HR for a business with 1–10 employees in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Running HR for a micro-business in Australia doesn't require a dedicated HR team, but it does require you to get the basics right — because the legal obligations are the same whether you have one employee or one hundred.
Know your obligations from day one
The Fair Work Act and the National Employment Standards (NES) apply to almost every private-sector employer in Australia. The NES sets minimum entitlements that you cannot contract out of, regardless of what an employment agreement says.
Key NES entitlements to know:
- Annual leave: 4 weeks per year for full-time employees, accruing progressively
- Personal/carer's leave: 10 days per year for full-time employees
- Parental leave: up to 12 months unpaid, with the right to request a further 12 months
- Redundancy pay: scales with years of service (note: small business employers with fewer than 15 employees are exempt from redundancy pay in most cases)
- Notice of termination: minimum periods based on length of service
Most employees are also covered by a Modern Award, which sets minimum pay rates, penalty rates, allowances and rostering rules for their industry or occupation. Before you hire, identify which award covers the role. The Fair Work Commission's Pay and Conditions Tool (PACT) is the practical place to start.
Set up payroll correctly before anyone starts
Payroll compliance is where small employers most commonly come unstuck. The following obligations apply from the first pay run.
Tax file number declarations. Collect a TFN declaration from each new employee before or on their first day. Without a TFN, you must withhold tax at the highest marginal rate.
PAYG withholding. Income tax is withheld from wages under the Pay As You Go system and remitted to the ATO. The amount depends on each employee's earnings, tax-free threshold election and any other circumstances they've declared.
Superannuation Guarantee. From 1 July 2026, the Super Guarantee rate is 12% of ordinary time earnings. You must pay contributions to a complying superannuation fund — or the employee's chosen fund — by the quarterly due dates. Paying late means you owe the Super Guarantee Charge, which includes an interest component and is not tax-deductible.
Medicare levy. The Medicare levy of 2% is factored into ATO withholding tax tables automatically. You don't calculate it separately.
HECS/HELP repayments. If an employee has a study debt, they're required to disclose it on their tax file number declaration. You then withhold an additional amount based on a banded scale applied to their income. The ATO's withholding tables include this component.
Single Touch Payroll (STP). Every pay event must be reported to the ATO via STP-enabled payroll software. This is not optional, even for employers with one employee. At the end of each financial year, you finalise employee income statements through STP by 14 July — this replaces the old payment summary process.
Write a simple employment contract
A written employment contract isn't legally required in every case, but it is strongly advisable. For a small team, a straightforward offer letter that covers the following is usually sufficient:
- Role title, duties and reporting line
- Employment type (full-time, part-time, casual)
- Remuneration and any allowances
- Hours of work and location
- Applicable award or enterprise agreement (if any)
- Notice periods for resignation and termination
- Confidentiality expectations
The contract cannot undercut NES minimums or award conditions. Where the contract says less than the award, the award applies.
Keep records — it matters more than you think
Fair Work inspectors can audit employers of any size. The Fair Work Regulations specify what records you must keep and for how long — generally seven years for pay records and time-and-wages records. At minimum, maintain:
- Hours worked for each pay period
- Gross and net pay, and all deductions
- Leave accruals and balances
- Superannuation contributions made
A basic STP-compliant payroll platform will generate most of these records automatically. If you're running payroll manually on a spreadsheet, you're creating risk.
Handle termination and offboarding properly
Ending employment — even in a small team — involves several steps beyond handing over a final payslip.
Give the correct notice period (or pay in lieu), calculated correctly under the award or contract, whichever is greater. Pay out all accrued but untaken annual leave in the final pay. If the employee is resigning, you still owe accrued leave; it is not forfeited.
For employees with more than 12 months' service, long service leave entitlements may have accrued — the rules vary by state and territory, so check the legislation in your jurisdiction.
If you're making a position redundant and you have 15 or more employees at the time of dismissal, redundancy pay applies under the NES scale. Document the business reason for the redundancy and consult the employee before making the decision final. Inadequate process, even when the business reason is genuine, can lead to an unfair dismissal claim.
For businesses managing staff across different locations or employment arrangements, how Mellow runs payroll across six countries on one platform covers how multi-jurisdiction payroll can be consolidated without duplicating effort.
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