Upon engaging a new Subcontractor, a Business is required to check if this Subcontractor is deemed to be an Employee under the Super Guarantee Ruling and Workers Compensation Act. 

The ATO Employee/Contractor Tool is available on the ATO website to help businesses make this determination.

If the Subcontractor is deemed to be an Employee then the Subcontractor should:

• complete a Superannuation Choice Form within 28 days of the start of their engagement and;
• provide their date of birth to the Business.

Create a Subcontractor as an Employee

Before you start creating a new subcontractor as an Employee Contact,

you should ensure the Superannuation Funds he/she has selected in the Superannuation Choice Form has already been added to the Xero Organisation.

1. Go to Payroll > Employees
2. Click on [Add Employee] > Add New
   
   è  The Employee screen opens
   Note: at this stage, the employee screen only includes the [Details] Tab
   
   
3. Enter the Subcontractor's basic information
   Note: Date of Birth, Gender and Address are mandatory fields
4. Click on [Save]
   Note: Additional tabs are now displayed on the Employee screen
5. Click on the [Employment] Tab
   
   è  The Employment Tab
   
   
   
6. Select/Enter the following details:
   • Employment Type > Select Contractor
   • Income Type > Select Non-employee
   • Employment basis > Xero automatically pre-populates: Non-employee
   • Australian Business Number (ABN) > Type the contractor's ABN
   • Start Date > Type the Contractor's Employment start date
   • Classification > Type: Subcontractor
   • Payroll Calendar > Select the Superannuation Monthly/Quarterly Payment Calendar
   • Employee Group > Select the relevant Employee Group (if applicable)
   • Holiday Group > Xero automatically pre-populates: Not applicable for this employment type
   • Include holidays in payslips > Xero automatically disables this option
   • Ordinary Earnings Rate > Xero automatically pre-populates: Not applicable for this employment type
7. Click on [Add a super membership]
   
   è  The Add a Superannuation Membership pop-up screen opens
   
   
   
   
8. Select/Enter the following details:
   • Fund > Select the Subcontractor's fund from the list
   • Employee Number > Type the subcontractor super membership number
9. Click on [Save]
10. Click on the [Pay Template] Tab
    
    è  The Pay Template Tab
    
    
    
11. Click on [Add Earnings Line]
    
    è  The Earnings Line
    
    
    
    
12. Select the following details:
    • Earnings Rate > Select: Ordinary Hours - Labour (or Ordinary Hours)
    • Calculation Type > Select: Enter Rate
13. Click on [OK]
14. Type 0 in both the hours and rate
15. Click on [Add Superannuation Line]
    
    è  The Superannuation Line
    
    
    
    
16. Modify the following details:
    • Calculation Type > Select: Fixed Amount
    • Expense Account > Select: Superannuation Subcontractors
    • Payment Frequency > Select either Quarterly or Monthly (depending on how frequently the business wishes to pay the Super to subcontractors)
17. Click on  [OK] > [Save]

Training Videos - How to add a Subcontractor as an Employee