How to Hire Your First Employee in Australia: A Step-by-Step Guide for SMEs

Hiring your first employee in Australia means registering for PAYG withholding, confirming award coverage and correct pay, providing a compliant employment contract, giving the employee a Fair Work Information Statement, setting them up for superannuation and Single Touch Payroll, and arranging workers compensation insurance — all before their first day. It sounds like a lot, but each step is manageable once you know the order to do it in. This guide walks Australian small business owners through the process from “I think I need help” to a fully compliant first pay run.

Do You Actually Need an Employee — or a Contractor?

Before anything else, work out whether the work genuinely requires an employee or could be performed by an independent contractor. This isn’t just semantics — misclassifying an employee as a contractor can expose a business to unpaid superannuation, back-pay, and penalties under the Fair Work Act.

Broadly, an employee works in your business (you control how, when and where the work is done, and they’re integrated into your operations), while a genuine contractor runs their own business and controls how they deliver the result. If in doubt, the ATO’s Employee/contractor decision tool and Fair Work Ombudsman guidance are the right starting points — this is a distinction worth getting right from day one, not fixing later.

Step 1: Work Out the Right Type of Employment

Decide whether the role is full-time, part-time or casual, and how that interacts with your industry’s Modern Award. Most SME roles are covered by an award — for example, hospitality businesses are typically covered by the Hospitality Industry (General) Award, retail businesses by the General Retail Industry Award, and office-based roles often by the Clerks – Private Sector Award. You can confirm coverage using the Fair Work Ombudsman’s Find My Award tool.

The award (or the National Minimum Wage if no award applies) sets the minimum pay rate, penalty rates, allowances and classification level for the role — this is layered on top of, and can never go below, the National Employment Standards.

Step 2: Confirm the Correct Pay Rate

As at 1 July 2026, the National Minimum Wage is $26.44 per hour or $1,004.90 per week (before tax) for adult employees not covered by an award or agreement, with casuals entitled to a 25% loading on top. Most employees, however, are covered by an award, and award minimum rates increase by the same Annual Wage Review percentage each 1 July — for 2026 this was a 4.75% increase to award rates.

Use the Fair Work Ombudsman’s Pay and Conditions Tool or a current award pay guide to confirm the exact rate for the employee’s classification — never rely on a rate you remember from a previous year, as these change annually.

Step 3: Sort Out Your Business Registrations

Before you can legally pay a new employee, you generally need to:

• Register for PAYG withholding with the ATO (a one-off registration, not per employee) so you can withhold tax from wages.
• Set up Single Touch Payroll (STP) reporting — most payroll software does this automatically, and STP reporting is compulsory for employers.
• Arrange workers compensation insurance. This is compulsory in every state and territory once you employ anyone, and is administered by your state or territory scheme (e.g. WorkCover, icare, WorkSafe) rather than the Fair Work system.
• Check payroll tax obligations with your state or territory revenue office — this only applies once your total wages bill passes a state-specific threshold, but it’s worth knowing where that line sits.

Step 4: Put a Written Employment Contract in Place

A written contract should set out the employment type, classification and applicable award (if any), ordinary hours, pay rate, probation period (if used), and reference — never override — the NES. Remember: any clause purporting to reduce an NES entitlement is void to that extent, even if the employee agreed to it in writing.

This is also where good recruitment support pays for itself — getting the contract, classification and award coverage right at the offer stage avoids a much more painful correction (and potential back-pay) six months in.

Step 5: Complete the Fair Work Paperwork

Every new employee — full-time, part-time or casual — must be given a copy of the current Fair Work Information Statement (FWIS) as soon as practicable after starting. New casual employees must also receive the Casual Employment Information Statement (CEIS). Always download a fresh copy from fairwork.gov.au rather than reusing a saved PDF, as the FWO updates these documents periodically when the law changes.

Step 6: Handle Tax File Number and Superannuation Setup

New employees need to either complete a Tax File Number declaration (or the ATO’s online commencement forms) and a Superannuation standard choice form, giving them 28 days to nominate a super fund. If they don’t choose a fund within that window, you’re required to request their stapled super fund details from the ATO before defaulting to your nominated employer fund — skipping this step is a common compliance gap.

Superannuation Guarantee (SG) contributions are currently 12% of ordinary time earnings, payable on top of wages (never deducted from them), for eligible employees regardless of full-time, part-time or casual status. From 1 July 2026, Payday Super requires employers to pay SG contributions in line with each payday rather than quarterly, so it’s worth checking your payroll software is configured for this.

Step 7: Induct the Employee and Meet WHS Obligations

Under work health and safety laws, you must provide a safe working environment from day one. A short, documented induction — covering safety procedures, emergency exits, reporting hazards, and who to go to with questions — protects both the employee and the business if anything is ever queried later.

Step 8: Understand Probation and Unfair Dismissal Timing

A probation period is a contractual tool, not something created by the Fair Work Act. Separately, the Act sets a minimum employment period before an employee can bring an unfair dismissal claim: 6 months for most employers, or 12 months for small business employers (fewer than 15 employees). Small business employers should also be familiar with the Small Business Fair Dismissal Code, which sets out a fair process for ending employment.

