Hiring your first employee in Australia is more involved than most overseas businesses expect. Australia has one of the most employee-protective workplace systems in the world, built on the Fair Work Act, a set of legislated minimum standards, and more than a hundred industry awards that set pay and conditions. On top of that sit Single Touch Payroll reporting, compulsory superannuation, and state payroll taxes. Get any of it wrong and the consequences are real, including, since 2025, criminal liability for deliberate underpayment.
This guide walks through what every employer needs to know to hire compliantly in Australia: the two ways to actually employ someone, the employment law that governs the relationship, how payroll and tax work, the compliance traps that catch businesses out, and how an Employer of Record lets you hire here without setting up a local entity at all.
The two ways to employ someone in Australia
Before any of the detail, there is one structural decision that shapes everything else: do you set up your own Australian legal entity, or do you use an Employer of Record?
Setting up an entity means registering an Australian company or a foreign company branch, obtaining an ABN and usually an ACN, and registering for PAYG withholding and, depending on the state and your wage bill, payroll tax. You will also need workers' compensation insurance, a local bank account, and the payroll and HR systems to run it all. For a business committed to Australia long term and hiring at scale, that investment makes sense. For a company hiring one engineer or testing the market, it is months of setup and ongoing accounting overhead before the first payslip.
An Employer of Record (EOR) is the alternative. The EOR already has an Australian entity and legally employs your worker on your behalf, while the person does their day to day work for you. The EOR runs payroll, withholds tax, pays superannuation, provides a compliant local contract, and carries the compliance obligations. You get an Australian employee in days, without forming a company. This is the model Deel is built around: its wholly owned Australian entity employs your hire, and you manage them through Deel's platform.
Hiring in Australia without setting up a company? See how Deel's Australian Employer of Record works.
Australian employment law: the standards every contract must meet
Australian employment is governed federally by the Fair Work Act 2009 and overseen by the Fair Work Ombudsman and the Fair Work Commission. Two pieces of it matter most when you hire.
The National Employment Standards (NES) are eleven minimum entitlements that apply to every employee and cannot be undercut by a contract. They include maximum weekly hours, paid annual leave of four weeks for full-time staff, paid personal and carer's leave, parental leave, public holidays, notice of termination and redundancy pay, and the right to request flexible working. A contract can offer more than the NES, never less.
Modern Awards sit on top of the NES. There are well over a hundred awards, each covering an industry or occupation, and they set minimum pay rates, penalty rates for weekends and public holidays, overtime, allowances and casual loadings. If your employee is covered by an award, and most are unless they are high earners on a registered agreement, you must apply it correctly. This is where overseas employers most often slip: a flat salary that looks generous can still breach an award if it does not cover the penalty rates and allowances the award requires.
You also choose an employment type. Full-time and part-time employees are ongoing and accrue leave. Casual employees are engaged without a firm commitment to ongoing work, receive a casual loading instead of paid leave, and, under recent reforms, have a defined pathway to convert to permanent employment. Misclassifying a permanent role as casual is a growing area of risk.
Payroll and tax: PAYG, STP, superannuation and payroll tax
Running Australian payroll means meeting four obligations at once.
PAYG withholding. You withhold income tax from each employee's pay and remit it to the Australian Taxation Office. Single Touch Payroll (STP) Phase 2 then requires you to report payroll information to the ATO every pay run, digitally, including detailed income and tax components. There is no annual lodgement; reporting is continuous.
Superannuation. You must pay the Superannuation Guarantee into each employee's chosen fund. The rate is now 12% of ordinary time earnings, having stepped up over recent years. From 1 July 2026, the Payday Super reforms require super to be paid at the same time as wages rather than quarterly, which tightens cash flow timing and makes accurate, on-time payment more important than ever.
Payroll tax. This is a state and territory tax on wages, separate from income tax, and it catches many growing employers by surprise. Each state sets its own threshold and rate, generally between roughly 4.75% and 6.85%, and once your Australian wage bill crosses the threshold you must register and pay in each relevant state. Because thresholds and rates differ by state, multi-state employers face a patchwork rather than a single national rule.
