The Employment Conundrum
How the different employment models impact businesses and trainers alike!
I’m going to try my best to present both sides of this argument - the business owner and the staff member. It’s important to acknowledge that both parties have different needs. The business owner mostly likely needs staff to help deliver sessions in order to maximize the use of the business premises and hopefully meet demand for sessions from their clientele. Most of the time, the staff member needs to work to derive income in order to live their life. Both parties generally work within our industry due to a love of the industry, and both can probably agree that it’s unlikely they see themselves incredibly financially wealthy, although hopefully it feeds the mind and spirit side of their needs. It’s also probably best to acknowledge that neither party is actively trying to take advantage of the other, even if it may feel that way - and yes, this feeling does go both ways.
The Business Owner
Firstly, as a business owner, the topic of how to bring staff on is always a tricky one to decide on. There’s no correct answer, as you might have 3 different people on your team with three different life situations, and no one model suits any of them. But the reality is that you have to draw a line in the sand and made a decision on what’s best for the longevity of the business at the moment in time. This may change in the future, at which point you can change with it, and as long as you have complete transparency with your team, they will generally understand. Setting a strong culture and a tight nit team will help make your business about more than just you, giving you opportunity to develop the team and create a legacy that goes beyond however long you wish to run a business for.
The Staff Member
It’s important that when you are searching for work, you are really clear on what it is you really require from a workplace. If you have no attachment to who you work for, and just need the money, then make sure you work for the places that pay the most, and make yourself invaluable to them. If you’re looking for something a bit beyond the money, make sure you buy in to the culture of the environment, and look for extra’s - perhaps that’s location, type of clientele, professional development and growth opportunities within the business. You’ll find most employers are always on the look out for those who can go beyond the job description so they can build them up to be a bigger part of the business - this is how you as a staff member could work up to managing a space, getting profit share or perhaps becoming a business partner.
Another great piece of advice I learned early on from a business owner when I was starting out contracting was the start with how much money you wanted/needed to make in a year - let’s say $70k - and divide that by how many weeks you want to work - maybe 46? Based of $70k / 46 weeks, it works out that each week you need to earn around $1630. Now how many hours a week do you actually want to work - perhaps 25 contact hours? $1630 / 25 hours lands you at about $65 for each hour of work. Now also keep in mind that $70k will have tax come out of it, pay for you training and living costs - so perhaps you need to adjust the figure a bit, but this gives you a rough template to work with on how to best choose what work you take on.
Goal income DIVIDED BY weeks of work per year = weekly required income. DIVIDE BY hours per week to work = hourly rate required to reach goal.
Sub-contracting
The Business Owner
The subcontractor is by far and away the most popular model in our industry, as it allows for the greatest flexibility when it comes to pay and benefits. You may weave certain benefits in as part of an agreement, but at it’s most basic, you can set the rules and the subcontractor agrees to the work and that's that. Often you don’t have to pay the contractor if there isn’t work, and you’re not required to pay super or other benefits. You may have to pay a higher rate when you do have clients, but it’s a really safe model to start things with a team member.
However it’s becoming increasingly murky water in the eyes of Fair Work. If you were pressed by a complaint by a staff member, depending on how long they’ve worked for you, it’s likely you’ll be found out to be owing benefits to that staff member such as award rates for over time, weekends, public holidays and leave. Your only saving grace will be if you’ve been paying super on top of their earnings. The determining factors between an employee and a contractor are if they’ve worked the same shift for 12 months, and who supplies the equipment. A true subcontractor gets given a task, and they can complete however they like, and then they are done. Where as in our environment, the business owner supplies everything and the contractor delivers what the owner asks, often an a repetitive cycle every week - this isn’t a contractor relationship unfortunately, this is employment.
The Staff Member
This is what you’ll see advertised most, and will require you to have your own ABN, first aid and insurances. You’ll get paid a higher rate per session, have flexibility to say yes or no to work (if you’re in demand) and also allows you to run through extra expenses to make your life a bit cheaper, so long as you can justify it to the tax office! However, remember that if you take a class for say, $60, you then have to put some money away for tax - let’s say 12% so $7.2; you also want to save some for holidays, let’s say 7%, so $4.20; then account for your training and industry requirement, let’s say another 5%/$3; and then factor in how long you’re actually there for - say if the class is 55 minutes but you get their 15 minutes before and leave 15 minutes after, you’re basically there for 90 minutes - so when we run the math, you’ve got $60 - $7.2 - $4.2 - $3 = $45.60, divided by 1.5 hours lands your hourly rate at $30.40 per hour - so that $60 class starts to look a bit funny right?! Best case scenario is to get multiple classes back to back to make it worth your while where possible, otherwise let’s just hope they pay you super too..!!
