HR and payroll for legal firms in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Running HR and payroll for a legal firm in Australia follows the same statutory framework as any other employer, but the sector adds layers of complexity: award coverage that is easy to misread, trust account obligations that intersect with payroll, and a workforce that often mixes employed solicitors with contracted barristers or casual clerks.
Award and employment classification
Most support staff in legal firms — legal secretaries, receptionists, file clerks — are covered by the Legal Services Award 2020. That award sets minimum rates across multiple classification levels, penalty rates for overtime and weekend work, and allowances for specific duties. Employed solicitors and paralegals sit outside that award in most circumstances but are still covered by the National Employment Standards (NES), which includes four weeks' annual leave and a redundancy-pay scale tied to years of service.
The classification you choose matters. Placing someone at the wrong level in the Legal Services Award — a common error when a legal secretary takes on paralegal duties over time — creates back-pay exposure. Review classifications whenever a role changes materially, not just at performance review time.
Contractors require separate consideration. Barristers briefed through your firm are typically engaged as independent contractors, but administrative or paralegal work done by someone who works exclusively for your firm, uses your equipment, and follows your direction looks a great deal like employment under the multi-factor test applied by the Fair Work Commission. Misclassification has become a sharper risk since the 2024 changes to the sham contracting provisions.
PAYG withholding and payroll obligations
Every pay run requires you to calculate and withhold income tax under PAYG (Pay As You Go). Tax is progressive, so the rate withheld depends on each employee's annualised earnings bracket and the tax-free threshold declaration on their Tax File Number declaration form. You also withhold the Medicare levy at 2% of taxable income, subject to low-income thresholds and exemptions.
Where an employee holds a HECS/HELP debt, you are required to withhold an additional amount on a banded scale. The employee does not need to tell you explicitly — the ATO's online tax withheld calculator or your payroll software will prompt for the HELP repayment once you enter the relevant salary. Missing these withholdings creates a gap that the employee has to make up at tax time, which is a quick way to damage trust in your payroll function.
All of this is reported to the ATO via Single Touch Payroll (STP) at each pay event. Payroll finalisation must be completed by 14 July after the end of each financial year — giving employees accurate year-to-date figures for their income tax return.
Superannuation
From 2026, the Superannuation Guarantee sits at 12% of ordinary time earnings, paid to a complying fund. For legal firms this is straightforward for salaried staff, but it catches people out in two areas.
First, partner distributions are not salary and generally do not attract super obligations, but a partner who also draws a salary for work performed under an employment arrangement does. Second, certain high-earning solicitors may have individual super fund choices or salary-sacrifice arrangements that reduce their employer contribution obligations — confirm this with your accountant rather than assuming the standard 12% always applies.
Super must be paid to the employee's chosen fund by the quarterly due dates. Late payments attract the Superannuation Guarantee Charge, which is not tax-deductible and includes penalties and interest.
Trust account payroll considerations
Legal firms holding money in statutory trust accounts face an additional layer of governance that occasionally intersects with payroll. Trust account funds cannot be used to pay wages or super — even temporarily. Accidental or deliberate trust account shortfalls arising from payroll errors attract regulatory scrutiny from the relevant state Law Society or Legal Services Commissioner, not just the ATO. Keeping payroll accounts entirely separate from trust accounts, and reconciling them independently, is not optional best practice: it is a regulatory requirement.
If you run payroll in-house, confirm that your bank setup physically prevents any draw from trust for wages purposes. This is a surprisingly common finding in trust account audits.
Leave management and record-keeping
The NES entitles employees to four weeks' annual leave per year (five weeks for some shift workers). Legal firms with variable billing cycles sometimes allow leave to accumulate beyond reasonable levels because senior staff feel they cannot step away. Excessive leave balances are a liability on your balance sheet and, if left unmanaged, attract increased provisions as salaries rise.
The Fair Work Act requires you to keep time and wages records for seven years. For legal firms this overlaps with general document retention obligations, but payroll records specifically must capture hours worked, pay rates, leave balances, and super contributions. These are the first documents a Fair Work inspector will request, and they are also useful evidence in any unfair dismissal claim.
If your firm operates across multiple states — common for mid-size practices — be alert to state-based long service leave laws, which differ in accrual rates and portability rules. There is no single federal long service leave standard, so each jurisdiction needs to be mapped individually.
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