Hiring Your First Employee as a Tradie in Australia: Everything You Need to Know

The jump from solo operator to employer is one of the most significant steps a tradie business can take. More hands means more jobs done, more revenue, and eventually a business that doesn't depend entirely on you being on the tools every day. But it also means a new set of obligations — legal, financial, and administrative — that catch a lot of tradies off guard.

This guide covers everything you need to do before your first employee starts, what it costs beyond the wage, and the ongoing obligations you'll need to stay on top of.

First Question: Employee or Subcontractor?

Before you engage anyone, you need to determine whether they're an employee or a contractor. This isn't your choice to make — the ATO and Fair Work Australia have specific tests, and getting it wrong is expensive.

An employee:

• Works under your direction and control — you tell them when, where, and how to work
• Uses your tools and equipment
• Doesn't run their own business
• Can't subcontract or delegate their work to someone else
• Is paid a regular wage (not invoicing you for their labour)
• Has leave entitlements (annual leave, personal leave, etc.)

A contractor (subcontractor):

• Has a high degree of autonomy over how they complete work
• Uses their own tools and equipment
• Runs their own business (has their own ABN)
• Can subcontract or delegate work to others
• Invoices you for their services
• Takes on their own financial risk

If you engage someone who is genuinely an employee but call them a contractor to avoid super, PAYG, and leave obligations, you're liable for unpaid super (plus penalties), unpaid PAYG withholding, and any unfair dismissal claims down the track. The ATO audits this area actively.

Use the ATO's Employee vs Contractor decision tool at ato.gov.au before engaging anyone you're unsure about.

Pre-Employment Checklist

Once you've confirmed you're hiring an employee, here's what needs to happen before they start:

1. Register as an Employer with the ATO

If you haven't already, you need to register as a PAYG withholding employer through the ATO Business Portal or myGov. This allows you to withhold tax from employee wages and remit it to the ATO.

2. Choose the Right Award

Most trade employees in Australia are covered by a Modern Award that sets out minimum pay rates, penalty rates, allowances, and conditions. Relevant awards for tradie businesses include:

• Building and Construction General On-Site Award — builders, labourers, carpenters, concreters, painters, tilers, and most general construction trades
• Electrical, Electronic and Communications Contracting Award — electricians
• Plumbing and Fire Sprinklers Award — plumbers and gasfitters

Awards are published and searchable at fairwork.gov.au. Pay at least the minimum rate for the relevant classification under the award — paying below award minimums is a serious breach of employment law.

3. Prepare an Employment Contract

Every employee should have a written employment contract that covers:

• Employment type (full-time, part-time, casual)
• Job title and duties
• Hours of work
• Wage or salary
• Leave entitlements
• Notice period for termination
• Probationary period (if applicable)

Employment contract templates are available from Fair Work Australia's website for free. A lawyer or HR service can prepare a more tailored contract if your situation is complex.

4. Register for WorkCover (Workers Compensation)

Workers compensation insurance is mandatory for all employers in every Australian state and territory. It covers medical costs and income replacement if an employee is injured at work.

Registration requirements and premium calculation vary by state:

• Victoria: WorkSafe Victoria — premiums based on industry classification and wages
• NSW: icare NSW
• Queensland: WorkCover Queensland
• WA: WorkCover WA
• SA: ReturnToWorkSA
• Tasmania: WorkCover Tasmania

Register with the workers compensation authority in your state before your employee's first day. Failing to have workers compensation in place when required can result in substantial fines — and leaves you personally liable for any claim.

5. Set Up a Superannuation Fund

You must pay superannuation for your employee into a complying super fund. The employee chooses their fund — ask them to complete a super choice form (available from the ATO). If they don't nominate a fund, use your business's default fund or their stapled fund (the ATO can tell you which fund an employee's super is "stapled" to if they don't nominate one).

The super guarantee rate for 2025–26 is 11.5% of ordinary time earnings, increasing to 12% from 1 July 2025.

6. Set Up Single Touch Payroll (STP)

Single Touch Payroll is mandatory for all employers. It means that every time you run payroll, you report wages, PAYG withholding, and super information directly to the ATO through your payroll software. Employees can see their year-to-date figures in their myGov account at any time.

You need payroll software to meet STP requirements. Xero Payroll, MYOB Payroll, QuickBooks Payroll, and several others all handle STP reporting automatically. Most accounting software subscriptions include payroll functionality.

7. Collect the Employee's TFN Declaration

Before paying wages, have the employee complete a Tax File Number (TFN) declaration form. This tells you their TFN and their residency status, which determines the correct withholding rate. The declaration is submitted to the ATO through your payroll software (via STP).

If an employee doesn't provide their TFN, you must withhold tax at the highest marginal rate (47%).

