HR and payroll for startups in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Running HR and payroll for an Australian startup means getting the legal foundations right from your first hire — PAYG withholding, superannuation, Single Touch Payroll reporting, and the National Employment Standards apply from day one, regardless of your headcount.
Get the basics right before you hire
Before you pay anyone, you need an Australian Business Number and need to register for PAYG withholding with the ATO. Without this, you cannot legally withhold income tax from employee wages.
Once registered, every pay run requires you to withhold the correct amount of income tax based on each employee's tax file number declaration and any HECS/HELP repayment obligations. Tax is withheld on a progressive scale — employees with study debts have an additional repayment amount withheld on top of income tax, calculated on a banded scale tied to their income.
The Medicare levy adds 2% to most employees' tax liability, and this is factored into the withholding rate tables the ATO provides.
Get this setup done cleanly before your first pay event. Fixing incorrect withholding after the fact creates administrative headaches with the ATO and erodes trust with employees.
Superannuation: non-negotiable from the first pay run
The Superannuation Guarantee is 12% of ordinary time earnings, payable to a complying superannuation fund. This rate applies from 2026, and it applies to every eligible employee — there is no minimum earnings threshold to worry about for most engagements.
Startups sometimes treat super as something to "sort out later." That is a mistake. The ATO charges the Superannuation Guarantee Charge — a penalty regime — when super is paid late or not at all, and the charge is not tax-deductible. Super must be paid at least quarterly, though paying each pay cycle is cleaner and easier to reconcile.
Ask each new employee which fund they want contributions paid into. If they do not nominate a fund, you must pay into their stapled fund (the fund already linked to them by the ATO) or a default fund if no stapled fund exists. The ATO's stapled fund lookup tool handles this.
Single Touch Payroll reporting
Every time you run payroll, you must report wages, tax withheld and superannuation information to the ATO via Single Touch Payroll (STP). This happens at each pay event — not monthly, not quarterly. Your payroll software sends the data directly.
At the end of each financial year, you finalise the STP submission by 14 July. This replaces the old payment summary process and is how employees access their income statement in myGov for tax return purposes.
STP-compliant payroll software is effectively mandatory. Running payroll in spreadsheets and manually submitting to the ATO is technically possible through STP-exempt micro-employer options, but it is operationally fragile and does not scale past a handful of employees. Choose software that handles STP Phase 2, which requires disaggregated reporting of income types.
Minimum entitlements under the National Employment Standards
The National Employment Standards (NES) are the floor below which no employment contract can go. For startups, the most relevant entitlements are:
Annual leave. Full-time and part-time employees accrue four weeks of paid annual leave per year. Casual employees do not accrue leave but are entitled to a casual loading (typically 25%) in lieu.
Redundancy pay. If you make a role redundant, the NES prescribes a scale of severance based on years of continuous service. Small business employers (fewer than 15 employees) are exempt from this scale, but most startups will pass that threshold as they grow. Plan for it.
Notice periods, personal leave, parental leave, and flexible working requests are also covered by the NES. These apply whether or not you have an enterprise agreement or a registered award.
Most startup employees will also be covered by a Modern Award — the award that applies depends on the industry and the role. Awards set minimum pay rates and conditions. Misclassifying a role as above-award or missing the correct award classification is one of the most common compliance failures in early-stage businesses.
Employment classification: employees versus contractors
Startups frequently engage contractors to keep payroll lean. The distinction matters enormously. The ATO and Fair Work apply a multi-factor test to determine whether a worker is genuinely a contractor or a disguised employee.
Getting this wrong exposes the business to back-payment of entitlements, superannuation obligations (the SG can apply to certain contractors), and PAYG withholding liability. Recent court decisions and legislative changes have tightened the definition of employment in Australia. If you are uncertain, get a classification review done before the engagement starts, not after a dispute arises.
For startups hiring across multiple countries, managing different classification rules simultaneously adds significant complexity — how Mellow runs payroll across six countries on one platform covers how that works in practice.
Keeping records
The Fair Work Act requires you to keep employee records for seven years. This includes pay records, leave records, hours worked, and superannuation contribution details. These must be available for inspection if requested. Modern payroll software maintains most of this automatically, but verify that your system captures all required fields from the start.
---
Run HR and payroll in Australia with Mellow
Mellow brings HR, payroll and 12 AI agents into one platform — built to handle Australia properly, with payroll included, from £4 per employee per month. The AI agents don't just answer questions; they generate contracts, run cost estimates and draft letters for you.
[Start a free trial →](/register)