Hiring your first employee is a major milestone — but it comes with a stack of legal, tax, and compliance obligations. Miss any of these steps and you could face fines from the ATO, Fair Work, or your state's WorkCover authority. Here's everything you need to have in place before day one.
1. Before You Hire
- Register for PAYG Withholding with the ATO — you'll need this to withhold tax from wages.
- Get Workers Compensation insurance — this is mandatory in every state before an employee starts. Providers vary by state (icare in NSW, WorkSafe in VIC, WorkCover QLD, etc.).
- Set up payroll software — Xero Payroll, MYOB, or KeyPay. Ensure it supports STP Phase 2 reporting.
- Identify the correct Modern Award — use the Fair Work Commission's "Find My Award" tool to determine which award covers your employee's role.
- Check minimum pay rates — the National Minimum Wage and award rates are updated every 1 July.
2. Employee Paperwork
Collect the following from your new employee before their first pay run:
- Tax File Number (TFN) Declaration — submit to the ATO within 14 days of the employee starting.
- Super Choice Form — the employee nominates their preferred super fund. If they don't choose, you must use their "stapled super fund" (check via ATO online services).
- Fair Work Information Statement — you're legally required to provide this to every new employee before or as soon as possible after they start.
- Employment contract — not legally required but strongly recommended. Cover role, hours, pay rate, notice period, and key policies.
- Bank details — for wage payments via EFT.
3. Understanding Your Award Obligations
Modern Awards set minimum conditions for most employees in Australia. Key elements include:
| Obligation | Details |
|---|---|
| Minimum pay rate | Varies by award, classification level, and employment type |
| Penalty rates | Weekends, public holidays, overtime — can be 150–250% of base rate |
| Leave entitlements | 4 weeks annual leave, 10 days personal/carer's leave, long service leave |
| Superannuation | 12% of ordinary time earnings (increasing to 12.5% from 1 July 2026) |
| Notice of termination | 1–4 weeks depending on length of service |
4. Ongoing Payroll Obligations
- Run payroll on time — pay employees at least monthly (most awards require fortnightly or weekly).
- Report via STP — every pay run automatically reports to the ATO via your payroll software.
- Pay super quarterly — by the 28th of the month after each quarter (28 Oct, 28 Jan, 28 Apr, 28 Jul).
- Issue pay slips — within 1 business day of payment. Must include gross pay, deductions, super, and leave balances.
- Keep records for 7 years — all payroll records, time sheets, leave records, and employment contracts.
5. Common First-Hire Mistakes
- Paying flat rates without checking the award — "I pay $30/hour" may be below the award rate once penalty rates, overtime, and allowances are considered.
- Not paying casual loading — casuals must receive a 25% loading to compensate for lack of leave entitlements.
- Misclassifying employees as contractors — the ATO and Fair Work have different tests, and getting it wrong has severe penalties.
- Forgetting WorkCover — operating without workers comp insurance is an offence in every state.
Key Takeaways
- Register for PAYG withholding and get WorkCover insurance before day one.
- Collect TFN declaration, super choice form, and bank details from the employee.
- Identify the correct Modern Award and pay at least the minimum rates.
- Set up STP-compliant payroll software and report every pay run.
- Pay super quarterly and keep all records for 7 years.