Hiring Your First Employee in Australia

Taking on your first employee is a big step for a small business. It frees up your time, but it also brings new legal and tax duties. Getting the basics right from day one saves headaches later.

This guide walks through the main steps, from choosing the type of employment to keeping records. It draws on the official hiring employees checklist from business.gov.au. Each step is short, but missing one can be costly.

Decide what kind of employee you need

Start with the work itself. List the tasks, the skills and qualifications needed, the workload and how long you will need the person. Then choose an employment type. The options include full time, part time, fixed term and casual. Trainees and apprentices are another option.

Service businesses often feel the need for help first. A growing doggie daycare, for example, may need extra hands at busy drop off times. Think about whether the need is steady or seasonal. That answer points you to the right employment type.

You also need to confirm the person is an employee and not a contractor. This is your responsibility for tax and super purposes. The official guidance notes it is not as simple as whether someone has an ABN or sends invoices. If you are unsure, check the guidance before you sign anything.

Work out the real cost

The wage is only part of the cost. Find the pay rates and conditions in the relevant award. Employees who are not covered by an award are still entitled to a minimum wage and the National Employment Standards. Businesses in Western Australia may need to use the state industrial relations system instead.

Super is the next big cost. The super guarantee is 12 per cent of qualifying earnings. You pay it for employees aged 18 or over, and for those under 18 who work more than 30 hours a week. It cannot be deducted from the employee’s pay.

Check whether payroll tax applies to your business. It is based on total wages, and each state and territory sets its own threshold. Fringe benefits tax may also apply. You will need workers compensation insurance, and public liability cover is worth considering.

Before you commit, look at whether a hire is the right fix. Outsourcing a one off job can cost less than a wage. Moving premises is one example, and there are good reasons to hire a cleaning service when you move. Wasted ad spend is another place to look, so review these AdWords ecommerce mistakes first.

Recruit the right person

Write a clear job description, then advertise, shortlist and interview. Do not discriminate against applicants on protected grounds. Check the person can legally work in Australia using the free online service from the Department of Home Affairs. Confirm any licences or qualifications the role needs.

Telling your business story in job ads can help attract people who share your values. The same skills behind storytelling in your social media content work well here. Explain what the business does and what a normal day looks like. Then put the offer in writing with an employment contract and a letter of offer.

Paperwork before the first day

Every new employee must be given the Fair Work Information Statement. Give it before they start, or as soon as possible after. Casual staff also get the Casual Employment Information Statement. Staff on a fixed term contract get the Fixed Term Contract Information Statement.

Make the relevant award easy to access and tell the employee their award and classification. Agree on hours and rosters in advance for full time and part time staff. Talk about contact outside work hours too, as employees have a right to disconnect.

Tax and super set up

Ask the employee to complete a tax file number declaration. If they do not give you a TFN, you must withhold tax at the highest rate. Register for PAYG withholding before you make the first payment. You only need to do this once for the business.

Give a superannuation standard choice form within 28 days of the start date. If they do not choose a fund, request their stapled super fund details from the ATO. Pass their TFN on to the chosen fund. Super is paid electronically using SuperStream.

You will also need Single Touch Payroll software or a service provider. STP reports pay, tax and super to the ATO each time you pay your staff. Set this up before the first pay run so nothing is missed.

Induction and safety

A good induction helps a new starter settle in faster. Show them the premises and introduce them to colleagues. Explain how the business works, along with its policies, systems and any training. Include work health and safety information such as hazards, exits, evacuation steps and first aid. Tell them who the key safety contacts are.

Paying your employee correctly

Work out pay from the base wage, hours worked, penalty rates, overtime and allowances. Withhold PAYG tax using the ATO calculator or tax tables, and set it aside for the ATO. Pay at least monthly, although some awards require more frequent pay. Give a pay slip within one working day of paying them.

Super must be paid into the fund within 7 business days of payday. For a new employee, the first contribution has 20 business days. Pay rates can change when minimum wages are reviewed, usually around 1 July. They also change when juniors have birthdays or apprentices reach milestones.

Reporting and record keeping

Report pay, tax and super through STP every time you pay employees. By 14 July each year, check your STP data and make a finalisation declaration. PAYG withholding is reported and paid on your business activity statement. Depending on your business, that may be monthly, quarterly or yearly.

Keep employment records for 7 years. These include employee details, pay, hours, leave and super contributions. Tax and super records must be kept for 5 years. Contracts, job applications and performance reviews are also worth keeping on file.

Frequently asked questions

Do I have to pay super for a casual employee?

Casual staff are employees, so the usual super guarantee rules apply. You pay it for employees aged 18 or over. For employees under 18, it applies when they work more than 30 hours a week.

What is the Fair Work Information Statement?

It is an official statement that every new employee must be given. Hand it over before they start, or as soon as possible after. Casual and fixed term staff also get an extra statement for their type of employment.

How long do I keep employee records?

Employment records such as pay, hours and leave should be kept for 7 years. Tax and super records should be kept for 5 years. Keeping digital copies in one place makes this easier.

Can a new employee make an unfair dismissal claim?

Employees need a minimum period of service before they can make an unfair dismissal claim to the Fair Work Commission. For a business with fewer than 15 employees, that period is 12 months. For larger businesses, it is 6 months.

This article is general information only and is not legal, tax or financial advice. Rules change and some differ between states, so speak with a qualified accountant or lawyer about your situation.