This can often be convenient and is a common practice among many small businesses. Paying cash in hand is completely legal as long as employers keep a record of it. Typically, this is done in the form of a pay slip.
Why Do Employers Pay Cash in Hand?
Sometimes employees have good reasons for pay employee wages in cash. For instance, the employee may not yet have a bank account at the time the wage is being paid. This can often be the case for foreign students who have just arrived in Australia.
However, a lot of employees pay cash in hand because they want to avoid tax and employee responsibilities that are attached to wages. This is illegal.
For instance, any employee who is over the age of 18 and earns in excess of $450 per month is entitled to superannuation payments. Likewise, an employee who is younger than 18 is also eligible for these payments. The latter has to work more than 30 hours per week to be qualified.
In addition, all Australian employees have to pay special wage rates for working on public holidays and weekends.
So by keeping records off the books and paying wages in cash, some employers hope to avoid these responsibilities.
Your Rights and Responsibilities
If you receive your wages paid in cash, then it’s best to be aware of your rights and responsibilities under Australian law. You must make sure that:
- You receive the exact amount that is owed to you with each payment
- The correct amount of tax has been deducted from your pay
- A contribution has been made to your super fund
- You receive a pay slip within a day of getting paid
- You declare your cash payments as income when filling out tax return forms
- You receive a payment summary at the end of the year.
A pay slip is a must if when being paid cash in hand. Each and every slip should contain the following:
- Employer’s name
- Employer’s Australian Business Number (ABN)
- Your (Employee’s) name
- Gross and net pay (both before and after tax deductions)
- Contribution to the super fund
- Period of pay
- Date of receipt
- Any applicable entitlements or deductions
Your pay slip is proof that you have been paid in accordance with Australian work laws. For foreign students it’s also proof of being completely compliant with the law, by working only the permitted amount of hours per week.
What About Tips?
According to Australian law, any tips that you earn is considered income. Because of this, they too must be declared as income on tax returns. This is true regardless of whether you receive your tips from your employer or customers.
It isn’t illegal for employers to pay cash in hand as long as they keep a proper record of it. They must also adhere to the proper tax and employee responsibilities.