How to Hire Your First Employee in a Trade Business: The Complete Australian Guide

and does not constitute financial, tax or legal advice. Always consult a

Hiring your first employee is one of the biggest steps you'll take as a

tradie in business. It's exciting, nerve-wracking, and surprisingly

expensive if you go in blind. Most tradies underestimate the true cost

of an employee by 25-30% -- and that gap can seriously hurt your cash

flow in the early months.

This guide walks you through every step of hiring your first employee in

Australia: what you're legally required to do, how much it's actually

going to cost, and how to set yourself up so the hire works out

long-term.

Step 1: Make Sure You Actually Have Enough Work

Before you post a job ad, ask yourself honestly: do you have consistent,

ongoing work to keep someone busy five days a week? A lot of tradies

hire when they're at their busiest -- and then find themselves scrambling

to keep a second person gainfully employed when things quiet down.

A good rule of thumb is to make sure you have at least three months of

pipeline work locked in before hiring. That gives you enough buffer to

onboard someone properly and absorb the initial drop in productivity

that always comes with a new hire.

Step 2: Understand the Real Cost of an Employee

If you're paying someone $35 per hour, the actual cost to your business

is closer to $43-$45 per hour once you factor in on-costs. These

include:

• Superannuation guarantee (currently 11.5% on top of wages)

• Workers' compensation insurance premium

• Payroll tax (if you're above the threshold in your state)

• Leave entitlements -- annual leave, personal/carer's leave, public

holidays

• Tools, PPE and uniform costs

• Additional vehicle running costs or a second vehicle

• Mobile phone and data

None of these are optional. They're legal obligations. Before you set a

wage, reverse-engineer the full number so you know exactly how much that

person needs to generate in billable hours to cover their cost and

contribute to your profit.

Step 3: Choose the Right Award

Most tradies and their employees are covered by the Building and

Construction General On-site Award, the Electrical, Electronic and

Communications Contracting Award, or the Plumbing and Fire Sprinklers

Award, depending on the trade. The Fair Work website has a free tool

called the Pay and Conditions Tool (PACT) that will show you the minimum

pay rates, allowances and conditions that apply to your situation.

Getting this wrong -- even accidentally -- can result in back payments,

penalties and Fair Work investigations. It's worth spending an hour

getting it right upfront.

Step 4: Register as an Employer with the ATO

Once you've decided to hire, you need to register as an employer with

the Australian Taxation Office. This is done through your Business

Portal or through your accountant. You'll need to set up PAYG

withholding so you can withhold tax from your employee's wages and pay

it to the ATO.

You'll also need to register for Single Touch Payroll (STP). STP is

mandatory for all Australian employers regardless of size. It means your

payroll information is reported to the ATO every time you run a pay run.

Most payroll software -- including Xero, MYOB and Employment Hero --

handles STP automatically.

Step 5: Get Your Workers' Compensation Sorted

Workers' compensation insurance is compulsory in every state and

territory before your employee's first day. In NSW you organise this

through icare, in Victoria through WorkSafe, in Queensland through

WorkCover Queensland. Each state has different requirements, premium

structures and claims processes.

Your premium is calculated based on your wages bill and your industry's

risk rating. Trade businesses generally pay more than office-based

businesses because of the higher risk of physical injury.

Step 6: Issue a Letter of Engagement or Employment Contract

Every employee needs a written contract before they start. At minimum,

it needs to state their role, hours, pay rate, whether they're

full-time, part-time or casual, notice period, and any specific

conditions relevant to your trade.

You can get templates from Fair Work Australia's website for free. If

your situation is more complex -- for example, if you want to include a

restraint of trade clause or confidentiality provisions -- it's worth

getting a lawyer to review it. The cost is usually $300-$600 and can

save you significantly more if there's ever a dispute.

Step 7: Set Up a Super Fund

You're required to pay superannuation for your employee at least

quarterly (though monthly is better for cash flow management). From 1

November 2021, employees can choose their own super fund. If they don't

choose, you pay into their stapled fund -- the ATO can tell you what that

is through the employer portal.

Many small trade businesses use a clearing house to manage super

payments. The Small Business Superannuation Clearing House, operated by

the ATO, is free for employers with fewer than 19 employees.

The Apprentice Option

If you're not ready for a fully experienced tradesperson, taking on an

apprentice can be a smarter first hire. Apprentice wages are

significantly lower (set by the relevant award), and you may be eligible

for federal and state government incentives that offset a portion of

their wages in the early years.

The Australian Apprenticeships Incentives Program is a good starting

point, though the specific incentives change regularly. Speak to an

Australian Apprenticeships Support Network (AASN) provider in your state

-- they're free to use and can walk you through what you're entitled to.

The Subcontractor Alternative

If hiring feels like too much too soon, subcontracting is a lower-risk

way to take on more work without the full obligations of employment. A

genuine subcontractor runs their own ABN business, sets their own hours

(within the scope of the job), uses their own tools, and takes on their

own insurance obligations.

Be careful here though. The ATO watches this space closely. If your

subcontractor works exclusively for you, follows your direction closely,

and can't delegate the work to someone else, they may actually be a

deemed employee -- and you'd be on the hook for PAYG, super and

entitlements regardless of what the contract says.

Common Mistakes to Avoid

The most common hiring mistake tradies make is paying someone as a

contractor when they should be an employee. The second is not keeping

proper payroll records. Under the Fair Work Act, you're required to keep

employee records for seven years, including time and wages records,

leave records, and superannuation records.

The third common mistake is not doing proper onboarding. Spending time

in the first few weeks setting your standards, showing someone how you

want jobs done, and being available for questions pays off enormously in

the long run. The tradies who keep good staff invest in them early.

Wrapping Up

Hiring your first employee is a significant milestone. Get the

compliance side right from day one -- ATO registration, workers' comp,

Fair Work Award rates and STP payroll -- and then focus your energy on

making the hire work. A good second pair of hands, well-managed, can

double your capacity and transform your business. Take your time, do it

properly, and it'll be one of the best decisions you make.

Tip: Talk to your accountant before you hire. They can model the true

cost to your business and help you set a break-even billing rate for the

new employee. If you don't have a tradie-savvy accountant yet, that's

worth sorting first.