Australian employment laws vs. US
If you’re a US company looking to employ in Australia, you’re required to either employ US nationals on international assignment or hire local workers on Australian soil, according to Australian employment laws. No matter which way you go, you must follow stringent Australian payroll, immigration and tax rules that apply to you.
As a US company looking to employ in Australia, one of the most important overarching rules you’re required to follow is employing workers through an Australian entity, such as a PEO agency like Australia PEO. As a Professional Employment Organisation, we help your business manage payroll-related tasks, HR functions and visa applications, so you can concentrate on other tasks associated with your expansion into Australia.
To begin with, one of the key differentiators you may not be aware of is that US employment benefits have statutory minimums in Australia. The US works to a pro-business employment policy which must be altered to suit Australian laws, as they have more labor laws in place.
As a US company wanting to employ in Australia, it’s important to understand that employment laws are very different to those of the US, if you were to employ on your own, without the help of a PEO.
Here are the difference between Australian employment laws and US employment laws:
Labor laws and National Employment Standards (NES)
There are 10 guidelines outlined in the NES that form the basis of employment protection in Australia. These benefits include maximum weekly hours, holidays and anti-discrimination laws. Australia’s NES guidelines are far more in-depth and complex than those set out in US’s Labor Laws.
The term for retirement savings in the Australia is “Superannuation”. One important thing to note in Australia is that retirement funds are mandatory and require employers to add 9.5% onto one’s salary package.
Superannuation funds are highly restricted and an employee in Australia must request access to them. Employees can also contribute to their fund if they please.
The US equivalent to Australia’s super is known as the 401K but it’s not compulsory. The amount that the employers contribute can only be matched by that of the employee. The yearly contribution and withdrawal limits are set by IRS tax rules.
Paid Time Off and Annual Leave
The Australian equivalent to Paid Time Off is Annual Leave and includes holidays, vacation time, sick leave and maternity leave.
The least amount of annual leave days Australian employers are required to provide their workers is 20 days, or 20 working days. Employees have the choice of using their leave or claiming accrued leave days at the end of employment period.
In the US, employers can choose to offer their workers paid leave days, however the national standard is two weeks, or 10 working days.
Tax – ATO and the IRS
The Australian Taxation Office (ATO) is the enforcing body for all tax contributions in Australia, similar to the Internal Revenue Service (IRS) in the US.
Each Australian worker has their own Tax File Number (TFN) and remains the same throughout the worker’s entire life. The US equivalent to the TFN is the Social Security Numbers.
The standard method of tax contributions in Australia is very similar to the US Pay As You Go method in that a certain amount of one’s paycheck is deducted based on their remuneration levels.
PAYG Withholding Tax vs. FICA
In Australia, an employer has to responsibility of paying an employee’s tax contributions on their behalf. The required rate for each employer depends on their salary and package and the process of submitting an employee’s tax contributions is complicated.
The FICA payroll system in US is fixed at 15.4% and the responsibility of contributions is shared equally by the company and the employees themselves.
Redundancy and Severance pay
There are several differences between Australia’s redundancy laws and US’s Severance Pay.
In Australia, if a worker’s position is no longer needed due to changes within the business, the employer must issue them a payout. The amount is decided by the Fair Work Commission and depends on their current salary and the length of time they’ve worked at the company.
Severance pay in the US is not compulsory, though it does need to be outlined on the employee’s contract if the company choose to offer it.
There are also several laws outlining notice periods and reasons for termination in Australia that different from those of the US. But rather than worrying yourself with these, you can work with the leading PEO agency, Australia PEO, so we can take care of the complication employment practices for you.
Collective Bargaining Agreements and Enterprise agreements
Australia PEO have helped many US businesses who have employed workers on Australian soil without fully understanding the inherent laws surrounding Collective Bargaining Agreements.
There are many jobs in Australia that rely on union bargaining representatives to negotiate contract terms on behalf of the worker. To find out which ones apply to your business, speak to someone from our team at Australia PEO.
Employment Contracts and Modern Awards
We’ve lost count of the many US companies who’ve found themselves in strife, after employing in Australia without fully understanding “modern awards”.
Modern awards outline the terms and conditions of employment in every industry. In the US, it’s common for employment contracts to be the only form of documentation for employment terms in the US.
Have you hired Australian nationals and are not sure whether you’ve complied with modern award regulations in Australia? Partnering with us means you don’t have to second guess yourself. We’ll take care of the paperwork for you.
Are you a US company wanting to know more about Australian employment laws?
Whilst Australia and US share some very common similarities when it comes to employment, when you scrape the surface, you’ll soon realise they’re very different.
The risks associated with non-compliance when you employ in Australia is vast, so there are many benefits of working with Australia PEO. With our main office in Australia, we take care of every stage of employment in the country by becoming the actual, legal employer of record in Australia.
Whether you need help securing local working visas for US or Australian workers or assistance with compliance issues, we take all the guess work out of employing workers in Australia, so your expansion into the country is seamless and stress free. Give us a call today to find out how we can help your business.
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