Managing a small team in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Managing a small team in Australia means navigating a specific set of legal obligations — superannuation, leave entitlements, tax withholding and payroll reporting — that apply from the moment you hire your first employee, regardless of your company size.
Know your obligations before you hire
Employment in Australia is governed by a combination of federal law, awards and any enterprise agreements. Most employees are covered by the Fair Work Act and a relevant Modern Award, which sets minimum pay rates, penalty rates, overtime and allowances for their industry or occupation.
Before you bring someone on, confirm:
- Which Modern Award (if any) covers the role
- Whether you need to register for PAYG withholding with the ATO
- That you have a complying superannuation fund ready to receive contributions
- Whether the role is genuinely employment or contractor engagement — misclassification carries serious penalties
If you are unsure of the applicable Award, Fair Work Australia's Pay and Conditions Tool is a reliable starting point.
Payroll: PAYG, super and STP
Once you are paying wages, three obligations run simultaneously.
PAYG withholding. You must withhold income tax from each payment and remit it to the ATO. Tax is progressive, so the amount varies with the employee's earnings. You calculate it using the ATO's tax tables or your payroll software, taking into account any tax offsets the employee has declared on their Tax File Number declaration.
Medicare levy. Most employees pay a 2% Medicare levy, which is factored into the withholding calculation automatically.
HECS/HELP repayments. If an employee has a study debt, they will indicate this on their TFN declaration. You then withhold an additional amount on a banded scale on top of ordinary tax — the ATO's withholding tables include these bands. You do not need to assess the debt yourself; you simply apply the correct band for their income.
Superannuation Guarantee. From 2026, you must pay 12% of each employee's ordinary time earnings into a complying super fund. Ordinary time earnings generally means their regular pay, not overtime. Super is due at least quarterly, though many payroll systems remit it more frequently. Missing the deadline triggers the Superannuation Guarantee Charge, which is not tax-deductible and includes interest and an administration fee — so timeliness matters.
Single Touch Payroll. Every time you run a pay event, you must report it to the ATO via STP. Your payroll software handles the transmission, but you are responsible for accuracy. At the end of the financial year, you finalise each employee's income statement through STP by 14 July, replacing the old payment summary process. Employees then access their income statement via myGov.
Leave entitlements under the NES
The National Employment Standards set a floor that no Award or contract can go below. For a small team, the entitlements you will deal with most often are:
- Annual leave: full-time employees accrue 4 weeks per year; part-time employees accrue on a pro-rata basis. Leave accrues progressively and is paid out at termination.
- Personal/carer's leave: 10 days per year for full-time employees, pro-rata for part-time.
- Parental leave: up to 12 months' unpaid leave, with the right to request a further 12 months.
- Redundancy pay: scales by years of service under the NES. Employees with less than one year's service are not entitled to redundancy pay; beyond that, the entitlement steps up incrementally.
Keep accurate leave records. Disputes about leave balances are common in small teams where processes are informal, and the obligation to prove what was accrued and taken sits with the employer.
Keeping records correctly
Under the Fair Work Regulations, you must retain time and wages records for seven years. At minimum these should capture:
- Pay rate and gross and net amounts paid each period
- Hours worked (particularly important for Award-covered employees paid by the hour)
- Leave balances and leave taken
- Super contributions made and the fund details
You must also give each employee a payslip within one business day of each payment. Payslips must show the pay period, gross and net amounts, any loadings or allowances, super contributions and the employer's ABN.
Managing terminations
When an employee leaves — whether they resign, are made redundant or are dismissed — you must pay out all outstanding entitlements in their final pay. This includes accrued but untaken annual leave and, if they are Award-covered and have met the minimum employment period, any redundancy entitlement.
Check the notice period in the relevant Award or contract. Notice periods under Modern Awards are set by length of service, and you can either require the employee to work notice or pay it out in lieu.
Finalise the employee's STP income statement promptly after their final pay so they can lodge their tax return without delay.
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