Practical Examples

Example 1 — A café owner hires their first barista. A sole trader running a café decides to bring on a part-time barista. They confirm the role sits under the Hospitality Industry (General) Award, use the Pay and Conditions Tool to set the correct hourly rate and penalty rates for weekend shifts, register for PAYG withholding, arrange workers compensation insurance through their state scheme, and issue a written contract plus the current FWIS before the barista’s first shift.

Example 2 — A bookkeeping business hires an admin assistant. A two-person bookkeeping firm hires an admin assistant under the Clerks – Private Sector Award. Because the assistant doesn’t nominate a super fund within 28 days, the business requests the ATO stapled fund lookup before defaulting to its own nominated fund — avoiding an unintentional breach of the choice-of-fund rules.

Common Mistakes When Hiring a First Employee

• Assuming no award applies without checking. Most roles are covered by a Modern Award, even in small businesses.
• Paying “market rate” instead of the correct award or minimum wage rate. Market rate and legal minimum rate are not the same thing, and award rates change every 1 July.
• Defaulting straight to the employer’s chosen super fund instead of checking for a stapled fund first when the employee hasn’t made a choice.
• Using an old Fair Work Information Statement saved from a previous hire.
• Confusing probation length with the minimum employment period for unfair dismissal protection — they are legally different things.
• Forgetting workers compensation insurance, which is compulsory in every state and territory, separate from the Fair Work system.
• Treating a genuine employee as a contractor to avoid super, leave and PAYG obligations — this is a significant compliance and financial risk if the relationship is later found to be employment.

First Employee Compliance Checklist

[ ] Confirmed whether the role is genuinely an employee or a contractor

[ ] Identified the correct Modern Award (or confirmed award-free status)

[ ] Checked the current minimum pay rate for the role’s classification

[ ] Registered for PAYG withholding with the ATO

[ ] Set up Single Touch Payroll–compliant payroll software

[ ] Arranged workers compensation insurance with your state/territory scheme

[ ] Prepared a written employment contract referencing (not overriding) the NES

[ ] Issued the current Fair Work Information Statement (and CEIS if casual)

[ ] Collected the TFN declaration and Superannuation standard choice form

[ ] Set a reminder for the 28-day stapled super fund lookup if no fund is chosen

[ ] Configured super contributions at the correct rate and payment timing

[ ] Planned a documented WHS induction for day one

Related Reading from the HR Knowledge Centre

• What Are the National Employment Standards (NES)? A Plain-English Guide for SMEs
• Casual vs Permanent Employment: Getting Classification and Conversion Right
• Writing a Compliant Employment Contract: What Every SME Needs to Include

How HR Excellence Partners Supports SMEs

Hiring your first employee is a major milestone — and also the moment where the compliance stakes go up. Award coverage, contract terms, super setup and Fair Work paperwork all need to line up correctly from day one, and getting it wrong early tends to compound as the business grows.

HR Excellence Partners provides practical recruitment support and onboarding guidance for Australian business owners taking on their first (or next) employee — from confirming award coverage and pay rates through to building a compliant contract and induction process.

The best place to start is our free HR Health Check, which reviews your hiring readiness against the Fair Work Act, NES and relevant award before you make an offer. Use code HEPFREE at checkout to have the cost of your HR Health Check waived.

Book your free HR Health Check →

Vas Papadopoulos
Founder & Principal HR Consultant
HR Excellence Partners
vas@hrexcellencepartners.com.au
hrexcellencepartners.com.au
+61 432 244 744

References

1. Fair Work Ombudsman, National Employment Standards — https://www.fairwork.gov.au/employment-conditions/national-employment-standards
2. Fair Work Ombudsman, Minimum wages — https://www.fairwork.gov.au/pay-and-wages/minimum-wages
3. Fair Work Ombudsman, Minimum wages increase from 1 July 2026 — https://www.fairwork.gov.au/about-us/workplace-laws/annual-wage-review/annual-wage-review-2026
4. Fair Work Commission, The national minimum wage — https://www.fwc.gov.au/work-conditions/minimum-wages-and-conditions/national-minimum-wage
5. Fair Work Ombudsman, Unfair dismissal — https://www.fairwork.gov.au/ending-employment/unfair-dismissal
6. Fair Work Ombudsman, Ending employment fact sheet — https://www.fairwork.gov.au/tools-and-resources/fact-sheets/minimum-workplace-entitlements/ending-employment
7. Fair Work Ombudsman, Determining a new employee’s superannuation fund — https://www.fairwork.gov.au/tools-and-resources/library/K600658_Determining-a-new-employee-s-superannuation-fund
8. Australian Taxation Office, Hiring a new worker — https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/engaging-a-worker/hiring-a-new-worker
9. Australian Taxation Office, Stapled super funds for employers — https://www.ato.gov.au/businesses-and-organisations/super-for-employers/setting-up-super-for-your-business/offer-employees-a-choice-of-super-fund/stapled-super-funds-for-employers
10. Australian Taxation Office, Super guarantee — https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/super-guarantee
11. business.gov.au, Guide to hiring employees — https://business.gov.au/people/employees/hiring-employees
12. Fair Work Act 2009 (Cth) — https://www.legislation.gov.au/Details/C2024C00622

This article is general information only and does not constitute legal advice. Entitlements, pay rates and compliance obligations can change and should be confirmed against current Fair Work Ombudsman, Fair Work Commission and ATO guidance, or a qualified HR/workplace relations advisor for your specific circumstances.