The employee lifecycle in Australia, end to end
Reviewed by Mellow Editorial Team, HR & payroll content team
Every employment relationship in Australia follows a predictable arc — from pre-hire compliance through to termination or resignation — and each stage carries specific legal obligations for employers. Getting the sequence right protects both the business and the employee.
Hiring and onboarding
Before a new employee starts, you need a written employment contract. It does not need to be complex, but it must not undercut the National Employment Standards (NES) or any applicable Modern Award or enterprise agreement. The NES is the floor: it sets entitlements including four weeks of paid annual leave per year, personal leave, parental leave, and a redundancy pay scale based on years of service. Your contract can be more generous — it cannot be less.
At the point of hiring, collect a Tax File Number (TFN) declaration from the employee. Without a TFN, you must withhold tax at the highest marginal rate. You also need to confirm their superannuation fund. Since 1 November 2021, employees who do not nominate a fund must default to their stapled super fund (retrieved from the ATO) rather than your default fund. If no stapled fund exists, use your nominated default.
Confirm whether the employee has a HECS/HELP debt. They declare this on the TFN declaration or a separate withholding declaration. If they do, you add a HELP repayment amount on top of their regular PAYG withholding — calculated against a banded scale tied to their income.
Pay, tax and superannuation obligations
Once someone is on your books, your core ongoing obligation is accurate, timely pay with correct deductions and entitlements.
PAYG withholding. Income tax in Australia is progressive. You withhold the right amount at each pay run using the ATO's tax withholding tables, which account for the employee's income level, tax offsets they have claimed, and their Medicare levy obligation. The Medicare levy adds 2% to most employees' effective tax rate and is built into the ATO withholding tables, so you do not calculate it separately.
Superannuation. From 1 July 2026, the Superannuation Guarantee rate is 12% of ordinary time earnings, paid to a complying superannuation fund. "Ordinary time earnings" generally means base pay and most regular allowances — it excludes overtime. Super must be paid at least quarterly, though many payroll systems pay it more frequently. Late or missing super can trigger ATO penalties plus the Superannuation Guarantee Charge, which is not tax-deductible.
Single Touch Payroll (STP). Every pay event must be reported to the ATO in real time through STP. This covers gross wages, PAYG withholding and super liability. At the end of the financial year — by 14 July — you finalise each employee's STP data. This replaces the old payment summary and allows employees to pre-fill their tax return.
Modern Awards and pay rates. Most employees are covered by a Modern Award that sets minimum pay rates, penalty rates, and allowances for their industry or occupation. Award rates are reviewed annually by the Fair Work Commission. Check the relevant Award at the start of employment and each time a rate review is handed down.
Leave management
The NES entitlements accumulate as work is performed. Annual leave accrues at four weeks per year for full-time employees, pro-rated for part-time. Personal/carer's leave accrues at ten days per year. Long service leave is governed by state or territory legislation and typically vests after seven to ten years of continuous service, depending on jurisdiction.
Unused annual leave and long service leave generally must be paid out on termination. Accrued personal leave is not paid out. Your payroll system should track leave balances continuously — discrepancies discovered at termination are costly and create Fair Work disputes.
Performance management and termination
If performance or conduct issues arise, document everything. Australia's unfair dismissal framework under the Fair Work Act requires that terminations for performance or conduct be substantively and procedurally fair — a genuine reason, and a proper process that gives the employee an opportunity to respond.
Redundancy carries its own obligations. The NES sets a statutory redundancy pay scale starting at four weeks of pay after one year of continuous service and scaling up with tenure. You must also provide the minimum notice period (set by the NES or the contract, whichever is greater) or pay in lieu of notice.
On the final pay, include all outstanding wages, accrued annual leave, any accrued long service leave (depending on the jurisdiction and reason for separation), and any redundancy or notice entitlements. The final STP report flags the employee's income type and cessation reason, so the ATO knows the employment has ended.
Record-keeping and ongoing compliance
Employers must keep accurate employment records for seven years. This includes time and wages records, leave records, superannuation contribution records, and copies of any individual flexibility arrangements. Fair Work inspectors can request these records without much notice. Gaps in record-keeping shift the burden of proof to the employer in any wage dispute.
Pay slips must be issued within one business day of each pay event and must include specific information: employer and employee details, the pay period, gross and net pay, any loadings or allowances, PAYG withholding, and super contributions made or payable.
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