If you’re looking to accurately payroll your contractors in Australia, you need to be aware of the country’s complex pay regulations. Contractors within industries such as retail or hospitality are particularly at risk of misinterpretation of their award, leading to significant underpayment.
Step 1: Review their contract.
The first step is to ensure that you have a current and valid copy of the contractor’s signed contract. This should include their hourly rate or salary and any loadings, allowances, or penalty rates that apply. You should also have a record of the number of hours they’ve worked each week.
Step 2: Calculate hours worked
The second step is to calculate the employee’s ordinary hours using their contract details. Regular hours are generally defined as those worked between Monday to Friday during daylight hours. If the contractor is employed on a shift basis, their ordinary hours should be specified in their contract.
Step 3: Calculate overtime
The third step is to calculate the employee’s overtime hours. Overtime is generally defined as hours worked outside of the contractor’s ordinary hours. This could include weekends, public holidays, or night shifts. Contractors may also be entitled to penalty rates for working overtime hours.
Step 4: Calculate leave entitlements
The fourth step is to calculate the employee’s leave entitlements. Leave entitlements can vary depending on the type of leave, but they typically include annual leave, personal/carer’s leave, and compassionate leave. In some cases, contractors may also be entitled to paid sick leave and long service leave.
Step 5: Calculate other entitlements
The fifth step is to calculate any other entitlements the contractor may be entitled to, such as superannuation or bonuses. Superannuation is a compulsory savings scheme that most employees are entitled to, and it typically equals around ten per cent of an employee’s salary. Bonuses can vary depending on the company, but they’re normally given out based on performance or length of service.
Step 6: Calculate net pay
The sixth and final step is to calculate the employee’s net pay. This is the amount of money that will be paid into the contractor’s bank account, and it takes into account all of the deductions that have been made (e.g. tax, superannuation).