Payroll and Benefits Guide Australia – New South Wales

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee

*This table does not include an additional Medicare levy surcharge of between 1% and 1.5% that applies to certain higher-income taxpayers not covered by health insurance for private patient hospital cover. Special rates apply to unearned income of children below the age of 18 years at year-end where that income is more than AUD 416.

In addition, the above table does not include tax offsets, including the Low-Income Tax Offset (maximum of AUD 700 for those earning up to AUD 37,500) and the Low- and Middle-Income Tax Offset (maximum of AUD 1,080) that can apply to reduce the overall tax payable for those with taxable income of less than AUD 126,000 (note that the Low and Middle-Income Tax Offset was extended to continue to apply to the 2021/22 income year).

** Foreign workers are subject to different tax rates starting at 32.5% on earnings up to 120,000 AUD, a rate of 39,000 AUD plus 37% is applied on amounts over 120,000 to 180,000 AUD and a rate of 61,200 AUD + 45% is applied on amounts over 180,000 AUD.

General

As of July 2022, the Fair Work Commission confirmed the national minimum wage in Australia as 21.38 AUD per hour and 812.60AUD per month for a full-time award-free adult employee who is not an apprentice or a trainee. Each classification level has a different minimum pay rate.
Most states fall under the Fair Work Act 2009 and work to the national minimum wage, however, there may still be some exceptions for state or local government employees.

Most states fall under the Fair Work Act 2009 and work to the national minimum, including New South Wales, however there may still be some exceptions for state or local government employees.

Payroll Cycle

General

Paid Time Off

All employees (except for casual employees) get paid annual leave as stipulated by The National Employment Standards (NES) contained in the Fair Work Act 2009 (Cth). In general, all employees are entitled to a minimum of 4 weeks paid leave (5 weeks for shift workers). Furthermore, the NES states that awards and contracts/agreements cannot contain any less than this minimum, but they can contain a greater number of days.

The NES also states that if the period during which an employee takes annual leave includes a public holiday, a period of another kind of leave (including sick leave, personal leave, etc.), that time is not regarded as annual leave. Annual leave is paid at the same rate as the regular salary rate, but where there are exceptions within the employee’s award/contract/workplace agreement, there can be an additional annual leave payment due of up to 17.50%.

In addition, each state in Australia has an entitlement for employees to have extended service leave. For New South Wales, it is two months’ leave after ten years of service, with one month’s leave for each subsequent period of five years of service after that. Unused vacation days are carried over.

Public Holidays

10 days minimum (7 national holidays + additional state given holidays). Holidays that fall on weekends are moved to another day.

Sick Days

The NES entitles permanent employees to 10 days paid sick leave and two days of paid compassionate leave per year (personal/carers leave).
An employee may take this paid personal/carer’s leave if they are unfit for work because of their own personal illness or injury, or to provide care or support to a member of their immediate family. This is funded by the employer.

Maternity Leave

See Parental Leave.

Paternity Leave

See Parental Leave.

Family/Parental Leave

The Paid Parental Leave Act 2010 (Cth) provides financial support to eligible working parents of newborn or recently adopted children. Paid parental leave is paid to the child’s primary carer for up to 18 weeks of pay based on the national minimum wage rate.

The new leave policy, effective from July 2021, allows both parents to take two weeks concurrently at the time of birth, adoption, or surrogacy and up to 12 weeks separately to assume primary care duties. An employee is not entitled to parental leave under the NES unless they have 12 months of continuous service or are a “long-term casual employee.” The casual employee must have been employed regularly and systematically for at least 12 months.

Eligible working fathers and partners (including same-sex partners) also get two weeks’ leave paid at the national minimum wage.
Employers can also provide for paid parental leave in registered agreements, employment contracts, and workplace policies which do not affect the employee’s eligibility for the Australian government’s paid parental leave scheme so the employee can be paid both.

In addition, employees who have worked for more than 12 months are entitled to at least 12 months of unpaid parental leave if the employee is or will be responsible for caring for a child or adopted child under 16 years old.

From 6 June 2023, parents who request unpaid leave for a period greater than 12 months will have a stronger right to request an extension of unpaid parental leave. If an employee has already taken 12 months of unpaid leave, they can request a further 12 months of unpaid leave (24 months in total). This is provided that their partner has not already taken 12 months of unpaid leave.

The combination of parental leave pay and dad and partner pay changes with effect from 1 July 2023, this will be combined into one single 20 week payment to work towards evening the caring responsibilities between parents. Claims are gender-neutral and will allow either parent to claim parental leave pay.

Currently, paid parental leave is 18 weeks, and is set to increase to 26 weeks by 2026, by extending the leave entitlement by 2 weeks per year with effect from1st July 2024 up to and including 1^st July 2026.