Leave, benefits and insurance obligations
Beyond pay, Australian employees are entitled to a baseline of leave and benefits you cannot contract out of. Full-time employees accrue four weeks of paid annual leave a year, plus ten days of paid personal and carer's leave, and are entitled to paid family and domestic violence leave, compassionate leave and public holidays. Long service leave is an additional, state-based entitlement that accrues over years of service, with the rules differing between states and territories. Parental leave entitlements sit in the NES, and many employees also access the government's paid parental leave scheme.
Workers' compensation insurance is mandatory and is run at the state and territory level, so you register and pay premiums with the relevant scheme wherever your employees are based. For an overseas employer, these state-by-state differences in long service leave, payroll tax and workers' compensation are one of the most underestimated parts of hiring here, because there is no single national system to plug into. An Employer of Record absorbs all of it: the entitlements, the state registrations and the insurance sit with the EOR's local entity rather than with you.
The compliance risks that catch employers out
Three risks account for most of the trouble overseas employers run into.
Award underpayment is the big one. Because awards are detailed and change with annual wage reviews, it is easy to underpay penalty rates or allowances without intending to. Since 1 January 2025, intentional underpayment of wages is a criminal offence under federal law, with significant penalties for companies and individuals. Even unintentional underpayment leads to back pay, interest and Fair Work action.
Sham contracting and misclassification is the second. Engaging someone as an independent contractor when the working relationship is really employment exposes you to claims for unpaid leave, superannuation and penalties. Australian law looks at the substance of the relationship, not the label on the contract, and recent reforms have sharpened the test.
Superannuation non-payment is the third. Late or missing super attracts the superannuation guarantee charge and is closely monitored, and the move to Payday Super will make timing errors more visible.
How Deel handles hiring in Australia
This is where an Employer of Record earns its place. Deel operates a wholly owned Australian entity, rather than relying on a local partner, which gives it direct control over compliance with the Fair Work Act, the Work Health and Safety Act and the rest of the local framework.
In practice, that means Deel provides locally compliant employment contracts built for Australian law, onboards your hire in days, and runs Australian payroll end to end: PAYG withholding, Single Touch Payroll Phase 2 reporting, superannuation at the correct rate, and leave accruals. Its in-country compliance teams monitor Australian regulatory changes, so award updates, the shift to Payday Super and similar moves are handled for you rather than left to catch you out. Deel also supports Australian contractor payments where the relationship genuinely is contracting, and can convert a contractor to an employee when the engagement changes, which directly addresses the misclassification risk above.
The result is that you can employ someone in Australia, compliantly, without registering a company, learning the award system, or building local payroll, while keeping full day to day control of your employee.
Ready to hire in Australia? Hire your first Australian employee through Deel's Australian Employer of Record.
Entity or EOR: which is right for you
The honest answer depends on scale and commitment. If you plan to employ a large Australian team for the long term, your own entity will usually be more cost effective once you are past the setup, and it gives you full control. If you are hiring your first few people in Australia, testing the market, or want to move quickly without committing to local incorporation, an Employer of Record is almost always the faster, lower risk route, and you can always set up an entity later and transition staff across.
Many companies use both over time: an EOR like Deel to enter the market and hire the first employees, then a local entity once the Australian team is large enough to justify it.
Deel is one of several Employer of Record providers operating in Australia. If you want to weigh the options side by side, see our independent guide to the best payroll software for global teams.
The bottom line
Hiring in Australia is very doable, but it is unforgiving of shortcuts. Get the employment type, the award, payroll reporting and superannuation right from the first payslip and you avoid the back pay, penalties and now criminal exposure that come with getting them wrong. If you would rather not build all of that yourself, an Employer of Record lets you hire compliant Australian employees without a local entity, and handle the local complexity for you.
