Hiring an employee for your new business is an exciting milestone. Needing to get more hands on deck is a promising sign that your business is growing and also carries with it the potential to be very lucrative. However, there are some important legal tips that you need to know before you start the hiring process. Recruiting the right people is important and a bad hire can cost your business thousands of dollars. Addressing the legal issues that may arise in the process of employment is key for a productive workforce. The following steps will explain how to hire an employee and make the right choices for your business.
1. What employment type are you looking for?
In general an “employee” works for an “employer”and provides services in return for a wage. The employer-employee relationship is fundamentally a “contract of service”, where the employee provides exclusive services to an employer and also at the discretion of the employer. Employees also tend to keep regular hours and work on a consistent basis. Full and part time employees can take annual and sick leave. Further, when an employee leaves the job they need to provide notice and work through that period.
By contrast, an “independent contractor is a “contract for service”. This is because the contractor is part of an independent business with an obligation to provide goods and/or services for a price. Independent contractors often work for themselves and receive payment on a fixed basis. Contractors have the freedom to choose their own hours so long as they complete the terms of the contract, but can be terminated without notice. Further, you can see our guide on How to Hire a Contractor to help you decide on which option works best for your business.
2. The Hiring process
If you decided on hiring an employee, the next step is to promote the position through a position/job description. A position description or ‘PD’ provides prospective candidates with an overview of the role and its responsibilities and can include a selection criteria and information about remuneration. You can also create a Employee Application Form to easily request and collate vital information about prospective applicants. The information from this form will help you to compare and contrast each applicant to make a more informed decision. Additionally, once you’ve chosen the applicant, you won’t need to chase after their personal and professional information.
3. Making an offer of employment
A written offer should be made to a prospective employee. A new employee should also sign an Employment Contact which will confirm that they agree to the employment terms. A written offer should include the date the job commences, the position, information regarding wages and also include any other aspects of the employment relationship that are not set out in the Fair Work Act 2009 (Cth). You can also include a confidentiality and restraint of trade clause to protect your business.
4. Employee benefits
You can set out employee benefits in an Employment Contract. It is integral that you make an employee aware of the minimum statutory requirements set out in the Fair Work Act 2009 (Cth). This includes long service leave and superannuation entitlements.
In addition, there are 10 National Employment Standards set out in the Fair Work Act. These standards must be provided to all employees in Australia and along with the minimum wage, are the minimum entitlements for employees. The National Employment Standards include:
- Hours of work
- Request for flexible working arrangements
- Annual leave and also personal/carer’s leave
- Compassionate leave
- Community service leave
- Public holidays
- Parental leave
5. Employment confidentiality
An employment agreement includes a confidentiality clause that requires an employee not to disclose an employer’s confidential or proprietary information. Information that is “confidential” is unique to a particular company similarly disclosure of such information can harm a business.
6. Important considerations in an Employment Agreement
- Confidentiality clauses
- General statement of eligibility for benefits plan
- Non-compete (also known as restraint of trade) clauses
- Rate of pay
- Severability clause
- Specified probationary period
- Starting date
- Statement of at-will nature of employment
- Title of position being offered
- Any other state, industry-specific, or company required information
- Statement indicating that there are no agreements between the parties other than those explicitly stated within the agreement
If you’re ready to hire an employee, you can easily create an Employee Agreement for a full-time, part-time and casual employee here. Whether you’re hiring your first or fiftieth employee, following the right process and knowing how to hire an employee properly will not only inspire confidence in your employees, but will also protect your business.