How to pay employees in Australia: a payroll guide

Published Wednesday 22 April 2026

Table of contents

• Understanding legal requirements for paying employees
• How to pay employees: Payment methods explained
• Types of employee compensation structures
• Setting up your payroll system
• Deciding on pay is a balancing act
• Work out what to pay your employees in five steps
• FAQs on paying employees

Key takeaways

• Understand your legal obligations under the Fair Work Act 2009, including the National Employment Standards, minimum wage rates, and any awards or agreements that apply to your industry, to make sure you pay employees correctly from day one.
• Set up a payroll system that handles pay as you go (PAYG) withholding, superannuation contributions, compliant payslips, and Single Touch Payroll (STP) reporting, as missing any of these steps can put your business at risk of non-compliance.
• Research current market salary data using job sites, recruitment firms, and industry contacts to set a pay rate that attracts the right candidates while staying within your budget and cash flow capacity.
• Keep detailed payroll records for seven years and provide employees with a compliant payslip within one working day of each payment, as these are legal requirements for all Australian businesses.

Understanding legal requirements for paying employees

Legal requirements for paying employees cover the minimum standards you must meet when paying staff in Australia. These include the National Employment Standards, which set the minimum standards that apply to all Australian employees under the Fair Work Act 2009. They also include minimum wage rates and any applicable awards or agreements.

Key things to be aware of include:

• National Employment Standards (NES): the 12 minimum entitlements you must provide to all employees
• minimum wage: the lowest hourly rate you can pay, reviewed each year by the Fair Work Commission
• awards and agreements: minimum pay rates and conditions for your industry or occupation

You can find up-to-date information on pay rates and legal requirements on the Fair Work Ombudsman website.

How to pay employees: Payment methods explained

Choosing the right payment method ensures your employees are paid securely and on time. It also helps you keep accurate records for your business.

Direct deposit and electronic funds transfer

Direct deposit is the most common way to pay employees in Australia. It transfers wages directly from your business bank account into your employee's nominated account.

This method is fast, secure, and creates an automatic digital record of the transaction. It saves you the administrative hassle of handling physical money or paper cheques.

Cash payments

Paying employees in cash is legal, provided you meet all your employer obligations. You still need to deduct the correct amount of tax and pay superannuation.

If you choose to pay in cash, you must provide a compliant payslip within one working day of the payment. Keep detailed records to prove you've met your legal requirements.

Cheques and paper payments

While less common today, you can still pay employees using a paper cheque. This method might suit businesses that prefer traditional banking methods or have employees without standard bank accounts.

Cheques take time to clear. You need to ensure the funds are available in your employee's account by their scheduled payday.

Choosing the right payment method for your business

The best payment method depends on your business operations and your employees' needs. Most modern businesses opt for electronic transfers because they integrate easily with accounting software.

Discuss payment preferences with your team during the onboarding process. Document whatever method you choose in their employment contract or agreement.

Types of employee compensation structures

Employee compensation structures define how you pay your staff, whether through fixed salaries, hourly wages, or performance-based bonuses. Understanding these options helps you create an attractive and competitive offer.

Common compensation structures include:

• salary: a fixed annual amount distributed in regular instalments, typically fortnightly or monthly, for full-time and part-time roles
• wages: an hourly rate based on time worked, typically for casual staff or roles with variable hours
• bonuses and commissions: extra payments tied to individual or business results that reward performance

You can also offer non-financial benefits, like flexible working hours or extra leave, which can be just as valuable to employees.

Setting up your payroll system

A payroll system automates the process of paying employees correctly and on time. It manages tax withholding, superannuation contributions, and reporting requirements, saving you time and reducing errors.

Collect employee details

Before you can pay anyone, you need to gather their essential information. This includes their Tax File Number (TFN), contact details, and superannuation fund information.

Calculate PAYG withholding

You must withhold the correct amount of tax from your employees' pay. This is known as pay as you go (PAYG) withholding. The amount depends on their earnings and the information provided on their TFN declaration.

Calculate superannuation contributions

You must pay superannuation guarantee contributions for eligible employees, and from 1 July 2026, you must pay super guarantee for each payday.

You need to calculate this based on their ordinary time earnings (with the minimum SG rate set at 12% from 1 July 2025) and pay it into their nominated super fund.