Other Leave

The NES stipulates employees are entitled to be absent from work for three main reasons, all to undertake community service activities.
Jury service is paid when employees take leave for jury service. Employees receive jury service pay from the government and employers then top this up to their usual pay for up to 10 days at the rates set.

Voluntary emergency management activity is unpaid leave. Activity in community service that the regulations prescribe is also an unpaid leave.
The leave period includes reasonable travel and rest time before and following the eligible activity, and the employee must aim to provide as much prior notice and information as possible.

Termination Process

There are several complex laws relating to termination processes in Australia. To ensure the correct process is followed, employers must adhere to the four key areas below to ensure the termination of an employee for the right reasons.

• Capacity – if an employee lacks the ability or capacity to complete the job
• Performance – unsatisfactory performance of the employee, which is outlined clearly to the employee with the opportunity for them to rectify their conduct
• Misconduct – failing to adhere to workplace standards, or if the employee is involved in serious misconduct
• Redundancy – if the job the employee is completing is no longer necessary for the business, or technological change has made their role unnecessary

Employees must have completed six months of service (12 months for a small company) before they can make an unfair dismissal claim.
An additional legal requirement for the employer is to provide the employee with an employment termination letter that must include confirmation of:

• the reason for the termination
• the date of the employee’s last day of work
• the fixed number of payments/entitlements etc. and any unpaid wages the employee will receive as final pay

Notice Period

The Fair Work Act 2009 (Cth) stipulates that the minimum notice periods for termination varies with the employee’s length of service as below:

• Less than 12 months of employment: 1 week’s notice
• 1-3 years of employment: 2 weeks’ notice
• 3-5 years of employment: 3 weeks’ notice
• 5 + years of employment: 4 weeks’ notice

In addition, if an employee is over 45 years of age and has completed at least two years’ continuous service, an additional week of notice is required.
However, it is common practice in Australia for the award/contract/workplace agreement to have a more extended period of notice than the minimum requirement; this is commonly four weeks’ notice.

Despite the minimum notice periods provided in the Fair Work Act 2009 (Cth), employees who have no notice period specified in their contract of employment may be entitled to what is called in Australia “reasonable period of notice” .
The reasonable period of notice will set a notice period of greater than the norm, and minimum, for employees with long lengths of service and/or where equivalent jobs/skills are in short supply.

Severance Pay

The entitlement to severance as a result of termination because of redundancy is based on a sliding scale and calculated by reference to the length of the employee’s period of continuous service on termination.

There are some exceptions to this entitlement. An employment contract, enterprise agreement, or modern award may also specify a greater entitlement.

Probation Period

Probation is not mandatory but it is common to use a period of 3-6 months (12 months for a small company). This can be greater or less as stated in the award/contract/workplace agreement.

• Commuter benefits (e.g., parking)
• Fitness/wellness cover (e.g., gym memberships)
• Meal vouchers/allowance
• Entertainment (such as tickets to concerts, product discounts)
• Life and private health insurance
• Internet/phone allowance
• Car allowance

VISA

Under the Migration Act 1958 and the Migration Regulations 1994, employers have a legal obligation to ensure all employees have the right to work in Australia.  Even if they already live in Australia and are not Australian Citizens, they may be permanent residents or New Zealand Citizens on a special class of visa that allows them to remain in Australia indefinitely or have a temporary visa. All these types of visas need to be checked regularly by the employer via the Department of Home Affairs’ online verification system, the Visa Entitlement Verification Online (VEVO). 

Suppose employers cannot find the appropriate person with the required skills/experience etc., for a job. In that case, applications can be made to sponsor workers temporarily or permanently. However, skilled workers must generally be included on the “Skilled Occupations List,” and the length of sponsorship is set by the length of time in the sponsored visa. However, this approach has been significantly affected by COVID-19, where many employees have been made redundant/reduced hours, etc. The Department of Home Affairs is now more focused on ensuring that no foreign workers will take a job opportunity from one that could place an Australian.  

There are several ways to sponsor a skilled foreign worker: 

• Sponsor a skilled worker for permanent migration through the Employer Nomination Scheme (ENS) or the Regional Sponsored Migration Scheme (RSMS)
• Sponsor a worker on a temporary visa through the Temporary Skill Shortage visa (subclass 482), which allows overseas people to come to Australia to work for up to 4 years.
• Take over the sponsorship of temporary migrants already in Australia on skilled work visas.
• Enter a labor agreement that allows you to employ several overseas skilled workers on a permanent or temporary basis by entering a formal labor agreement with the Australian government if the job is not on the Skilled Occupations List.

General

The standard rate of GST in Australia is 10.00%.