What does it actually cost to hire your first employee in Australia?

On top of the gross wage you pay, expect: 12% superannuation guarantee (mandatory from 1 July 2025), ~1.0-1.8% of wages in workers' compensation insurance premium (varies by state and industry), and for permanent employees an additional ~7.7% in accrued leave entitlements (4 weeks annual + 10 days personal). Total 'on-cost' is typically 14-22% above gross wages. Payroll tax only kicks in once your annual wages bill exceeds the state threshold (NSW $1.2M, Vic $700k, QLD $1.3M, etc.) — not relevant for a first hire.

What do I need to set up before my first employee starts?

Twelve things: (1) confirm ABN + get TFN Declaration from employee, (2) register for PAYG withholding (free, ATO portal), (3) set up Single Touch Payroll (STP), (4) get the employee's super fund details + register with SuperStream-compliant clearing house, (5) buy workers' compensation insurance from your state insurer, (6) identify the correct modern award, (7) write an employment contract aligned with the award + NES, (8) give them the Fair Work Information Statement (and Casual Employment Information Statement if casual), (9) set up payslip generation, (10) display workers comp details, (11) register for FBT if you provide benefits, (12) set up record-keeping for the 7-year retention requirement.

Do I have to use payroll software for my first employee?

You don't strictly need paid software, but you DO need Single Touch Payroll (STP) reporting since 2021. Free micro-employer STP options exist (Reckon Payroll Free, Xero free trial). Paid options (Xero, MYOB, QuickBooks) cost $15-50/month for one employee and handle STP + payslips + super + leave automatically. For your first hire, the time saved usually justifies paid software.

Can I just pay my first employee cash?

Cash payment is legal IF you still meet all compliance obligations: withhold PAYG tax, pay super to their fund, lodge STP, issue payslips, keep 7-year records. 'Cash in hand' without those compliance steps is illegal — both for tax and Fair Work purposes. Most employers find using payroll software with bank transfer simpler than running a compliant cash payroll.

First Employee Hire Checklist + Cost Calculator

Sole trader becoming an employer? Pick your state, employment type and weekly wage. Get the 12-step compliance checklist and the realistic on-cost (usually 14-22% more than wage). Built for first-time AU employers.

Last verified: 16 May 2026

FIRST EMPLOYEE COMPLIANCE

About to hire your first employee? Here's the 12-step compliance checklist + the realistic weekly cost (more than just the wage). Set aside 2-3 hours to set everything up; doing it right costs less than the FWO discovering it wasn't.

State / Territory

Employment type

Gross weekly wage ($)

Realistic weekly cost

Gross wages

What you pay before withholding tax + super.

$800.00

Superannuation Guarantee (12%)

12% of OTE from 1 July 2025. Paid to their fund quarterly (or fortnightly under Payday Super from 1 July 2026).

$96.00

Workers' compensation (NSW)

Average premium ~1.4% of wages. Actual depends on industry classification. Mandatory in every state.

$11.20

Payroll tax (NSW)

Well under threshold ($1,200,000). One employee at $42k/yr doesn't trigger payroll tax.

—

Total weekly cost

≈ $47,174/year

$907.20

12-step compliance checklist

TFN + ABN check

Confirm your business has an ABN. Employee needs to give you a TFN Declaration form (don't pay without it — you'd have to withhold 47%).

Free, instant on ATO Business Portal. You'll withhold income tax from their gross pay each cycle.

Set up Single Touch Payroll (STP)

Mandatory since 2021 for all employers. Most cloud accounting tools (Xero, MYOB, QuickBooks) include free STP. Micro-employer free options also available (e.g. Reckon Payroll Free).

Choose a super fund + register with their fund

Employee can nominate their own super fund (or use stapled fund from ATO). You need fund details before first super payment. Pay via SuperStream-compliant clearing house.

Get workers' compensation insurance

Mandatory in NSW. Buy through your state insurer (icare NSW, WorkSafe VIC, WorkCover QLD, etc.) before the employee starts.

Identify the correct modern award

Use our Award Finder to identify the correct award. Most industries are covered by one of 121 modern awards. Award sets minimum pay, hours, breaks, allowances, penalty rates.

Write an employment contract

Must cover: position, hours, rate, type (casual/permanent), notice period, probation, leave (for permanent). Doesn't have to be fancy — must align with award + NES floor.

Provide the Fair Work Information Statement

Mandatory — give before or on first day of work. Free PDF from fairwork.gov.au. New casuals also get the Casual Employment Information Statement.

Set up payslip generation

Payslips must be issued within 1 working day of payment. Must include: employer name + ABN, employee name, pay period, gross + net pay, deductions, super contributions. Xero/MYOB/Reckon auto-generate.

Display your workplace insurance details

Workers' comp certificate must be visible at workplace (or accessible to employee on request).

Only if you give the employee fringe benefits (car, gym, accommodation, entertainment). Most first-hires are pure-cash + no FBT.

Keep records for 7 years

Time + wages records, super contributions, tax records, leave balances, contracts, payslips. Per Fair Work Regs 3.31-3.40.

Small Business Fair Work Guide 2026: Simple Compliance for Under 15 Employees

Straightforward Fair Work compliance guide for Australian small businesses with fewer than 15 employees. Covers the small business fair dismissal code, casual conversion, simplified record keeping, common mistakes, free resources, and when to seek legal advice.

Payroll Tax Australia 2026: State-by-State Thresholds & Rates for Employers

Complete 2026 guide to payroll tax in Australia. State-by-state thresholds (NSW $1.2M, VIC $900K, QLD $1.3M) and rates (4.85-6.85%), what's included in taxable wages, grouping rules, and how to register — everything employers need to know.

Sole Trader Tax Rates Australia 2026: How Much Tax Will You Pay?

Sole traders pay the same individual tax rates as employees — but also owe Medicare levy, GST (if turnover exceeds $75K), and get no employer super. Here's what you'll actually pay on $120K with $30K in deductions.

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General information and estimates only — not legal, financial or tax advice. Always check your specific award, agreement or contract, or a qualified professional, before you rely on the result.

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