Hiring Your First Employee in Australia: What Every Small Business Needs to Know

The Australian Employment System

Australian employment law is more structured than many countries. Fair Work Australia sets minimum conditions, industry Awards add specific requirements, and the Small Business Fair Dismissal Code provides some protections for employers.

Understanding the basics before hiring saves headaches later.

Casual, Part-Time, or Full-Time?

Casual Employment

What it is: No guaranteed hours, paid per shift worked.

Casual loading: 25% extra on top of base rate (compensates for no leave entitlements)

Benefits for employer:

• Flexibility
• No paid leave obligations
• Easier to adjust hours

Downsides:

• Higher hourly cost
• After 12 months, casuals can request conversion to permanent
• Some uncertainty about "regular casual" rights

Part-Time

What it is: Guaranteed regular hours (less than 38/week), with leave entitlements pro-rata.

Benefits: Predictable costs, employee loyalty

Downsides: Less flexibility than casual

Full-Time

What it is: 38 hours/week with full leave entitlements.

Most first hires start as casual or part-time, then convert if the relationship works.

Understanding Awards

What Awards Are

Awards are industry-specific minimum standards set by Fair Work. They cover:

• Minimum pay rates
• Overtime and penalty rates
• Leave entitlements
• Allowances

Almost every employee is covered by an Award unless on an individual contract above Award rates.

Finding Your Award

Check the Fair Work Ombudsman's Award Finder. Common awards:

• General Retail Industry Award
• Clerks Private Sector Award
• Building and Construction General On-site Award
• Restaurant Industry Award

Why It Matters

Underpaying against the Award — even accidentally — is wage theft. Fair Work actively investigates and penalties are serious.

The True Cost

Super Is Mandatory

Superannuation guarantee is 11% of ordinary time earnings (rising to 12% by 2025). This is on top of wages.

Example: Paying someone $25/hour actually costs $27.75/hour when you include super.

Leave Provisions

Permanent employees accrue:

• 4 weeks annual leave
• 10 days personal/carer's leave
• Long service leave (after 7-10 years, state-dependent)

These are liabilities you build up and must pay out.

Workers' Comp

State-based, mandatory. Rates depend on industry and state. Budget 1-5% of wages.

Payroll Tax

Only kicks in above thresholds (varies by state — often $600K-$1M+ in wages annually). Most small businesses don't pay it.

Use our salary calculator for complete cost breakdown.

Setting Up as an Employer

Register for PAYG Withholding

You'll withhold tax from employee wages and remit to ATO. Register through your ABN when you set up payroll.

Choose a Superannuation Fund

Your employee chooses their fund (or you use a default fund if they don't). You must pay super quarterly.

Register for Workers' Comp

Contact your state's workers' compensation authority before the employee starts.

Single Touch Payroll (STP)

All Australian employers must report payroll through STP — real-time reporting to ATO each pay run. Most payroll software handles this automatically.

Required Documents

Tax File Number Declaration

Get the employee to complete this before first pay. If they don't provide TFN, you withhold at the highest rate.

Super Choice Form

Employee nominates their super fund.

Fair Work Information Statement

Must provide this to all new employees. Download from Fair Work website.

Common Mistakes

Ignoring the Award

"We're a small business, Awards don't apply to us." Wrong. Awards apply to nearly all employment regardless of business size.

Miscalculating Casual Loading

Casual loading is 25% of the base rate, not 25% of the Award rate. Getting this wrong leads to underpayment.

Missing Super Payments

Super is due quarterly (28th of month following the quarter). Late super attracts the Super Guarantee Charge — non-deductible and with additional penalties.

Sham Contracting

Paying someone as a contractor when they're really an employee. Fair Work and ATO both crack down on this.

Small Business Fair Dismissal Code

Protection for Small Business

If you have fewer than 15 employees, you get some protections:

• No unfair dismissal claims in first 12 months
• Summary dismissal allowed for serious misconduct
• Fair dismissal if you follow the code

What "Following the Code" Means

• Valid reason related to capacity or conduct
• Employee given opportunity to respond
• Warning given (except for serious misconduct)
• Support person allowed if requested

Document everything. Written warnings, meeting notes, performance discussions.

Alternatives to Hiring

Labour Hire

Someone else is the legal employer. You pay a margin, they handle payroll and compliance.

Contractors

For genuinely independent work. But be careful — if they work like an employee, they probably are one.

Apprentices

Subsidised training wages. Good for trades and some other industries. Check Australian Apprenticeships for eligibility.

First Hire Checklist

Before they start:

• Identify the correct Award
• Register for PAYG withholding
• Set up workers' comp
• Choose payroll software (STP compliant)
• Prepare employment contract

Day one:

• TFN Declaration signed
• Super choice form completed
• Fair Work Information Statement provided
• Employment contract signed

First pay:

• Calculate pay correctly (including casual loading or leave accrual)
• Issue pay slip
• Lodge STP report

Quarterly:

• Pay super on time (by 28th of following month)

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