Hiring employees in Australia: Step-by-step employer guide

Published Tuesday 23 December 2025

Table of contents

• When to consider hiring your first employee
• Hire the right person for the job
• Understand your legal obligations
• Set up tax and superannuation compliance
• Establish workplace protections
• Build your administrative systems
• Your employees are your most valuable asset – choose wisely
• FAQs on hiring employees

Key takeaways

• Create a comprehensive job description that defines specific role requirements, salary range, key responsibilities, and company culture to attract qualified candidates and set clear expectations from the start.

• Understand your mandatory legal obligations including PAYG withholding, superannuation guarantee contributions (12% minimum from July 2025), and workers' compensation insurance before your employee's first day to avoid costly penalties.

• Establish proper payroll systems and maintain accurate employee records for at least five years, including personal details, employment contracts, tax information, and payment preferences to ensure compliance and protect both parties.

• Set clear goals and expectations with your new employee from day one while providing them with the Fair Work Information Statement and relevant workplace rights documentation to build a foundation of mutual trust and legal transparency.

When to consider hiring your first employee

Deciding to hire can feel like a big leap. It often means you're growing, which is great news. Look for signs that it's the right time. You might be turning away work because you're too busy, or spending too much time on administrative tasks instead of focusing on your business strategy. Bringing in a new person can also add fresh skills and ideas to your team, helping you take your business to the next level.

Hire the right person for the job

This 12-step checklist ensures you meet all Australian employment law requirements when hiring employees. Following these steps protects your business from legal penalties and costly mistakes.

You can also read more in our Hiring guide.

1. Create a clear job description

Job descriptions define the role requirements, skills needed, and salary range for potential employees. Clear job descriptions attract qualified candidates and set proper expectations.

Create your job description by defining:

• Role requirements: Specific skills, experience, and qualifications needed
• Salary range: Competitive pay based on market rates and your budget
• Key responsibilities: Daily tasks and expected outcomes
• Company culture: Work environment and team dynamics

Keep detailed records of each candidate throughout the process. Document their strengths, weaknesses, salary expectations, and interview performance for final selection decisions.

You can get started today with our free job description template.

2. Determine who is doing the recruiting

Recruitment planning determines who handles each hiring task to ensure efficient use of your time and resources. Most small business owners underestimate the time commitment required for proper hiring.

Typical recruitment tasks include:

• Job posting: Writing descriptions and advertising across multiple channels
• Candidate communication: Responding to applications and scheduling interviews
• Screening process: Conducting interviews and checking references
• Final coordination: Making offers and communicating with unsuccessful candidates

Time-saving options:

• Delegate internally: Assign tasks to existing team members
• Hire a recruiter: Outsource the entire process to specialists
• Hybrid approach: Handle final decisions while outsourcing initial screening

Understand your legal obligations

When you hire anyone for your business, you have tax, superannuation and workplace obligations. You need to get these right from the start.

3. Understand your obligations

Employer obligations are legal requirements that apply to all Australian businesses with employees, regardless of employment type or business structure. These obligations protect employees and ensure proper tax compliance.

Your mandatory obligations include:

• PAYG withholding: Deducting income tax from employee wages
• Superannuation guarantee: Contributing to employee super funds. According to the ATO, from 1 July 2025 the minimum super guarantee rate is 12% of their ordinary time earnings (OTE).
• Fringe benefits tax: Paying tax on non-cash employee benefits

Key timelines to keep in mind:

• Start date: Obligations begin immediately when employees start work
• End date: Some responsibilities continue even after employees leave
• Business closure: Certain obligations persist even if you stop employing people

You need to be very clear about your legal obligations. Talk to your accountant to make sure you understand them and that you're clear about your responsibilities.

4. Understand the rights of your employees

Employee rights are minimum workplace entitlements protected by Australian employment law. All employers must communicate these rights clearly to ensure legal compliance and workplace transparency.

Mandatory information requirements:

• Fair Work Information Statement: Provide to all new employees detailing minimum entitlements
• Casual Employment Information Statement: Required for all casual employees
• Modern Award coverage: Additional entitlements like overtime and penalty rates
• Workplace posters: Display employee rights information (may be state-required)

Why this matters: Not all employees fully understand their rights. Clear communication prevents disputes and demonstrates your commitment to fair employment practices.

You can find out more about your obligations as an employer including which Modern Awards may cover your business from the Fair Work Ombudsman’s website.

Set up tax and superannuation compliance

Staying on top of tax and super is a key part of being an employer. Here's what you need to do.

5. Ensure each employee has a Tax File Number

Tax File Numbers (TFN) are unique nine-digit identifiers that every Australian employee must provide to their employer, typically within 28 days of starting. If they don't, the ATO requires you to withhold at the top tax rate plus Medicare. The ATO uses TFNs to track individual tax obligations and ensure proper tax withholding.

6. Maintain accurate tax records

You are legally required to keep proper tax records for five years, and according to the ATO, this period starts from when you prepared or obtained the records, or completed the related transactions, whichever is later. It's important that you keep them safe, secure and easily accessible. Your accounting software should be able to do this for you.

