Hiring Your First Employee in Australia
Registering for PAYG withholding, securing workers' compensation insurance, meeting superannuation obligations, setting up Single Touch Payroll, and understanding the true cost of employment.
Hiring your first employee in Australia requires registering for PAYG withholding with the ATO before making any payment, obtaining mandatory workers' compensation insurance before the employee starts work, and selecting a default superannuation fund. The superannuation guarantee rate is 12% of ordinary time earnings for 2025-26. A $60,000 base salary typically costs $78,900 to $80,000 in the first year once you include super, workers' compensation, leave provisions, payroll software, and onboarding costs, representing approximately 1.3 times the base salary.
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Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact ATO. Read our editorial scope →
Register for PAYG withholding
You must register for Pay As You Go withholding before making your first payment to an employee. Register through the Australian Business Register portal using your existing ABN, through your tax or BAS agent, or by calling the ATO business line on 13 28 66. Registration is mandatory for all employers even if no tax is withheld from the initial payment. Use the ATO's current tax tables or online tax withheld calculator to determine the correct amount. Report withheld amounts on your BAS: monthly if your annual withholding is between $25,001 and $1 million, or quarterly if $25,000 or less annually.
Workers' compensation insurance
Workers' compensation insurance is mandatory for all Australian employers and must be obtained before your employee starts work. Each state and territory operates its own scheme with different insurers, premium rates, and claim processes. Premiums are calculated on total wages (including super and bonuses) multiplied by an industry-specific rate, adjusted by your claims history. The NSW average rate is approximately 1.8%, though rates vary significantly by state and industry risk classification.
Superannuation obligations
The superannuation guarantee rate is 12% of ordinary time earnings for 2025-26. The maximum super contribution base is $62,500 per quarter: you are not required to pay SG on earnings above this amount unless specified by an award or enterprise agreement. Select a default super fund for employees who do not choose their own. All payments must be made through SuperStream-compliant methods, which means electronic payment through a clearing house, your payroll software, or your super fund's online portal. Provide every new employee with a Superannuation Standard Choice Form (NAT 13080). If the employee does not nominate a fund, request their stapled super fund details from the ATO.
Single Touch Payroll reporting
All employers must use STP-enabled payroll software to report salary, wages, PAYG withholding, and super information to the ATO each pay event. STP Phase 2 requires reporting of employment type, income type, employment basis (full-time, part-time, or casual), and disaggregated gross payments. Before going live, verify your business details match ATO records, set up complete employee records, and run a test pay to identify errors. STP replaces the need for annual payment summaries: employees access their income statement through myGov year-round.
TFN declarations and onboarding
Collect a Tax File Number declaration from every new employee and lodge it with the ATO within 14 days of their start date. Employees can complete the form online. Provide the Fair Work Information Statement to all employees before or as soon as practicable after they start. Casual employees also receive the Casual Employment Information Statement. Penalties for failure to provide required information statements: up to $93,900 for corporations or $18,780 for individuals per contravention.
Modern awards and employment contracts
Determine which modern award applies to your employee using the Fair Work Commission website. All modern award wages increased by 3.5% from the first full pay period on or after 1 July 2025. The 2025-26 national minimum wage is $24.95 per hour ($948.00 per week). The casual minimum wage, including the 25% loading, is $31.19 per hour. Awards specify minimum pay rates, penalty rates, allowances, leave entitlements, and other conditions. Provide a written employment contract covering role description, remuneration, hours of work, employment type, probation period, notice requirements, and confidentiality obligations. The contract must meet or exceed minimum entitlements in the National Employment Standards and the applicable modern award.
Record-keeping and pay slips
Maintain employee records for seven years in legible English, readily accessible to Fair Work Inspectors. Required records include employee identity and employment details, pay details (gross and net amounts, deductions, allowances, penalty rates, bonuses), daily start and finish times, overtime hours, annual leave taken and balances, superannuation contributions, and termination details. Pay slips must be provided within one working day of payment, including employer name and ABN, employee name, payment date and period, gross and net amounts, and superannuation details.
True cost of a $60,000 employee
The base salary represents only part of the total employment cost. On-costs include the superannuation guarantee (12%, or $7,200 on a $60,000 salary), workers' compensation insurance (approximately 1.8% average in NSW, or $1,080), leave provisions covering annual and sick leave accrual (approximately $9,000), payroll software and compliance costs (approximately $627 per year), and recruitment and onboarding costs (approximately $1,000 in the first year). The total estimated first-year cost of a $60,000 employee is approximately $78,900 to $80,000, representing 1.3 times the base salary. The typical range across industries is 1.25 to 1.4 times base salary once all mandatory contributions, insurance, leave provisions, and administrative overhead are included.
Statute references
- Superannuation Guarantee (Administration) Act 1992
- Fair Work Act 2009 (National Employment Standards, modern awards, record-keeping)
- Tax Administration Act 1953, Division 12 (PAYG withholding)
- State and territory workers' compensation legislation
Frequently asked questions
Do I need workers' compensation insurance if I only hire one casual employee?+
What is a stapled super fund and when do I need to check for one?+
How quickly do I need to lodge a new employee's TFN declaration?+
When does payroll tax apply to my business?+
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