Introduction
As a business owner, hiring your first employee is an exciting milestone. It can help you take on more work, increase revenue and grow your business.
However, becoming an employer also brings legal obligations. Before your first employee starts, it is important to ensure that you have appropriate legal foundations in place.
The following checklist outlines some key legal considerations when hiring your first employee. This article is a guide only and your obligations may vary depending on your circumstances.
Key article takeaways
- Hiring your first employee creates legal obligations that should be considered before the employee starts work.
- Employers should confirm whether the person is an employee or contractor and check whether a modern award applies.
- Employment terms must comply with the National Employment Standards and any applicable award or registered agreement.
- A written employment agreement should set out key terms including role, pay, hours, leave, confidentiality, IP ownership and termination.
- Businesses should also consider Fair Work documents, superannuation, work health and safety, workplace policies, record keeping and workers compensation.
- LawBase’s fixed fee Employment Contracts Package can help small businesses put practical employment contracts in place before hiring.
Employment Arrangement
Before making an offer, determine whether the person you are engaging will be an employee or a contractor.
This distinction matters as each has different rights and obligations. Simply calling someone a “contractor” in an agreement does not necessarily determine their legal status.
You should consider the nature of the proposed relationship, including the level of control over how work is performed, the individual’s obligations and how the relationship will operate in practice.
Misclassifying the relationship can expose your business to claims for unpaid employee entitlements.
Check the Applicable Award
Many employees in Australia are covered by a modern award that sets out minimum employment conditions for their role and industry.
Before proceeding, determine whether an award applies and understand the minimum employment conditions and entitlements that apply.
Even where an employee is paid above award rates, the overall employment arrangement must comply with the minimum entitlements.
Meet Fair Work Requirements
In addition to awards, employees covered by the Fair Work Act 2009 (Cth) in Australia are covered by the National Employment Standards (NES).
The NES provides minimum entitlements relating to matters such as maximum weekly hours, annual leave, personal/carer’s leave, public holidays, parental leave and notice of termination.
Before your employee starts, ensure the proposed employment terms comply with the applicable minimum standards.
Written Employment Agreement
You should have a written employment agreement that clearly sets out the key terms of the employment arrangement.
Depending on the role, these terms may include:
- Position and responsibilities;
- Salary or hourly rate;
- Hours of work;
- Applicable award or classification;
- Leave and other entitlements;
- Probation arrangements;
- Confidentiality obligations;
- Intellectual property ownership;
- Notice and termination provisions; and
- Post-employment restrictions (if applicable).
A well drafted agreement can give both parties clarity about the rights and obligations from the outset. Provisions specifically relating to confidential information and intellectual property should be considered carefully to ensure your business is adequately protected.
When providing a written employment agreement, you must also provide new employees with relevant Fair Work documents, including the Fair Work Information Statement. Additional statements may be required for certain categories of employees including casuals.
Check Minimum Pay and Superannuation Obligations
Before the employee commences, confirm that their pay complies with any applicable minimum wage and award requirements.
You must also meet your superannuation obligations.
It is important that an employment agreement and actual payments are consistent with your legal obligations including applicable superannuation guarantee obligations.
Work Health and Safety
As an employer, you have legal obligations under applicable work health and safety legislation to provide and maintain a safe working environment. This includes considering risks associated with work being undertaken and taking reasonably practicable steps to eliminate or minimise those risks.
Depending on the role and workplace, this may include obligations relating to physical safety, workplace systems and psychosocial hazards.
Workplace Policies and Conduct
Employers should have policies and procedures in place that govern the workplace.
These policies and procedures can also cover legal obligations you have as an employer regarding discrimination, harassment, bullying and workplace conduct.
The appropriate policies will depend on the size and nature of your business and your legal obligations.
Record Keeping and Workers Compensation
As an employer, you have obligations to keep employment records including hours worked, pay and leave entitlements.
Businesses must also comply with applicable workers compensation requirements. These requirements vary between states and territories, so the relevant scheme should be confirmed before the employee commences work. You may wish to seek advice from an insurance broker in this regard.
