Some businesses choose to pay their employees cash in hand wages rather than transferring them to a nominated bank account. Whilst this method is generally believed to be illegal, that is not necessarily the case. Employers must meet their obligations to their employees and the government, whether they make payment in cash or otherwise. This article will explain how cash in hand wages can be legal and the obligations employers must observe when paying their employees.
What is ‘cash in hand’?
Payment of wages as cash in hand means that a person is paid directly in cash rather than through a bank or with a cheque. However, in small hospitality and maintenance businesses, where this practice is common, it is an easy and efficient way to operate the business.
If an employer wants to pay wages through cash in hand, it is important that they ensure their obligations are still being met by:
- Paying your employees the correct amount under the relevant award;
- Paying the correct amount as stipulated in the contract and allowing for any leave entitlements;
- Taking out the relevant tax amount to ensure your employees aren’t left with the bill;
- Contributing superannuation payments to their nominated super fund; and
- Being covered by workers compensation should your employee ever be injured at work.
To legitimise the cash in hand payment, it is advisable to provide your employees with a pay-slip to prove that their earnings correlate with the award, the correct tax is being taken out and superannuation payments are being made. Pay slips should generally include:
- Employer and employee names;
- Australian Business Number;
- Pay period (weekly or fortnightly);
- Gross and net pay (pay before and after tax);
- Applicable hours worked and rate of pay;
- Any additional loadings or penalty rates; and
- Superannuation contributions.
You can also provide your employees with a payment summary at the end of each financial year which outlines how much they have been paid throughout the year, and what amount of this is going to tax.
Once you have provided these records to your employees, it is essential to keep and file a copy for your own records. Employers are expected to keep a record of their employees and their pay and this can be as simple as keeping a physical or electronic copy of their pay slip.
It is also important as an employer that you ensure that you comply with the requirements of the Australian Taxation Office. Committing tax fraud or other tax related offences can attract severe criminal penalties. Therefore, it is important to comply with the ATO’s requirements and withhold the correct tax amount from your employees’ wages. If you are concerned about tax thresholds or understanding your reporting obligations, it is imperative that you seek the appropriate financial and legal advice.
There have been a number of high-profile cases involving the systemic underpayment of workers in restaurants, convenience stores and petrol stations. It is critical that these sorts of practices do not continue into the future.
Receiving cash in hand wages
As an employee, receiving cash in hand payments may be more convenient for you and your employer. However it is important to ensure that you are not being paid less than what you are owed under your contract or under the correct award rate. You are also obligated to declare your income to the Australian Taxation Office when completing your tax return. It is advisable to confirm with your employer that they are paying superannuation contributions to your nominated super fund. If you are concerned about the way in which you are being paid, speak to your employer or seek experienced legal advice.
How Etheringtons Solicitors can help?
We can help you by providing advice and representation in any employment law matter, whether you are the employer or employee. If you need any assistance contact one of our lawyers here or call 02 9963 9800 for a no-obligation discussion and for expert legal advice.