How to Pay Employees in Australia: Wages, Super & Tax Withholding Explained

Hiring Your First Employee? Here's What You Need to Know#

Hiring your first employee is a milestone. It means your business is growing — but it also means you're now responsible for getting payroll right. In Australia, that means navigating award rates, tax withholding, superannuation, payslips, and reporting obligations.

Get it wrong, and you face penalties from the ATO and Fair Work. Get it right, and it becomes a predictable, automated process that takes minutes per pay run.

This guide walks you through everything step by step.

Before You Pay Anyone: The Setup Checklist#

Before your first pay run, you need to tick off several legal and administrative requirements:

1. Register as an Employer with the ATO#

You'll need to:

• Register for PAYG withholding — this allows you to withhold tax from employee wages and send it to the ATO
• Get a withholding payer number (WPN) — issued when you register

Register through the Business Registration Service or call the ATO.

2. Check If an Award Applies#

Most employees in Australia are covered by a Modern Award — a legal document that sets minimum pay rates, overtime, penalty rates, leave entitlements, and other conditions.

Common awards for small businesses:

Use the Fair Work Award Finder to find yours.

3. Determine the Employment Type#

• Full-time — 38 hours/week, all leave entitlements
• Part-time — regular hours below 38/week, pro-rata leave
• Casual — no guaranteed hours, receives a 25% casual loading instead of leave

Important: You can't just call someone casual if they work regular, predictable hours. After 12 months of regular work, casuals may have the right to request permanent employment.

4. Set Up Superannuation#

Every employer must pay super guarantee (SG) contributions for eligible employees.

Current SG rate (2025–26): 12% of ordinary time earnings.

Key rules:

• Pay super at least quarterly (within 28 days after each quarter ends)
• Employees choose their own fund — if they don't, use their stapled super fund via ATO online services
• Super applies from the first dollar earned (the old $450/month threshold was abolished in 2022)
• Super is payable on ordinary time earnings — includes base pay and shift loadings, but generally not overtime

Late super triggers the Superannuation Guarantee Charge (SGC) — penalties + interest, and none of it is tax-deductible.

5. Register for Single Touch Payroll (STP)#

STP is mandatory for all employers. Every pay run, your software reports to the ATO:

• Gross wages
• PAYG tax withheld
• Super liability
• Allowances and deductions

No more end-of-year payment summaries — employees see their income statement in myGov.

Running Your First Pay Run#

Step 1: Calculate Gross Pay#

Start with the employee's base rate from their award:

Example: A Level 2 retail employee (MA000004) working 30 hours:

• Base rate: $26.05/hour
• Gross pay: 30 × $26.05 = $781.50

With 5 Saturday hours (1.25x penalty):

• 25 weekday hours: 25 × $26.05 = $651.25
• 5 Saturday hours: 5 × $32.56 = $162.80
• Gross pay: $814.05

Step 2: Add Allowances#

Awards may require allowances for specific conditions — meal allowances for overtime, uniform/laundry allowances, tool allowances for tradespersons, first aid allowances, or vehicle allowances. Check your specific award.

Step 3: Calculate PAYG Withholding#

PAYG withholding is income tax you deduct from gross pay and send to the ATO. The amount depends on earnings, the employee's TFN declaration, and any HELP/HECS debt.

Example: An employee earning $814.05/week, claiming tax-free threshold, no HELP debt:

• PAYG withholding: ~$99
• Net pay: $814.05 - $99 = $715.05

Step 4: Calculate Super#

Super contribution: $814.05 × 12% = $97.69

This is on top of wages — you don't deduct it from their pay.

Step 5: Issue a Payslip#

Payslips are due within 1 working day of payment. They must include:

• Employer name and ABN
• Employee name
• Pay period and date
• Gross and net amounts
• Hourly rate and hours worked
• Loadings, allowances, and penalty rates (separately itemised)
• Deductions (PAYG, salary sacrifice)
• Super contributions
• Leave balances

Missing or incorrect payslips: fines up to $16,500 per breach for individuals.

Penalty Rates & Leave#

Penalty Rates#

Leave Entitlements (Full-time)#

Casuals receive no paid leave — the 25% loading compensates for this.

Common Payroll Mistakes#

1. Underpaying Award Rates#

The #1 compliance issue. Fair Work audits small businesses regularly, and underpayment — even unintentional — results in back-pay and penalties.

2. Late Super Payments#

The SGC includes the super owed + interest (~10% p.a.) + $20 admin fee per employee per quarter. None of it is deductible.

3. Not Keeping Time Records#

You must keep records of hours worked for at least 7 years — start/finish times, breaks, and overtime.

4. Misclassifying Employees as Contractors#

If someone works regular hours, uses your tools, and you control how they work — they're likely an employee regardless of what the contract says.

5. Forgetting Casual Conversion#

After 12 months of regular employment, you must assess whether to offer a casual permanent employment.

How OneBookPlus Handles Payroll#

OneBookPlus includes a complete rostering and payroll module:

• Pre-loaded award rate tables — hospitality, retail, construction, cleaning, and more
• Automatic penalty rates — Saturday, Sunday, public holiday, and overtime calculations
• PAYG withholding using ATO tax tables
• Super tracking with quarterly due date reminders
• Compliant payslips delivered by email or employee portal
• STP reporting to the ATO with every pay run
• Time and attendance — clock in/out via phone with GPS
• Leave management — automatic accrual and balance tracking
• Public holiday detection — national and state-specific

Start your free trial at onebookplus.com.au.