HR for Australian startups: the essentials
Reviewed by Mellow Editorial Team, HR & payroll content team
Building compliant HR from scratch is one of the most common blind spots for Australian startup founders. Get the foundations right early and you avoid the costly fixes later.
Employment contracts and classification
Every person doing work for your business should have a written agreement before they start. For employees, the contract must not undercut the National Employment Standards (NES) or any applicable Modern Award — the contract can be more generous, but never less.
The classification question matters more than founders often realise. Workers are either employees or independent contractors, and the distinction is not yours to decide unilaterally. Courts and the Fair Work Commission look at the totality of the relationship: who controls how the work is done, whether the worker can subcontract, whether they bear financial risk, and whether they operate their own business independently. Misclassifying an employee as a contractor to avoid super and leave obligations is a serious compliance risk, and the ATO and Fair Work have both stepped up enforcement in recent years.
If someone is an employee, they have full NES entitlements from day one. If they are a genuine contractor, the arrangement should reflect that in practice, not just on paper.
Awards, pay rates and the NES
Modern Awards set minimum pay rates and conditions for most occupations in Australia. There are over 100 of them. A startup hiring a software developer, a customer service rep and an office manager may sit under different Awards for each role — or possibly none, if those employees are covered by an enterprise agreement or earn well above the high-income threshold.
The safest starting point is to identify the correct Award for each role and confirm the minimum rate for the relevant classification and experience level. Fair Work's Pay and Conditions Tool (PACT) is a practical resource for this.
The NES guarantees every national system employee at least four weeks of paid annual leave per year (pro-rata for part-time), plus personal/carer's leave, compassionate leave, parental leave, and the right to request flexible working arrangements. Redundancy pay scales with years of service under the NES, starting from one year of continuous employment. You cannot contract out of any of these.
Payroll and super obligations
Once someone is on payroll, three obligations run with every pay cycle.
PAYG withholding. Income tax is progressive and you must withhold the correct amount from each payment using the ATO's tax tables. The withheld amount is reported and remitted to the ATO on your activity statement cycle.
Medicare levy. A 2% Medicare levy applies to most employees and is factored into the standard withholding tables — you do not calculate it separately.
HECS/HELP repayments. If an employee has a study debt, they should notify you via their Tax File Number declaration or through myGov. Repayments are deducted through payroll on a banded scale based on annual income and remitted to the ATO.
Superannuation. The Superannuation Guarantee sits at 12% of ordinary time earnings from 2026. You must pay contributions to a complying fund — either the employee's chosen fund or your default fund — by the quarterly due dates. Late or missing super can trigger the Superannuation Guarantee Charge, which is not tax-deductible and includes an interest component.
Single Touch Payroll (STP). Every pay event must be reported to the ATO via STP on or before the payment date. At the end of the financial year, you finalise each employee's record in your STP-enabled software by 14 July. This replaces the old Payment Summary process — employees access their income statement directly through myGov.
If you are running payroll across Australia and other markets, how Mellow runs payroll across six countries on one platform may be relevant context.
Policies, records and documentation
You are not legally required to have an employee handbook on day one, but you do need certain things documented from the start: a privacy policy that covers employee data, a workplace health and safety policy appropriate to your industry, and a complaints or grievance procedure. As you grow past 15 employees, additional obligations under the Fair Work Act and anti-discrimination law become more pronounced.
Keep employment records for a minimum of seven years. This includes contracts, pay records, leave balances, super payments, performance notes and any disciplinary correspondence. Disputes about underpayment or unfair dismissal often come down to what was documented at the time.
Termination and offboarding
Termination is where under-resourced HR catches up with startups. Employees are entitled to notice periods set by the NES (or their contract if more generous), their full accrued annual leave balance paid out, and any applicable redundancy entitlements. Dismissal must not be harsh, unjust or unreasonable — employees with at least six months of continuous service (or twelve months for small businesses with fewer than 15 employees) can lodge an unfair dismissal claim.
Follow a procedurally fair process for performance-based dismissals: put concerns in writing, give the employee an opportunity to respond, and allow a support person at formal meetings. Skipping these steps does not necessarily make a dismissal unlawful, but it significantly increases the risk of an adverse outcome at the Fair Work Commission.
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