Taking on staff? What do you need to know?
So you’re ready to hire your first employee, congratulations! You’ve had subbies working for you for years, so what’s the big deal?
Most tradies will one day find themselves in the position that they’ve got a good crew of guys who do an awesome job and they want to keep them happy. This awesome crew might still subcontract back to the head contractor (the business owner), which is always a risk that they could go off at any time and do their own thing – with minimal or in some case, no notice whatsoever. We get it, you want to look after your crew so they feel loyal and stick around, so you want to offer them a permanent employment contract. Let’s cover off some of the basics of hiring staff by introducing our tradie for this scenario.
John is a Builder with a crew that consists of himself and two guys; a carpenter and an apprentice.
Both guys are great – they turn up to work (which is always a good start, am I right?) they do a great job and produce some good, quality work in an efficient manner for your projects. Things are going well, deadlines are being met and John’s customers are happy.
John’s carpenter (let’s call him George) has mentioned a few times that he has a few smaller projects on the go as well, and they are getting to the point he doesn’t know how he will fit them in on the weekends. John decides to offer George a full time, permanent employee contract in lieu of George running his own small business.
What to consider first?
First of all, John is already registered as an employer with Inland Revenue as he has been taking WT deductions from both George and the apprentice. So big tick here. John has been working out the deductions manually using a very paper based process, and he files the required payday information online using his MyIR login twice a month.
What John may not realise is when offering an employment contract to a potential employee, an employer is also responsible for the following;
- Pay employees what their employment contract states, and at least the legal minimum wage.
- Give the employee at least four weeks’ annual holidays.
- Give the employee the day off on 11 public holidays or give them an alternative holiday if they work, if it is a normal working day for them.
- Pay at least time and a half if an employee works on a public holiday.
- Give employees at least five days’ sick leave per year.
- Act in good faith and honesty.
- Provide a safe workplace.
- Do not deduct money from wages unlawfully.
Source: © 2019 EMPLOYMENT NEW ZEALAND
For some tradies, annual leave can be a big hassle when a staff member requests to take a week off in the middle of December when everyone is scrambling to get those projects finished and handed over before Christmas, not to mention the hit to their back pocket when they have money going out and no hours to charge the clients for. This needs to be taken into account when quoting jobs and ensuring the correct margin is included for future expenses.
When it comes to calculating annual leave (or other types, such as sick or bereavement) there are also varying methods by which each leave type must be calculated in accordance with legislation. Even if as a small business owner you invest in payroll software to manage your employees’ leave, you must at all times ensure the leave is calculated and recorded correctly.
So back to John and his considerations to offering George a permanent job. He’s reviewed all of the above points, is comfortable with his responsibilities as an employer and knows he needs to ensure his quoting includes all relevant costs. The next step is to put together an employment contract to offer to the potential employee.
Business.govt.nz have a great employment agreement builder tool – check it out!
Some points to consider when putting together an offer of employment;
- What is the role?
- Rate of pay (hourly rate or salary?)
- Hours of work
- Benefits (if any)
Hours of work is where some tradies can get unstuck. Current workload means John has at least a 40 hour week for George to work, but what happens if it get’s quiet? Make sure you’re both on the same page with the expectations moving forward. An employment agreement must include agreed hours of work or an indication of the arrangements relating to the times the employee is to work and if either party wishes to change the hours, of work, both should agree to this in writing.
If the employment contract states 40 hours per week, then the employer must pay the employee 40 hours per week – regardless if the work was there to do or not. This is something that small business owners may not be aware of and is worth taking into consideration when hiring staff.
George accepted the offer, yippee! Now what?
Both John and George must sign the employment agreement and it is recommended (but not compulsory) to ensure the employer has this signed copy returned prior to the employment commencement date. This is a great chance to organise a meet up with the new employee the week before the start date, give any uniform items and building access keys/codes, where to park etc. John is going to make himself a checklist of what he would like to know if it was him starting on Monday so he doesn’t miss anything for George.
Once John has taken George through the first day induction process (including an overview of the Health & Safety program and company structure/background/culture), it’s time to sit down and add him to the new payroll system that John has had set up to take care of his payroll. Wait! John has actually got in touch with the helpful team at Ontrack to take care of his payroll for him.
So there you have it! Interesting fact, there are 60 additional pieces of compliance that come with employing your first staff member. Hopefully the above blog has helped give you an idea of what is required, and what should be considered when making the decision to hire an employee.
Now as for the difference between an employee and a subcontractor, that’s a whole other story…