The core obligations that begin the moment someone starts work
You're ready to hire your first employee.
And suddenly, you're not just a business owner anymore — you're an employer, with a genuinely new set of legal and financial obligations attached to that word.
The short answer
Before your new employee's first payday, you need to: correctly classify them as an employee (not a contractor), register for PAYG withholding, set them up for superannuation, arrange workers' compensation insurance, and be ready to report through Single Touch Payroll (STP). Each of these is a genuine legal requirement, not an optional extra.
Step one: get the classification right
This comes before everything else, because it determines which obligations actually apply. The distinction isn't decided by a single factor like who controls the day-to-day work — Australian courts now look primarily at the terms of the written contract between you and the worker, assessed as a whole: things like who bears the commercial risk, whether the worker can delegate the work to someone else, who provides equipment, and how integrated the person is into your business, alongside the degree of control. Getting this wrong is against the law, regardless of what a contract calls the relationship — a label alone doesn't decide it, and the ATO and Fair Work both look at the substance of the arrangement, not just what it's called.
Some roles are always employees, regardless of how they're engaged — apprentices, trainees, labourers and trade assistants, for example.
The core obligations, once you've confirmed it's an employee
Register for PAYG withholding with the ATO, if you haven't already — this is a one-off registration, not something done per employee.
Check the relevant award. Most small businesses are covered by an industry or occupation award, which sets minimum pay rates, entitlements and workplace rules.
Collect their Tax File Number declaration within 28 days of their start date.
Give them a Superannuation Standard Choice form within 28 days — if they don't choose a fund, you'll need to request their existing “stapled” fund from the ATO.
Set up Single Touch Payroll (STP) reporting through compliant software — every pay run reports wages, tax withheld and super information to the ATO in real time.
Arrange workers' compensation insurance — compulsory in every state and territory once you have employees, though the specific requirements, thresholds and any limited exemptions vary by jurisdiction, so confirm the rules that apply where you operate.
Confirm they're legally entitled to work in Australia, and provide a Fair Work Information Statement.
Super is now paid on payday, not quarterly
From 1 July 2026, superannuation guarantee contributions must be paid at the same time as wages — landing in the employee's fund within 7 business days of each payday — replacing the old quarterly system entirely. This is a significant change to plan payroll cash flow around: super is now a same-pay-run cost, not something to think about once a quarter.
What this actually costs, beyond the wage itself
Superannuation (12% of qualifying earnings), workers' compensation insurance, leave entitlements and payroll tax (once you cross your state's threshold) typically add somewhere between 25% and 45% on top of the base wage, depending on your industry and state. This is covered in detail in its own guide — but it's essential to budget for before you make an offer, not after.
A quick self-check
Have I correctly assessed whether this role is genuinely an employee or a contractor?
Am I registered for PAYG withholding and set up for STP reporting?
Do I have workers' compensation insurance arranged for my state?
Have I budgeted for the full on-cost of employment — not just the wage — including payday super?
Free official resource
The Australian Government provides a full hiring employees checklist and guide.
business.gov.au — Guide to hiring employees https://business.gov.au/guide/hiring-employees
When should you get professional help?
you're not confident whether a role should be an employee or a contractor;
you're setting up payroll and STP reporting for the first time;
you want to understand the true cost of the hire before making an offer; or
you want your first pay run checked before it's actually processed, since errors here tend to compound.
Continue learning
→ How Much Does an Employee Really Cost My Business?
→ PAYG Withholding, Super and Payroll — What Does an Employer Actually Have to Do?
→ Can I Afford to Hire Another Employee?
SKC Accounting | Knowledge Centre | Knowledge Guide 031
Last reviewed: August 2026
General information only. This guide does not take into account your individual circumstances and is not a substitute for professional accounting, taxation, legal or financial advice.