Casual Employment
The Business Owner
Less common but not on heard of, the casual employee is a great place to start a new staff member as you can have flexibility in their hours to an extent, and although you pay a higher rate than a permanent employee, you don’t have to withhold benefits outside of tax. This option is a more Fair Work friendly version of subcontracting, although there are a few more things to be aware of. You do have to provide a minimum of 3 hours work for a casual employee per shift, but once they have completed each shift, there is no contractual obligation to provide more work. This is great if they don’t turn out to fit in with the business, or need to make any changes to staffing. But after 12 months of working the same shift consistently, you must offer to transition them on to a permanent contract which requires you to now add benefits to their pay - this may mean a drop in their hourly rate, or you may decide it’s worthwhile to maintain it if they prove to be a great support and it’s financially viable.
The Staff Member
Less seen in the industry, but potentially a better option for staff members as the minimum requirement is 3 hours work per shift. The rate is likely to be lower per hour than subcontracting, somewhere around the $30-$40 mark, but it requires super to be paid. The downfall may be in terms of tax - depending on how many places you’re a casual, you may end up having tax withheld from your pay check at a higher rate. You have a tax-free threshold of $18,200 which you should claim at the place you are employed the most, and then you’ll have tax withheld from the rest. It’s likely you’ll get most of this back at tax time depending on how much you earn, particularly if you use a blend of employment and subcontracting. There’s also no requirement for continuity of work, so you’ll need to be awesome every week to ensure the work remains yours. But if you’ve worked the same shift for 12 months, the employer is required to offer you a permanent position with all the benefits, although potentially at a lower rate - you don’t have to accept, but I would recommend it if you like having sick days, and paid holidays that you don’t have to budget for!
Permanent Employment
The Business Owner
This is the high risk, high reward scenario for any business owner. You’re going to gambling on how busy you are now, against how busy you’re hoping to be in the future. This model requires you to lock in hours, and they get paid this every week regardless of how busy they are. The hourly rate is generally lower than contracting or casual but this is to account for withholding benefits such as leave, insurances and other extra’s that come as an employee. It’s also important to acknowledge that the staff members diary generally will fluctuate, so there needs to be some wiggle room worked in to the math. This is definitely the most Fair Work friendly option for any staff member who has been working for the business for 12 months or more, and so long as you’re busy, it’s actually the potentially highest grossing option for staffing a business. It would be worth your while building in bonus structures to promote a culture of hard work, high reward, and also to potentially make it more enticing to work those shifts that are less popular - weekends and evenings! But also remember that it’s not all about the money, and set a really strong culture to get a fantastic team engaged and working towards the same goal, and reward them when they get there - don’t just shift the goal posts!
The Staff Member
Although this method may generally have the lowest hourly rate, it’s stacked full of benefits like holiday and sick pay, being covered by their insurance, being paid on a public holiday, and generally just having a heap more financial stability. It also offers other benefits like being able to get a loan or apply for a home without having to prepare 2 years worth of financial statements. As with a casual contract, you get the first $18,200 tax free so depending on how much you work at a venue, you may not have to pay tax and still get all the benefits. This kind of employment suits anyone who wants to stay predominantly in one venue, and work longer hours in a shift rather than chasing the big bucks all across town, or having to find your own clients. It may not reap as much financial reward as a subcontractor, but it’s a heck of a lot more stable - as most people would have found when COVID forced many businesses in to lock down and closure. And it’s not to say you can’t earn good money - a good employer should build in a bonus structure to reward you for being busy and good at your job, as well as paying for other things like courses. For example - an hourly rate of $32 per hour, on a full time salary still lands you at $63k + Super, and that’s before a bonus structure is in place.
In Summary
Regardless of whether you’re an employee or an employer, the different methods each have their pro’s and con’s. Subcontracting allows for the most flexibility for both parties, but make sure everyone is being paid properly and at a rate that it makes it worthwhile. Casual is a more Fair Work friendly option over contracting, but best for working only at one or two places. And employment is the most Fair Work friendly option, and best suited to those who want to have work in one place, or have staff working a lot for you, as long as you can keep them busy. Be sure that both parties are open minded in discussing the others needs as you can have a blend of options, as long as it works for everyone and the boundaries are clear. Remember that working in our industry is meant to be fun and good for you, not soul and health destroying. If it was all about the money, go work in finance!