✅ Updated 2026

Hiring your first employee is one of the biggest milestones in a tradie business. It means more jobs, more income potential — and a lot more responsibility. Get it right from day one and it's transformative. Get it wrong and it's expensive. Here's everything you need to know.

📋 In This Article

  1. →Are you ready to hire?
  2. →The real cost of an employee
  3. →Steps to hire legally
  4. →Award wages for tradies
  5. →Setting up payroll
  6. →FAQs

Are You Ready to Hire?

The honest test: are you consistently turning away work, or working unsustainable hours, for at least 3 months? That's the signal. Hiring to "grow" when you don't have consistent work to give an employee is a fast track to financial stress.

Before hiring a full employee, consider: can a subcontractor fill the gap? Subcontractors give you flexibility — you only pay when they work, and there's no ongoing employment obligation.

The Real Cost of an Employee

A common mistake: hiring someone at $40/hour and thinking that's your cost. The real cost is significantly higher:

Cost ComponentApproximate Amount
Base wage (example: $40/hr × 38hr week)$1,520/week
Superannuation (12% of ordinary earnings)$182/week
Workers compensation insurance (varies by trade, ~3%)~$46/week
Payroll tax (only if total wages exceed state threshold)Varies
Leave entitlements (annual leave loading, sick leave provision)~$100–150/week effective cost
True weekly cost~$1,850–$1,900/week

Your employee needs to generate more than their true cost in revenue for it to make financial sense. A general rule: an employee should generate at least 2.5–3x their wage in revenue to cover their cost and contribute to your overhead and profit.

Steps to Hire Legally

  • 1. Register as a withholding payer with the ATO — you'll withhold PAYG tax from wages
  • 2. Get a workers compensation policy — legally required before your first employee starts. Contact your state's workers comp insurer (icare in NSW, WorkSafe in VIC, WorkCover in QLD)
  • 3. Determine the correct award — Building and Construction General On-site Award or Joinery and Building Trades Award covers most tradies. Check Fair Work's Pay Calculator
  • 4. Provide a letter of engagement or employment contract
  • 5. Have them complete a TFN declaration and superannuation choice form
  • 6. Set up payroll software — Xero Payroll or MYOB handles STP (Single Touch Payroll) reporting to the ATO, which is legally required

Award Wages for Tradies (2025–26)

Most trade employees are covered by the Building and Construction General On-site Award. Minimum rates vary by classification — a qualified tradesperson (CW/ECW 3) earns a minimum of approximately $31–$34/hour base rate, with industry allowances and loadings on top. Check the current rates at fairwork.gov.au before you offer a wage.

Setting Up Payroll

As soon as you have an employee, you must report to the ATO via Single Touch Payroll (STP) every time you pay wages. Manual payroll becomes complicated fast. Use payroll software from day one.

Xero includes full payroll with STP reporting from their Standard plan. MYOB is particularly strong for payroll and is the other popular choice for trade businesses with employees.

What's the difference between an employee and an apprentice?

An apprentice is a type of employee in a formal training arrangement — they receive a lower wage during training (set by the relevant training award) and you may be eligible for government incentives and payroll tax exemptions for employing them. Contact your state training authority or a registered training organisation for current incentive details.

Can I hire a family member as an employee?

Yes, but they must be paid award wages and have the same entitlements as any other employee. You can't pay family members less than award rates or deny them super — the ATO watches this closely. Done correctly, employing a family member can be a legitimate tax strategy; done incorrectly, it creates serious ATO issues.

What happens if I can't afford to pay them during a slow period?

You must pay wages regardless of whether you have work coming in. This is one of the biggest risks of employment — you're committed to wages even during quiet periods. This is why many experienced tradie business owners keep subcontractors until they have at least 6 months of consistent overflow work before hiring permanently.