsible for contributing 10.5% (as of 2022) of your workers ordinary time wage to their superannuation account. This is required under the Super Guarantee system. You will need to pay the superannuation at least four times a year by the quarterly due dates. Late payments will incur a fee.
There are citizenship requirements attached to employing staff in Australia. You are responsible for ensuring that your workers either are Australian citizens or permanent residents, or have a visa entitling them to work in Australia.
You will need to take out personal and workers’ compensation insurance to protect both your customers and employees from the adverse effects of a workplace accident. If a workplace accident causes an injury or illness, the insurance will protect your interests and help the injured party recover.
Workplace health and safety
You are required to comply with the Workplace Health and Safety Regulations in the workplace. This involves making assessments of and mitigating risks that may adversely impact your employees or customers. An easy way to have all of this covered is to have a Workplace Health and Safety Policy.
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So, to answer the question of can I hire an employee as a sole trader? You 100% can, if it will address your business needs.
It is just important to understand and remain compliant with your obligations as an employer. If you need further advice, you can get in touch with an employment lawyer.
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