A handy guide to the different types of employment
Your business is itching to grow, and it follows that you'll need extra staff to help you get there. But do you know which type of employee will best suit your needs? To save you some homework, we unpack the most common employee types and reveal some of their pros and cons.
For most roles, you’ll want to hire one of the following four types of employee:
Before you rush into the differences and details of each, there are a few questions to consider:
Once you’ve figured these out, you’ll be ready to accurately weigh the upsides and downsides of each option.
As per the Fair Work Act, a full-time employee works an average of 38 hours a week in an ongoing capacity. The actual hours worked are agreed between you and the employee and may be specified in an award or registered agreement.
Full-time employees are entitled to paid annual leave and sick leave and public holiday pay plus superannuation payments. They may also qualify for other types of leave, such as parental leave, personal leave, carer's leave, long service leave, and unpaid community service leave.
You will also need to give them notice if the job is no longer required.
Financially, offering full-time employment is a big commitment. Think of a full-time permanent employee as an investment. Over time, they can develop skills, knowledge and loyalty that may help accelerate business growth and cover their payroll costs many times over.
A part-time employee typically works fewer than 38 hours a week but enjoys the same pay rates and leave entitlements as full-time employees. It's usually a good option for non-full-time workers if you expect the work to be steady and ongoing. Like full-time employees, they'll also require notice if the job ends.
Because you don't need to pay them extra to make up for their reduced hours, part-time employees can cost less to employ in the short term than casuals. Unlike casuals, however, you'll still be responsible for their leave entitlements over the long term.
If you have a specific skillset need for a finite period, such as a specialist required to work on a specific project, you can offer them an employment contract for a set period of weeks, months or years. These are called fixed term contracts.
Fixed term contract employees are usually full-time or part-time employees, though they are different from permanent employees who are employed on an ongoing basis until either the employer or employee ends the employment relationship.
Full-time or part-time fixed term contract employees are generally entitled to the same benefits as permanent employees, including paid leave entitlements – though some employers choose not to operate in this way.
The key benefit of hiring an independent contractor is that you know exactly how much they will cost you for a pre-defined period, simplifying project budgeting and cash flow forecasts. And with the advent of flexible working arrangements being considered the norm, they may be happy to work from home rather than requiring an extra workstation in your offices.
Full-time and part-time employees can both expect some kind of guarantee of ongoing work. By contrast, those in casual employment are hired only when the business needs them, with no minimum hours or duration of employment.
This extra flexibility lets you bring in workers to cover short-term projects or peak periods. It's well-suited to industries that see varying seasonal demand, such as retail and agriculture.
Because they aren't entitled to sick or annual leave, casual employees are entitled to higher pay (referred to as casual loading) – equal to the equivalent permanent hourly rate plus 15–25% of that rate. This loading may need to increase if you require them to work evenings or weekends.
It's worth keeping in mind that casual workers may not feel as invested in your business as your part-time or full-time staff. Beyond fulfilling the requirements of the role, they're free to turn down shifts, even if you're desperate, just as you have the right to not roster them on. That said, if they're a great fit, there's no reason why you couldn't earmark them for a more permanent role if/when one comes up.
The differences between the various employee types can seem confusing at first, especially when you're still getting to grips with recruitment. Classifying them correctly ensures you have the right person for the job, while also meeting your wage and entitlement obligations.
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business. Westpac does not endorse any of the external providers referred to in this article.