8. Verify the Right to Work in Australia

All employees must have the legal right to work in Australia. For Australian citizens and permanent residents, this is straightforward. For visa holders, verify their visa conditions and work rights through the Department of Home Affairs' VEVO (Visa Entitlement Verification Online) system.

What Does an Employee Actually Cost?

Most tradies focus on the wage and are surprised by the total cost of employment. As a rough guide, the true cost of an employee is typically 15–25% above their gross wage, depending on the trade award and conditions.

On top of the hourly wage or salary:

Superannuation (11.5%): Mandatory for all employees earning more than $450/month (note: the $450 threshold was removed, so super is now payable from the first dollar of earnings for most employees).

Annual leave (17.5% loading on leave): Full-time employees accrue 4 weeks of annual leave per year. When they take that leave, you pay their wage plus 17.5% annual leave loading under most trade awards.

Personal/sick leave: 10 days per year for full-time employees.

Public holidays: Employees are entitled to paid public holidays — typically 10–12 days per year depending on state.

WorkCover premium: Varies by trade, but typically 1–5% of wages for construction trades.

Payroll tax: Applies only if your total annual wages bill exceeds the payroll tax threshold in your state. Thresholds vary: Victoria ~$900,000, NSW ~$1.2M, Queensland ~$1.3M. Most small tradie businesses are under these thresholds.

Example: What it costs to employ a qualified electrician at $42/hour

The wage is $84,000; the total cost is nearly $97,000 — about 15% above the base wage. For higher-risk trades or states with higher WorkCover premiums, this percentage is higher.

Ongoing Employer Obligations

Once your employee starts, your ongoing obligations include:

Pay runs: Process payroll on the agreed schedule (weekly, fortnightly, or monthly) and file STP reports to the ATO each time.

PAYG remittance: Remit the PAYG withholding from employee wages to the ATO — either monthly or quarterly depending on the amount withheld.

Super payment: Pay super contributions at least quarterly, by the 28th day after each quarter ends. Late super is subject to the Superannuation Guarantee Charge (SGC), which is more expensive than the original obligation. Many payroll systems support monthly super payments, which reduces the risk of falling behind.

Fair Work record-keeping: You must keep employment records for 7 years — including pay records, time records, leave records, and any agreements or contracts.

Leave accrual: Track annual leave and personal leave balances. Most payroll software does this automatically.

Annual PAYG Payment Summary: At year end, your payroll software generates payment summaries (income statements) for each employee, which appear in their myGov account via STP.

Superannuation clearing house: Use the ATO's Small Business Superannuation Clearing House (free for businesses with fewer than 20 employees) or your payroll software to send super contributions. Paying into a clearing house on time counts as meeting your super obligation on time, even if the fund hasn't received it yet.

Fair Work Obligations

As an employer, you must comply with the Fair Work Act and the National Employment Standards (NES). Key NES entitlements include:

• Maximum weekly hours (38 ordinary hours for full-time employees)
• Annual leave (4 weeks per year)
• Personal/carer's leave (10 days per year)
• Parental leave (up to 12 months unpaid, with right of return)
• Community service leave
• Long service leave (after extended tenure — varies by state)
• Notice of termination and redundancy pay

Fair Work Australia's website (fairwork.gov.au) has plain-language guidance on all of these, including pay calculators and template contracts.

Apprentices and Trainees

Many tradies hire their first employee as an apprentice. Apprenticeships have additional considerations:

Training contract: Registered with the relevant state training authority. The apprentice is formally enrolled in a training qualification (Certificate III or IV in the relevant trade).

Award pay rates: Apprentice rates are set out in the relevant trade award as a percentage of the trade qualified rate, increasing each year of the apprenticeship.

Australian Apprenticeships Incentives: Employer incentives are available for hiring apprentices in priority trade occupations. Check the Australian Apprenticeships Incentives Program for current eligibility and amounts — these can be worth several thousand dollars over the apprenticeship term.

TAFE/training obligations: Apprentices must be released to attend TAFE or other training. Their wages during this time are generally your responsibility.

Supervision: Apprentices must be supervised by a licensed tradesperson while on site.

Getting Help

Hiring your first employee is one of the more complex things you'll do as a tradie business owner. The consequences of getting it wrong — underpaid wages, missed super, no workers compensation — can be significant and sometimes illegal.

Resources:

• Fair Work Australia (fairwork.gov.au) — employment conditions, awards, pay rates, templates
• ATO (ato.gov.au) — PAYG, super, STP obligations
• Your state's workers compensation authority — WorkSafe (VIC), icare (NSW), WorkCover (QLD), etc.
• Your accountant — setting up payroll, STP, and ongoing compliance
• An employment lawyer — for contract review or complex situations

The investment in getting the first hire right pays dividends in reduced risk and a better experience for both you and your employee.

Tradie Money AU provides practical guidance for Australian tradie businesses. This article is general information only — employment law and obligations are complex and state-specific. Seek professional advice for your specific situation.