Hire and pay employees in Australia

Employer of Record (EOR) vs. entity

If you don't already have an Australian entity, you need to decide whether to hire Australian employees through an EOR or set up your own entity. 

• Legal entity in Australia. Setting up a legal entity from scratch usually requires registration with local authorities, opening a local bank account, and consulting with local experts to ensure compliance with tax and labour laws.
• Australian EOR. An EOR is a third-party service that operates on the employer’s behalf, handling all the legal requirements for hiring full-time Australian employees, like payroll, contracts, and benefits.  

Deciding between an EOR and your own entity depends on your company’s resources, size, and plans to scale. Here are the pros and cons of each:

Once you’ve picked an EOR, you can begin the onboarding process by collecting your employee’s information (including name, date of birth, date of hire, contact and bank information) and Tax File Number (TFN).

Understand the steps to hiring through an EOR in Australia—and learn how Rippling can help you hire and onboard Australian employees in 90 seconds—in our guide.

Classifying Australian workers: employees vs. contractors

Another crucial aspect in the early stages of hiring is understanding how to classify workers. As in many countries, Australia categorises employees and contractors differently—and classifying them correctly can be the difference between smoothly running your global team and racking up huge fines and penalties.

Here’s an overview of some of the ways Australian law distinguishes between employees and contractors:

Work permits for Australian employees

Before you can proceed with the rest of the hiring process, you need to be sure your prospective employee is allowed to work in Australia. Foreign nationals who aren’t Australian citizens and don’t have permanent residency in Australia need to obtain a work permit. After the visa expires, the holder either reapplies for new authorisation or returns to their home country.

Visas for skilled foreign professionals who want to legally work in Australia include the following:

• Temporary Skill Shortage Visa (Subclass 482): This visa allows employers to sponsor a skilled worker when they can't find an appropriately skilled Australian worker. It has three streams: Short-Term, Medium-Term, and Labour Agreement.
• Skilled Independent Visa (Subclass 189): For skilled workers who aren't sponsored by an employer, a state or territory, or a family member. Applicants must be under 45 years of age and able to meet the points test.
• Employer Nomination Scheme (Subclass 186): This permanent visa requires a job offer from an Australian employer and has three streams: the Direct Entry, the Labour Agreement, and the Temporary Residence Transition stream.
• Regional Sponsored Migration Scheme (Subclass 187): Similar to Subclass 186 but for employment in regional Australia. It also includes three streams.
• Global Talent Visa (Subclass 858): Targets highly skilled professionals in certain sectors, offering a streamlined pathway to permanent residency for individuals who are recognised as global leaders or emerging leaders in their field.
  

For the full list, and details on how to apply, see our guide to work permits in Australia.

New hire onboarding checklist

Once you’ve verified that your employee is legally allowed to work in Australia, you can continue onboarding them. This is your chance to lay the groundwork for a fulfilling employment relationship early on. 

Hint: a successful onboarding experience goes well beyond the employee’s first day, so make sure you’re thinking about more than just payroll and benefits. Here are some things to keep in mind for each stage of onboarding: 

Before their first day

• Complete a background check 
• Send an offer letter (more on that in the next section)
• Prepare for tax withholdings 
• Enrol them in benefits (if applicable)
• Add them to the payroll
• Order and configure their devices
• Schedule their orientation

On day 1

• Make sure their workspace is ready
• Send a welcome email
• Give them an agenda 
• Schedule a meeting with their onboarding mentor 
• Give them an office tour

During their first 90 days

• Schedule training
• Assign work and help them set goals 
• Schedule regular check-ins
• Seek their feedback on how to improve the experience

For the full list of onboarding must-haves, see our guide on new hire onboarding in Australia. 

What to include in an offer letter in Australia

As mentioned above, offer letters are an integral part of hiring (and can leave a lasting impression). Here’s a basic checklist of what to include in an offer letter—also known as an employment agreement:

• Position, job description, and job duties
• Start date, working days and working hours
• Probationary period
• Compensation and benefits
• Modern Award Coverage
• Annual leave policy
• Payment frequency
• Termination policy
• Confidentiality and non-disclosure agreements
• Contact information
• Non-compete and non-solicit agreements

Learn more about sending a legally compliant offer letter in Australia in our full guide.

NDAs and confidentiality agreements in Australia

Non-disclosure agreements (NDAs) are usually sent as part of the employment agreement. They must include the full names of the consenting parties, a thorough definition of the information that can’t be disclosed, situations where the NDA is nullified, and provisions for maintaining confidentiality after an employee is terminated. 

In Australia, an NDA can protect the following information: 

• Trade secrets
• Proprietary technology
• Business plans, strategies, and tactics
• Personal information of clients or co-workers
• Passwords
• Any information not intended for public consumption

Read about the different types of NDAs, and their essential components, in our guide to NDAs in Australia.

Running background checks on Australian employees

While you’re probably eager to fill your position as soon as possible, be sure not to skip the background check portion of the onboarding process.  

In Australia, employers are allowed to request information about job applicants that is relevant to the position, including education verification, past employment history, and social media checks—as long as the applicant consents to it. 

Here are the most common types, and a few other background checks you can consider:

Learn about the different types of background screenings you can run—and the checks that are illegal—in our guide to background checks in Australia.