Conclusion
Hiring your first employee creates a legal relationship that should be properly documented from the outset. Failing to do so can lead to underpayment claims, disputes over entitlements, penalties and other liabilities.
Getting the legal foundations right from the start can help protect both the business and the employment relationship as it develops.
LawBase can assist with this. LawBase specifically offers an employment contract legal package to assist business owners which can be found here.
Get Your Employment Contracts Sorted Before You Hire
Hiring your first employee is a big step. Before they start, make sure your employment contract, key protections and onboarding documents are in place.
LawBase’s fixed fee Employment Contracts Package helps SMEs prepare clear, practical employment contracts for permanent and casual employees, with the certainty of fixed pricing and legal support.
Additional resources
Frequently asked questions
Before hiring your first employee, you should consider whether the person will be an employee or contractor, check whether a modern award or registered agreement applies, confirm minimum pay and entitlements, prepare a written employment contract, set up payroll and superannuation, consider work health and safety obligations, prepare workplace policies and confirm workers compensation requirements.
It is important to put these foundations in place before the employee starts work, rather than trying to fix issues later.
LawBase can help small business owners prepare clear employment contracts before they begin hiring.
Yes, it is strongly recommended that your first employee receives a written employment contract before they start work.
An employment contract helps clarify the employee’s role, responsibilities, pay, hours, leave, confidentiality obligations, intellectual property ownership, notice periods and termination rights.
Having the agreement in writing gives both the employer and employee a clear reference point and can reduce the risk of misunderstandings or disputes.
Whether someone is an employee or contractor depends on the true nature of the working relationship, not just the label used in the agreement.
Relevant factors may include the level of control over how work is performed, whether the person works in and for the business, how they are paid, whether they can delegate work, who provides tools and equipment, and how the arrangement operates in practice.
Misclassifying an employee as a contractor can expose the business to claims for unpaid employee entitlements, superannuation and other liabilities.
Modern awards are industry or occupation-based, so the applicable award will depend on the business, the work performed and the employee’s role.
Employers should identify whether an award or registered agreement applies before making an offer, because this can affect minimum pay rates, classifications, overtime, penalty rates, allowances, breaks and other employment conditions.
If you are unsure which award applies, you should seek advice before the employee starts work.
A new employee should usually receive a written employment contract and the Fair Work Information Statement before, or as soon as possible after, they start work.
Casual employees must also receive the Casual Employment Information Statement. Fixed-term employees may also need to receive a Fixed Term Contract Information Statement.
Depending on the business, the employee may also receive workplace policies, tax and superannuation forms, onboarding documents and other role-specific information.
A first employee contract should usually set out the employee’s position, duties, employment type, salary or hourly rate, hours of work, award or classification, leave and entitlements, probation arrangements, confidentiality obligations, intellectual property ownership, notice periods, termination rights and any post-employment restrictions.
The contract should also be consistent with the National Employment Standards, any applicable modern award and the business’s actual employment arrangements.
LawBase’s fixed fee Employment Contracts Package can help businesses prepare practical employment contracts tailored for SMEs.
Employers must ensure employees are paid at least the applicable minimum wage, award rate or registered agreement rate.
Employers must also meet superannuation guarantee obligations for eligible employees. The employment contract and payroll setup should be consistent with these legal obligations.
Minimum pay and superannuation obligations can change over time, so employers should regularly review pay rates, award classifications and payroll systems.
Workplace policies are strongly recommended, even for small businesses.
Policies can help set expectations around workplace conduct, discrimination, harassment, bullying, safety, leave, confidentiality, technology use and other matters relevant to the workplace.
The policies needed will depend on the size and nature of the business, but having clear policies in place can support compliance and help manage issues if they arise.
Yes. LawBase can help small business owners prepare the legal documents needed before hiring their first employee.
LawBase’s fixed fee Employment Contracts Package includes permanent and casual employment contract templates, key protections such as confidentiality and intellectual property clauses, one revision round and email/phone support.
This can help employers put clear, practical employment contracts in place before issues arise.
Schedule a Free CallThe information in this article is for general purposes only and you should obtain professional advice relevant to your specific circumstances.
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