When your business grows, it can be terribly exciting, but in many cases, growth also brings more responsibilities and obligations along with it. This is especially true when it comes to hiring your first employee. So are you getting ready to hire someone? Here's a look at four at the issues you need to take care of with your first employee and how accountants can help:
1. Determining Employment Status
When you hire someone to work for your business, they can be an employee or a contractor. In most cases, an employee is someone who reports directly to you, who works on your schedule and whose tasks you largely control. A contractor, in contrast, typically has more autonomy with their schedule and tasks.
From a tax perspective, it's incredibly important to determine if the person you hire is a contractor or an employee. If he is the later, you have many more tax and legal obligations than you do with a contractor. However, if you mis-classify an employee as a contractor, you may be held liable for taxes or other obligations down the road if an issue arises.
A business attorney or an accountant can help you ensure that you classify your employees and contractors correctly.
2. Paying Payroll Taxes
Once you hire an employee, you have to pay them, but you also have to withhold taxes from their cheque and submit them to the Australian Taxation Office. This process can be confusing, and tax rates vary based on where you live. An accountant can help you lodge the correct forms and decide whether you should submit payroll taxes monthly, quarterly or on another schedule.
3. Setting up a Super
If you pay your employee more than $450 per month, you have to pay a super on top of their wages. The rate is 9.5 percent of your employee's earnings. For example, if you pay your employee $1,000, you would need to deposit $95 into their super fund.
An accountant can help you set up a super fund for your employees. They can also help you determine what to do if your employee's income sometimes dips beneath the $450 threshold and answer any other questions you may have.
4. Budgeting for Worker's Compensation Insurance
Additionally, as an employer, you may have to purchase a worker's compensation insurance plan. An accountant can help you work these extra costs into your budget, and they can help you claim your premiums correctly when you lodge your business's annual income tax return.
To learn more about how an accountant can help you navigate the process of hiring your first employee, contact an accountant.