Hiring your first employee is a big step for any small business in Australia, especially if you’re a budding entrepreneur. 

It’s exciting to grow your team, but it also comes with legal responsibilities that can feel overwhelming if you’re new to the game. 

Getting this right can save you time, money, and stress down the track.

Whether you’re a café owner, a tradie, or even someone eyeing insurance solutions for their business, it’s important to know the key legal requirements for hiring your first employee in Australia in 2025. 

The Fair Work Act 2009 is the backbone of workplace laws in Australia, and it’s where you’ll find most of the rules for hiring and managing employees. 

Combine that with other regulations such as superannuation and workers’ compensation, and you’ve got a clear checklist to follow. 

Here’s what you need to know to stay compliant and keep things running smoothly.

1. Understand the Fair Work Act 2009

The Fair Work Act 2009 sets the foundation for employee rights and employer obligations in Australia. 

It’s the go-to law for the basics, including minimum wages, working hours, and leave entitlements. 

As a small business owner, you’ll need to get familiar with its key parts to avoid any missteps when hiring your first employee.

• National Employment Standards (NES): These are the minimum entitlements that apply to all employees in Australia, covering things such as:
  
  

• Maximum weekly hours (38 hours for full-time employees, plus reasonable additional hours).
• Entitlements to leave, including annual leave and parental leave.
• Notice periods for termination which can be up to four weeks notice or five if the employee is over 45 years old with at least two years of service, and redundancy pay.
• Providing a Fair Work Information Statement to new employees, outlining their rights and conditions.
  
  

• Minimum Wage: Starting July 1, 2025, the national minimum wage will increase by 3.5%, from $24.10 per hour to $24.94, as set by the Fair Work Commission (FWC).
  
  If your employee is covered by an industry-specific modern award or enterprise agreement, their pay might be higher.
  
  Always check to make sure you’re meeting or exceeding these rates.
  
  
• Right to Disconnect: New laws which took effect last August 26, 2024, or August 26, 2025 for small businesses with fewer than fifteen employees, give employees the right to refuse contact outside working hours unless it’s unreasonable to do so. This is referred to as the ‘right to disconnect’.
  
  This is especially important if you expect your employee to be available even after working hours.
  
  Set clear expectations early to avoid issues.

2. Classify Your Employee Correctly

Not all workers are employees, and getting this wrong can lead to big problems. 

The Fair Work Act distinguishes between employees, independent contractors, and labour hire workers. 

For example, a casual employee doesn’t have a firm commitment to ongoing work, while a permanent employee (full-time or part-time) has more stability and entitlements like paid leave.

• Avoid Sham Contracting: Misclassifying an employee as a contractor to dodge entitlements (e.g., superannuation or leave) is illegal.
  
  This can also lead to costly penalties: $19,800 for individuals, $99,000 for businesses with less than fifteen employees, and $495,000 for businesses with over fifteen employees.
  
  That’s why it’s best to always check the nature of the work and the contract terms.
  
  
• New Definitions in 2024: Since last year, the Fair Work Act has a new way of defining ‘employee’ and ‘employer’ based on the reality of the working relationship, not just the contract.
  
  This means you need to ensure the actual work arrangement matches the contract. 

Businesses often trip up due to misclassification, but getting it right from the start can save you from disputes.

3. Set Up Superannuation Contributions

Superannuation is a must for all employees in Australia, and it’s a legal requirement under the Superannuation Guarantee (Administration) Act 1992.

This is essentially a retirement savings scheme where you contribute a percentage of your employee’s earnings to a super fund.

• Contribution Rate: This July 1, 2025, superannuation guarantee rate is set to increase to 12% of an employee’s ordinary earnings.
  
  This applies to full-time, part-time, and casual employees, with some exceptions for very low earners or young workers.
  
  
• Choice of Fund: Employees can choose their super fund, and you’ll need to provide a Superannuation Standard Choice Form.
  
  If they don’t pick one, you’ll pay into a default fund that meets legal requirements.
  
  
• Penalties for Non-Compliance: Failing to pay super on time can lead to penalties, including interest on overdue amounts.
  
  The Australian Taxation Office (ATO) keeps a close eye on this, so you must stay on top of it.

4. Get Workers’ Compensation Insurance

As an employer, you’re legally required to have Workers’ Compensation Insurance to cover workplace injuries or illnesses. 

This is regulated by state laws and it’s non-negotiable.

• Why It Matters: If your employee gets injured on the job, Workers’ Compensation can cover medical costs, lost wages, and rehabilitation.
  
  Without it, you could face massive fines or personal liability.
  
  
• How to Get It: An insurance broker can help you find a Workers’ Compensation policy that suits your business.
  
