12-step checklist for hiring employees

Small Business Guides

8 min read

Hiring employees can be extremely time-consuming, but it’s important if you want to grow your business. Your staff can become your most valuable asset so it’s important to get it right.

Hire the right person for the job

To make life easier, here are 12 steps to make sure you comply with Australian employment law before and after hiring employees.

1. Create a clear job description

Make sure you are clear about the type of person you want to hire, the skills they require and the amount (or the range) you are willing to pay. Throughout the hiring process, keep an accurate record of each candidate, including their strengths, weaknesses, expectations and interview notes. You’ll need to refer to this again when selecting your preferred candidate.

2. Determine who is doing the recruiting

How much time will it take to recruit each new employee? Think about all the tasks involved including:

  • writing the job description
  • advertising the job (online and offline)
  • communicating with prospective candidates
  • answering questions about the job and your business
  • interviewing and screening applicants
  • communicating with unsuccessful candidates.

You may not have time to do all of this. It might be more efficient to outsource this to someone in your team or a recruiter.

3. Ensure each employee has a Tax File Number

A Tax File Number (TFN) is a nine-digit number that every employee needs to have to be identified by the Australian Taxation Office (ATO). Every employee has a different TFN.

Even if an employee changes jobs or leaves the country (and returns later), their TFN stays with them – for life. If they move between states or change their name, their TFN remains the same.

You’ll need a TFN not only to transact with the ATO, but also with many other Australian government agencies. Your employees can apply for a TFN online if they don’t have one, but they’ll still need to visit a post office or an ATO office to finalise the process.

4. Maintain accurate tax records

You are legally required to keep proper tax records for five years. It’s important that you keep them safe, secure and easily accessible. Your accounting software should be able to do this for you.

The right accounting software will also help you monitor the financial and tax status of your business in real-time – for example, by keeping track of deductible expenses. Deductible expenses are business expenses that can be claimed to reduce your overall tax bill.

5. Understand your tax obligations

When you hire anyone for your business, you have tax and superannuation obligations. It doesn’t matter if you hire contract workers, part-time staff or full-time employees.

If you are a director of your business, these obligations can also include you and your family members. Your obligations may include:

  • pay as you go (PAYG) withholding tax
  • superannuation guarantee
  • fringe benefits tax (FBT).

Your responsibilities begin as soon as your employee (or contractor) begins working for you until they finish. Even if you stop being an employer altogether, some of these responsibilities will continue.

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.

6. Remember key dates and tasks

There are so many things to remember when you are running 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.

A good way to remember some of the most important dates is by using some of the freely available online tools to sign up for reminders.

The ATO has an app that can help you out. It can look at key dates and set reminders or alerts for your tax and super obligations. 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.

7. Obtain and display posters about employee rights

All employees are entitled to certain minimum rights under Australian employment law. However, many employees may not be aware of their rights or understand them. To help your employees out, you are required to display posters in your workplace that explain employees’ rights.

You can find out more about your obligations and download free resources for small businesses from the Fair Work Ombudsman’s website.

8. Obtain workers’ compensation insurance

What happens if your employees are injured at work? It is a legal requirement to have workers’ compensation for your employees. 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:

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

9. Set up a payroll system

Your options when setting up your payroll include:

  • doing it all yourself.
  • outsourcing the setup to your accountant or bookkeeper.

Make sure your accounting software can address all your payroll needs. Adding payroll to your accounting software should make paying employees painless.

Look for software that:

  • makes it simple to stay compliant
  • can pay your employees efficiently
  • files reports with the Australian Tax Office (ATO)

10. Keep a file for each employee

It’s important to keep up-to-date and accurate records for all your employees so that you can use them to figure out their pay and entitlements. You will also need records to give to your employee or their union/representative, if requested.

Each employee’s file should include their:

  • full name, address and contact details
  • emergency contact details
  • a signed copy of their employment contract (full-time or part-time)
  • tax details
  • preferred payment method and details, for example internet banking
  • any other important information about them.

Create an electronic version of these details and back it up in the cloud with services like BoxDropbox or Google Drive. These records must be kept for at least seven six years.

If you’re not sure about what information you can and should collect for each employee, contact your advisor.

11. Make it easy for your employees to access all your cloud programs

Depending on your type of business, your employees may need access to non-confidential company information such as policies, training manuals, procedures or job-specific instructions. Consider using a single sign-on service like OneLoginOkta or Google Cloud. You can set up each employee with access to personalised information. And if you set yourself up as an administrator, you can also restrict their access if you need to. Remember to make sure you can change the passwords to any third-party websites – there may be times when your employees no longer need access to these websites.

12. Be clear about goals and expectations

Even if you have just one employee, it’s important that you define and agree on what is expected of them 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 staff are your most valuable asset – choose wisely

Whether you’re hiring one employee or several, it’s important to follow the steps above. And don’t forget to think about how you will retain and reward excellent work. There are many ways to do this other than salary and wages, for example incentives and non-financial rewards.

Remember that your employees are your company’s most valuable asset. Good people are hard to find. And hiring can be time consuming and expensive.

If you get the process right, you’ll ensure you hire the right people. And if you look after your employees, they’ll stay with you longer and your business will perform better.

For more hiring information check out our Guide to hiring staff.