Issue compliant payslips

You must provide a payslip to your employees within one working day of paying them. The payslip needs to show their gross and net pay, any deductions, and superannuation contributions.

Report through Single Touch Payroll

Submit pay, tax, and super information through Single Touch Payroll (STP) each time you run payroll, as all employers have had to report using STP since 1 July 2019.

Report details from a new TFN declaration form within 14 days of receiving it.

Keep accurate payroll records

You're legally required to keep detailed payroll records for seven years. These records must be readily accessible and include details of hours worked, pay rates, and leave balances.

Using payroll software automates these tasks, from calculating pay runs to sending reports to the ATO. It simplifies compliance and gives you peace of mind that you're paying your employees accurately.

Deciding on pay is a balancing act

Employee pay balancing means finding a salary that attracts talent without overspending. A competitive offer shows you value your employees while keeping costs sustainable.

You have to weigh up four factors:

• the candidate's salary expectations
• their market value for similar roles
• their potential value to your business
• your budget and cash flow capacity

During this exercise, consider these alternatives:

• Part-time roles: reduce your commitment while attracting candidates who want flexibility
• Contract support: meet immediate needs without long-term salary obligations

Work out what to pay your employees in five steps

If you decide you need a full-time employee, here are some pointers on figuring out how much to pay them.

1. Write an accurate job description

A clear job description helps you set an accurate salary by defining exactly what the role requires. Start with a title that reflects the job duties and is generic enough to compare against similar roles in your industry.

Include these key elements in your job description:

• duties and responsibilities: the tasks and outcomes you expect the employee to deliver
• time allocation: the percentage of time spent on each major task
• required skills: the qualifications, experience, and competencies needed for the role

You can get started with this free job description template.

2. Get up-to-date salary data

Market salary research helps you find what other businesses pay for similar roles in your area. Pay rates shift as demand for certain skills changes, so use current data when benchmarking.

Start online

Search job sites and salary comparison websites to find market rates for different jobs in your location. This gives you a good snapshot of current rates.

Talk to local contacts

The web provides general data, but talking to people gives you specific insights. Contact these sources:

• business owners: those who've faced similar hiring decisions in your industry
• recruitment firms: specialists who place candidates daily and know current market rates
• suppliers and customers: industry contacts who have recent hiring experience
• other employers: anyone who's recently set salaries for similar roles

It also helps to speak with people whose job description matches your vacancy. If you're hiring a senior designer, for example, chat with senior designers in your network.

Comply with the law

Legal compliance means meeting all employment law requirements when paying employees. Check the Fair Work Ombudsman for guidance, especially if you plan to pay minimum wage or offer overtime.

Use this checklist:

• minimum wage obligations: check you meet the current national minimum wage or applicable award rate
• payment requirements: the rules for payday, frequency, and payment method
• payment changes: correct procedures before changing payment schedules
• annual leave: annual leave entitlements calculated and paid correctly
• record keeping: required documentation maintained and income statements finalised by 14 July each year

3. Find out a candidate's pay expectations

Candidate pay expectations are the salary and benefits a prospective employee wants for the role. Candidates have clear opinions about fair compensation based on their experience and market research.

Use the interview process to understand their expectations and decide early if you can afford them.

Ask about:

• current pay: whether they receive a salary, wages, or commission-based pay
• additional benefits: what non-salary benefits they currently receive, such as flexible hours, remote work, or extra leave

FAQs on paying employees

Here are answers to common questions about paying employees in Australia.

What's the minimum wage in Australia?

The national minimum wage is set by the Fair Work Commission and reviewed annually. Check the Fair Work Ombudsman website for the current rate.

How often do I need to pay employees?

You must pay employees according to the terms in their employment contract or award. Common pay frequencies include weekly, fortnightly, or monthly.

What information must be on a payslip?

A compliant payslip must show the employee's name, employer name, pay period, gross and net pay, any deductions, and superannuation contributions. Provide payslips within one working day of payment.

Do I need to pay superannuation for all employees?

You must pay superannuation guarantee contributions for eligible employees. Generally, this includes employees who earn $450 or more (before tax) in a calendar month and are 18 or older, or under 18 and work more than 30 hours per week.

What's Single Touch Payroll?

Single Touch Payroll (STP) is a government initiative that requires you to report payroll information to the ATO each time you pay your employees. All employers have had to use STP since 1 July 2019.