Employment practices in Australia are heavily affected by
statutory provisions, tax, superannuation as well as market forces.
With relatively low unemployment, it is also not uncommon for
employers to provide more than statutory requirements.
For employers coming from a United States background, the common
law position is also significantly different to the position in the
United States. One of the most important differences is that the
Californian concept of "at will" employment does not
apply in Australia. In particular:
in the absence of misconduct an employee is entitled to minimum
notice periods under federal law;
in addition to the minimum rights under federal law, whenever
the contract of employment fails to specify the required period of
notice, there is a common law requirement for the employer to give
reasonable notice. The amount of reasonable notice varies with a
number of factors, including the employee's age, seniority and
length of service. At the upper end, dismissing a CEO with 20 years
service who is in their late 50s could require notice of a year or
there are unfair dismissal laws.
In summary, in Australia employment conditions will be governed
by the following, the most important first (and with (a) to (d)
given statutory force):
National Employment Standards (NES), which
apply to all employees;
a minimum wage;
for most employees, Awards. These set out more detailed
conditions for the general workforce but will not apply in some
cases such as to many senior executives. These are in the process
of transition from prior state Awards to national Awards, and the
result of this transition has been in many cases to push up cost to
enterprise agreements that may be entered into to change the
application of some of the NES and Awards provisions, provided that
the employees in the enterprise are better off overall;
subject to the above, the individual contracts of employment;
terms implied into the contract of employment at common
The Australian laws include restrictions on dismissals
(including process and prohibited grounds including discriminatory
grounds), and more extensive redundancy obligations/payments. Those
obligations can pass to succeeding businesses, along with accrued
entitlements to annual leave, personal leave and long service
Taxation is a significant influence – there is a tax on
the employer on "fringe benefits", being benefits
provided to employees or their associates. There are some
exemptions (in particular for superannuation contributions) and
some concessions (certain car fringe benefits, laptop etc are on a
concessional basis). Because of the extra paperwork involved in
these matters, many employers prefer to effectively have no fringe
benefits provided, so that all remuneration is provided by way of
salary or superannuation.
It is not the practice in Australia for employers to provide any
Employers are generally required to pay 9.5% of base salary as a
superannuation contribution to a complying fund nominated by the
employee. In default of a nomination by the employee, there are
various industry and other funds. Employees can "salary
sacrifice", and request employers to reduce their base salary
and increase their superannuation, up to a limit. Above the
applicable limits, the employer will not obtain a tax deduction and
the employee would receive a penalty. If the employer does not pay
the required amounts into a complying superannuation fund, it is
subject to a levy called a superannuation guarantee levy.
Employer on-costs include, in addition to leave entitlements,
the cost of payroll tax and workers compensation.
Employers are required to make tax deductions for the
remuneration of employees and remit those deductions to the
Australian Taxation Office. There are also potential withholding
obligations, and other regulations, in relation to many contractor
Employers often seek confidentiality obligations or restraint
obligations from employees. These will not always be enforceable
and care should be taken in considering/drafting such obligations,
and in preparing employment agreements generally. In particular if
it is proposed to obtain a post employment restraint, these should
be drafted specifically for each employee to be bound where
There are occupational heath and safety obligations, union
rights, anti-discrimination laws and other matters to be
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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