  The cost depends on your industry, payroll, and claims history, but it’s a small price to pay for peace of mind.
  
  
• Recent Updates: There are efforts to review the Workers’ Compensation schemes, with proposed changes to improve support for psychological injuries.
  
  Keep an eye out for updates that might affect your coverage.

5. Comply with Anti-Discrimination and Privacy Laws

Hiring your first employee means you’re also responsible for creating a fair and respectful workplace. 

Australian laws, including the Fair Work Act and the Australian Human Rights Commission Act 1986, protect against discrimination and ensure privacy.

• Anti-Discrimination: You can’t discriminate based on protected attributes, be it race, sex, age, or disability during hiring or employment.
  
  For instance, job ads must avoid discriminatory language, and pre-employment checks (e.g., criminal background checks) must be relevant to the job.
  
  
• Sexual Harassment Protections: The Fair Work Act has stronger rules against workplace sexual harassment, covering employees, contractors, and even volunteers.
  
  You need to take reasonable steps to prevent it, or you could be liable.
  
  
• Privacy: Under the Privacy Act 1988, you must handle your employee’s personal information carefully.
  
  This includes getting consent for pre-employment checks and securely storing records.
  
  The employee records exemption applies to some data, but you still need to be cautious.

6. Keep Accurate Records and Issue Pay Slips

The Fair Work Act requires you to keep detailed records of your employee’s pay, hours, leave, and super contributions for seven years.

This isn’t just paperwork; it’s critical for compliance and resolving disputes.

• Pay Slips: You must provide a pay slip within one working day of paying wages, showing hours worked, pay rates, and deductions.
  
  
• Record-Keeping: Failing to keep proper records can lead to penalties, as it makes it hard for the Fair Work Ombudsman to check compliance.
  
  The records must also be in English and accessible to employees on request.
  
  
• Wage Theft Laws: Intentionally underpaying employees, known as wage theft, is a criminal offence under the Fair Work Act, with penalties including fines or even jail time for serious cases.
  
  Double-check your payroll to stay compliant.

7. Create a Clear Employment Contract

While employment contracts don’t have to be in writing under the Fair Work Act, it’s better to have one. 

A clear contract sets expectations and helps avoid misunderstandings.

• What to Include: The contract should cover the start date, job role, pay, hours, and any specific conditions such as confidentiality clauses.
  
  Make sure it aligns with the NES and any relevant modern awards.
  
  
• Types of Contracts: You can hire on a permanent (full-time or part-time), casual, or fixed-term basis.
  
  Each has different entitlements, so choose the one that fits your business needs.
  
  For example, casual employees don’t get paid leave but may get a casual loading (usually 25%) to compensate.
  
  
• Recent Changes: Casual employees who’ve worked for six months (12 months for small businesses) can request to convert to permanent employment if they no longer meet the casual definition.
  
  Be ready to respond to these requests within 21 days after your employee notifies you.

How About Insurance for New Employers

Hiring your first employee opens up new risks for your business, from workplace injuries to disputes over pay or dismissal. 

As an insurance broker, we can’t stress enough how important it is to have the right coverage in place. 

Workers’ Compensation is mandatory, but you might also consider the following:

• Public Liability Insurance: This can cover claims from third parties, such as clients or suppliers, for injury or property damage caused by your business.
  
  
• Professional Indemnity Insurance: This is useful if your business provides advice or services as it can protect you against claims of negligence or errors.
  
  
• Management Liability Insurance: This can help cover legal costs if you face disputes over unfair dismissal, discrimination, or wage issues.

Our team at Tank Insurance can tailor these policies to your business, ensuring you’re protected without emptying your pocket so you can focus on growing your team.

Final Tips for Hiring

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Hiring your first employee in Australia is a milestone, but it’s not just about finding the right person.

What really matters is doing it legally and setting up your business for success. 

Here are a few last pointers:

• Check Resources: The Australian Government (business.gov.au) and the Fair Work Ombudsman (fairwork.gov.au) provide free tools and templates to guide you through the hiring process.
  
  
• Stay Updated: Laws change regularly. Subscribe to Fair Work updates to stay in the loop.
  
  
• Get Expert Help: If you’re unsure about contracts, awards, or compliance, consult a lawyer or HR specialist.
  
  For insurance, an insurance broker can assist you in finding the right policies to protect your business.

Hiring your first employee is a big deal, and getting the legal side right sets a strong foundation for your business. 

Here at Tank Insurance, we can support you with advice and insurance solutions that can keep your business safe as it grows.

For more insurance tips and business know-how, you can also read our blog. 

Ready to take the next step? Get in touch with us now!

Let’s chat about how we can help you navigate this exciting phase with confidence.