7. Remember key dates and tasks

You already juggle a lot when you run a small business. Your new employee should make your life easier. But when they first begin, you may find your workload increases while they are coming up-to-speed with everything.

You can use free online tools that send you reminders for key dates.

The ATO has a list of the most popular deadlines and your advisor will also be able to track these for you. Or if you prefer to use your desktop calendar for reminders try the ATO's reminder service that puts key dates directly into your calendar.

Establish workplace protections

Creating a safe and fair workplace is essential. This includes having the right insurance and agreements in place.

8. Obtain workers' compensation insurance

What happens if your employees are injured at work? You must have workers’ compensation cover for your employees and, in some cases, contractors. This provides wage replacement and medical benefits to your employees if they get injured at work. Each state has its own laws and its own government agency that administers workers' compensation.

Each insurer:

• helps employees to avoid workplace injury
• administers health and safety laws
• provides workplace injury insurance for employers
• helps injured workers get back to work
• manages the workers' compensation scheme

The workers’ compensation regulators for each state are listed below. Contact them to find out how employee protection works in your state and what your responsibilities are:

• Australian Capital Territory: WorkSafe ACT
• New South Wales:icare NSW
• Northern Territory:WorkSafe NT
• Queensland:WorkSafe Qld
• South Australia:ReturnToWork SA
• Tasmania:WorkCover Tasmania
• Victoria:WorkSafe Victoria
• Western Australia:WorkCover WA

You can also contact the Fair Work Ombudsman if you're not sure where to start.

9. Create employment contracts and workplace agreements

An employment contract sets out the terms and conditions of employment. It should include details like the employee's duties, pay rate, hours of work, and leave entitlements. Providing a written contract helps make sure you and your employee are on the same page. You can find templates and information on what to include on the Fair Work Ombudsman website.

Build your administrative systems

Good systems make managing your team much simpler. Setting up payroll and record-keeping correctly will save you time and help you stay compliant.

10. Set up a payroll system

Payroll systems manage employee wages, tax withholdings, and superannuation contributions while ensuring compliance with Australian employment law. The right system saves time and reduces costly errors.

Setup options:

• Self-managed: Handle all payroll tasks using accounting software
• Accountant-managed: Outsource setup and ongoing management to your bookkeeper
• Payroll service: Use specialized providers for complete payroll management

Essential software features:

• Compliance automation: Automatically calculates tax and super obligations
• Efficient payments: Processes employee wages and government remittances
• ATO integration: Files required reports directly with tax authorities

11. Keep a file for each employee

Employee record-keeping involves maintaining accurate files for each worker to ensure legal compliance, which includes responsibilities under the Privacy Act for handling sensitive information like TFNs. Proper records protect both your business and your employees' rights.

Mandatory record requirements:

• Personal details: Full name, address, and current contact information
• Emergency contacts: Designated person for workplace incidents or emergencies
• Employment contract: Signed copy outlining terms and conditions
• Tax information: TFN declaration and withholding details
• Payment preferences: Bank account details for wage deposits
• Additional documentation: Relevant certifications, training records, or agreements

Retention requirements: While some employment records must be kept for seven years, note that specific ATO requirements may differ; for instance, you must keep super contributions records for 5 years from the date of contribution. Consider using HR software to automate record management and ensure compliance.

You can find more details here on what information you should collect and how long to keep it.

12. Be clear about goals and expectations

Even if you have just one employee, set clear expectations together from day one. They should already have a good idea about this from the interview process.

The reverse is also true. Let them know what you will provide in return. This is a professional relationship and it should be based on mutual trust, respect and honesty. The better you treat your employees, the harder they will work for your business.

Your employees are your most valuable asset – choose wisely

Following this checklist ensures legal compliance and helps you build a strong team regardless of business size.

Beyond compliance: : Good employees drive business growth and are expensive to replace. Consider retention strategies like performance incentives, professional development opportunities, and workplace flexibility.

The bottom line: Proper hiring processes protect your business legally while attracting quality candidates. Investing time in correct procedures now prevents costly mistakes and builds the foundation for long-term business success.

For more hiring information, check out our Hiring guide. Ready to streamline your payroll and compliance? Try Xero for free and see how our software simplifies employee management.

FAQs on hiring employees

Here are answers to some common questions about hiring employees.

What is the first step to hiring an employee in Australia?

The first step is to determine if you really need to hire and then create a clear job description. This defines the role, the skills required, and the salary. It's the foundation for finding the right person and meeting your legal obligations.

What's the difference between an employee and a contractor?

An employee works in your business and is part of your business, while a contractor is running their own business. They have different tax, super, and legal obligations. The Australian Taxation Office (ATO) has tools to help you work out the difference.

How can I make sure I pay my employees correctly?

To pay employees correctly, you need to understand their minimum pay rates from the relevant modern award or enterprise agreement. Using a payroll system like Xero can help you automate payments, calculate tax and super, and stay compliant with Fair Work regulations.