Paying employees in Australia

Once you’ve decided whether to use an EOR or your own entity, you need to pick a payroll solution. In Australia, it's important to use payroll software that is authorised by the ATO to transmit Single-Touch Payroll (STP) data. Rippling is a Digital Service Provider (DSP) certified by the ATO. See the list of certified DSPs here.

You can read more about them in our guide.

Once you’ve picked a payroll solution, take the following steps: 

• Ensure your employees are correctly classified.
• Collect employee information, including name, date of birth, date of hire, contact and bank information, and Tax File Number.
• Input the payment amount in AUD—or get written permission from the employee if you plan to pay them in a different currency.
• Make sure you’re adhering to statutory requirements when calculating payroll deductions.
• Run payroll. 

Since you’re responsible for calculating payroll deductions, you should keep the following costs in mind:

Read our step-by-step guide to running payroll for employees in Australia.

Mandatory employee benefits in Australia

Australia has mandatory employee benefits as well as supplementary ones. It's important to understand what’s required on your part before finalising the employment agreement. Mandatory benefits include:

• Pension. Australia's pension program, known as superannuation, requires employers to contribute a minimum 11% (as of July 2023) of each worker's salary to their retirement accounts.  
• Annual leave and public holidays. Full-time employees get a minimum of 20 days (four weeks) of annual leave and public holidays, depending on their state or territory. This benefit continues to accrue each year, has no capped limits, and is payable to the employee upon termination.
• Leave loading. Employees covered by a Modern Award in Australia are entitled to an additional bonus payment of 17.5% of their base pay when using their 20 days of annual leave.
• Workers compensation. Australian employers must buy insurance to cover employees who get sick or injured on the job. 
• Sick and compassionate leave. Full-time employees are allowed 10 days of 'personal leave' per year, which can be used if they get ill or need to care for a family member who gets ill. They can also get up to two days of paid 'compassionate leave', as needed, for example, if a family member dies or is terminally ill. 
• Parental leave. Employees who are the primary carers of newborn or adopted children may be entitled to up to 20 weeks of parental leave, paid at the national minimum wage. This is a government-managed entitlement; the employer administers the funds. Employees are also entitled to 12 months of parental leave without pay, with a right to request an additional 12 months of unpaid leave.
• Long service leave. Employees who stay with the same company for seven to 10 years earn two to three months of paid leave, depending on the jurisdiction.

Read our full guide on meeting statutory requirements—and how to go above and beyond when offering benefits to your Australian employees.

Managing remote employees’ computers and apps

You need to ensure your Australian employees are set up with all the apps, tools, and integrations your company uses—and that you can manage them. However, remote work has created new logistical problems around device management, from shipping devices to configuring and updating them from afar.

With Rippling:

• You can quickly set up and secure employees’ accounts, ensuring all your employees have the access and permissions they need. 
• You have a single place to set up, manage, and disable all employee apps, such as Google Workspace and Slack.

Protecting company IP in Australia

Giving new employees access to apps and sensitive company information can put you at risk—if you don’t take the proper precautions. To protect your company’s original ideas, make sure to clarify IP protections in the employee agreement. This can include who owns the IP created by the employee, who has the right to use it for commercial purposes, confidentiality agreements for trade secrets, and more. 

IP Australia, a government agency, administers rights and legislation for the following:  

• Trademarks: used to protect and distinguish a company’s brand. 
• Patent protection: can protect third parties from profiting off an invention.  
• Design rights: used to secure industrial design rights to protect the appearance of commercial products. 

Read more about intellectual property protections in our beginner’s guide to IP ownership and rights in Australia.

Complying with Australian labour laws

One of the most important moving parts when hiring Australian employees is ensuring you’re in compliance with Australian labour laws. Failure to do so can result in hundreds of thousands of dollars in fines and penalties. 

Read more about the most important regulations to keep in mind when hiring in Australia, including:

• Australian employees are offered 11 minimum benefits under the NES, including maximum weekly hours, public holidays, and different types of paid leave entitlements. 
• Modern Awards cover many employees in Australia, providing legal documents that outline minimum entitlements beyond the NES and are categorised by industry and occupation; Enterprise Bargaining Agreements also cover many employees.
• At-will employment isn’t recognised, meaning you can only terminate an employee without notice in cases of 'serious misconduct.' More on that in the next section.
• The onus is on employers to respond proactively to sexual harassment through mediation, conciliation, arbitration, and other means of dispute resolution.

Terminating employees in Australia

Employees in Australia can only be terminated involuntarily for unsatisfactory performance, misconduct, or because their job no longer needs to be performed. However, employers must establish terms of dismissal in the employment contract and spell out statutory requirements for notice periods and acceptable reasons for terminating employees without notice.

Full-time and Part-Time employees are entitled to a notice period depending on their length of service, as detailed in the table below.

Employees over the age of 45 may also be entitled to 1 additional week's notice, dependent on the length of service.

Note: Non-compliance with termination requirements can be costly. Australian courts can impose penalties of up to AUD 82,500 for companies. Learn more about handling Australian termination requirements in our full guide to terminations in Australia.

Disclaimer: Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.