Hiring Your First Employee as a Tradie — The Complete Guide

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.

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:

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.

The 8 Steps to Hiring Your First Employee

1. Register for PAYG withholding at ato.gov.au — you must do this before paying any wages
2. Get a TFN declaration from your new employee on their first day
3. Set up payroll software — Xero Payroll, MYOB or KeyPay all handle Single Touch Payroll automatically
4. Check the award rate — most tradies are covered by the Building and Construction Award or Electrical Award. Use the Fair Work Pay Calculator at fairwork.gov.au
5. Set up superannuation — you must pay 12% super on ordinary time earnings. Set up with a clearing house (ATO Small Business Super Clearing House is free)
6. Get workers compensation insurance — mandatory in every state before your employee starts. Contact your state WorkCover authority.
7. Issue a written employment contract — not legally required but strongly recommended. Reduces disputes significantly.
8. Provide a Fair Work Information Statement — mandatory, download from fairwork.gov.au

## Setting Up Payroll and Tax Obligations: The Non-Negotiables The moment you hire your first employee, the ATO becomes your business partner whether you like it or not. Missing payroll deadlines or getting tax contributions wrong will cost you far more than the time it takes to get it right from the start. First, register for PAYG withholding with the ATO. You'll need an ABN, which you should already have, and you'll need to apply for a withholding declaration number. This is non-negotiable and must happen before your employee's first day. The ATO takes this seriously—penalties for non-compliance start at $420 and escalate quickly. Your employee's gross salary determines how much PAYG tax you withhold each pay cycle. Use the ATO's tax tables or better yet, use accounting software like Xero which calculates this automatically. You'll also need to contribute superannuation—currently 11.5% of their ordinary time earnings—into their chosen super fund. As of 2025-26, the superannuation guarantee cap sits at $30,000 per employee annually. If your employee earns over $450 per month, you must report their super contributions quarterly via SuperStream. If they earn less, you're still legally required to pay super, but quarterly reporting doesn't apply. Most tradies pay weekly or fortnightly, so you'll hit the $450 threshold quickly. Keep meticulous records. The ATO can audit you up to five years after a tax year ends. Store payroll records, super receipts, and timesheets digitally. Tradify integrates payroll tracking with job management, so your hours and pay align perfectly—essential when the taxman comes calling. Payroll deadlines are unforgiving. PAYG payments are due monthly by the 23rd. Super contributions are due quarterly. Miss these and you'll face penalties plus interest. Set calendar reminders two days before each deadline. Better yet, have your accountant or bookkeeper handle it. The $50–100 per week this costs is insurance against costly mistakes. ## Insurance and Legal Protection: What You Actually Need Many tradies think their existing business insurance covers employees. It doesn't. You need workers' compensation insurance before your employee starts work—it's legally required in every Australian state. Some states allow small businesses temporary exemptions, but most require it from day one. Workers' comp covers medical expenses, lost wages, and rehabilitation if your employee gets injured on the job. Premiums vary by trade and state. A plumber or electrician might pay 1–3% of payroll, while higher-risk trades like roofing or demolition can hit 5–10%. Get a quote from BizCover or your current insurer to understand your exposure. Beyond workers' comp, you need public liability insurance that explicitly covers employees. Your existing policy might only cover you as an owner-operator. Call your insurer and confirm coverage extends to employees. If not, upgrade immediately—claims from employee actions can be substantial. You'll also need an employment contract. This isn't optional. A proper contract defines hours, pay, leave entitlements, probation periods, and conduct expectations. Without it, the Fair Work Commission will fill the gaps using the National Employment Standards, which are often more generous to employees than you'd prefer. Here's what must be in every employment contract for Australian tradies: - **Pay rate and frequency** (weekly, fortnightly, etc.) - **Hours of work** and whether the role is full-time, part-time, or casual - **Notice periods** for both parties (typically 1–2 weeks for small businesses) - **Annual and personal leave** entitlements (4 weeks annual leave, 10 days personal leave minimum) - **Superannuation** contributions and fund details - **Probation period** (usually 3–6 months) - **Termination conditions** and redundancy information - **Safety and site conduct** requirements specific to your business Use a template from Fair Work or pay a lawyer $200–300 to draft one tailored to your trade. This protects you both legally and saves drama later. ## Hiring Checklist: Essential Tasks in the Right Order | Task | Timing | Who Does It | Tools/Resources | |------|--------|-----------|-----------------| | Confirm you need an employee | Before advertising | You | Financial projections | | Create employment contract | Before interviewing | Lawyer or template | Fair Work website | | Register for PAYG withholding | Before hiring | You or accountant | ATO online | | Arrange workers' comp insurance | Before first day | You | BizCover or insurer | | Set up payroll system | Before first day | You or accountant | Xero, Tradify, or MYOB | | Conduct interviews | 2–4 weeks before start | You | Job ad platform | | Verify references and qualifications | After interviews | You | Phone calls, credentials database | | Onboard employee | First day | You | Induction checklist | | Register for super fund | Before first pay | You | Employee's chosen fund | | Report to ATO | By first PAYG deadline | You or accountant | ATO online portal | --- ## Frequently Asked Questions --- Your first employee is an investment, not an expense. Get compliance right, communicate clearly, and invest in their development. Tradies who build strong teams grow exponentially—those who cut corners on the fundamentals face constant turnover, compliance headaches, and wasted time fighting the ATO.