How to hire staff for your small business (8 key steps)

Hiring your first employee or adding to your team is an exciting but major step. If you do it well, you can set your business up for growth. Get it wrong, however, and it can cause a lot of stress. For example, legal issues, payroll problems, or an unhappy new hire who chooses not to stick around.

The aim of this article is to help you get it right. We comprehensively cover how to hire staff for your small business. This includes how to plan your hire, find good candidates, and deal with the legal stuff. We also go over managing your new employee once they start.

Key takeaways

• Plan your hire carefully: Know exactly what you need, what you can pay, and what legal requirements apply before you start hiring.
• Recruit smart: Write a clear, compliant job ad. Promote it well. Run a fair and structured interview process. Check work rights and references before making an offer.
• Set up your employee properly: Issue a compliant employment contract. Collect all required details. Set up payroll, STP, super, and accurate record keeping before their first day.
• Manage the full employee lifecycle: Track leave, pay changes, and entitlements. Keep on top of STP and record keeping. Handle offboarding carefully and professionally when needed.

Planning your first hire (or next hire)

Before you rush out and post a job ad, take a step back. Hiring isn't a matter of just filling a gap. You need to make sure you hire the right person for the right role. Equally so, you need to ensure your business is ready to bring them on in the right way.

So, start by thinking about what your business needs. Is this going to be a full-time, part-time, casual, or independent contractor role? What are the key tasks they will be in charge of? What sort of person will mesh well with how your business does things?

Be very clear about what you can pay, as well. Check if the role you're hiring for falls under an award or enterprise agreement. If it does, the award will outline the minimum entitlements you must provide.

Next, check your budget. It's important to acknowledge that hiring someone costs more than their hourly rate or salary. You'll also need to pay super, leave, insurance, and payroll costs. So, make sure your business can handle it.

Once you're super clear on the role and the associated costs, it's time to move on to finding the right person.

Recruit effectively

This part of the hiring process can feel a little daunting. This is especially true if you haven't done it before. It's best to keep it simple. The objective should be to find the right employee, without making life harder than it needs to be.

Here's some guidance on how to go about it:

1. Write a clear and compliant job ad

Write a good position description that spells out exactly what the role involves. When listing key responsibilities, don't be vague. For instance, if you're hiring a barista, say 'make coffee to order,' and 'operate the till,' instead of just 'customer service.' Include the correct job title and the employment type (full time, part time, or casual). Also stipulate whether it's a permanent or fixed term position.

It's a good idea to include the pay rate or at least a clear pay range (that aligns with the Fair Work Act). Doing this can help you attract the right candidates. It can save time by filtering out those who wouldn't accept the pay on offer. Including the pay or pay range also supports pay transparency. And this is one of the steps that can help reduce pay gaps over time.

Finally, include what sort of person you are looking for. Though, it's important to base it on skills and experience instead of personal traits. Avoid any wording that potential applicants may view as discriminatory.

2. Promote the role

Now it is time to get your job ad out there. One of the easiest ways to do this is to post it on job websites where people are already looking. These may include platforms like SEEK, Indeed, and LinkedIn. These sites reach a big audience and have the potential to bring in strong job applications.

You should also consider tapping into your own networks. For example, tell your staff, business contacts, suppliers, and maybe even your customers that you're hiring. Word-of-mouth referrals are totally underestimated! They can often bring in someone fantastic.

If you plan to do a lot of hiring, using recruitment software may be the way to go. It can help you post jobs across several job websites and manage applications efficiently and in one place. This can save heaps of valuable time.

3. Shortlist and interview

Once the applications start rolling in, it's time to go through them and make a list of shortlisted candidates. Keep your eyes peeled for potential candidates who have the right skills and experience, but would also be a great cultural fit. Consider if you could see yourself building a successful working relationship with them.

When you interview candidates, keep it simple and fair. Use an organised interview process. This generally involves you asking everyone the same foundational questions. Doing this can make it far easier to compare candidates and keep the process unbiased.

Going into interviews, your aim should be to gauge their experience, how they work with others, and how they would manage the key parts of the role. Keep notes from all the interviews you conduct so you can refer to them to help you make a solid choice when the time comes.

4. Conduct pre-employment checks

Before you offer the job, you need to take care of a few legal obligations and run some key checks. To start with, make sure the person has the legal right to work in Australia. Under workplace laws and the Migration Act, you must confirm this before they start. Ask the candidate to provide proof, such as an Australian passport, birth certificate, or valid visa that grants work rights.

If the role needs specific qualifications, such as a trade licence or degree, ask for copies and check their currency. Don’t assume someone else has verified them. It's your responsibility.

You might also need to run a background check, like a National Police Check. But only if the job calls for it. For example, if the person will be working with children, vulnerable people, or handling money. You must get the candidate’s permission first and only collect what you have a right to under workplace laws and the Privacy Act.

You should also do reference checks, again with the candidate’s permission. Speak to at least two past managers or employers. Ask about how the person performed, how they worked with others, and whether they would be re-hired. Don’t rely on written references alone. A phone call can give you much better insight.

Make the offer and set up your employee

You’ve found the right person. Now it’s time to welcome them to your team. This part matters just as much as the search! Getting this part right can mean covering yourself legally and giving your new staff member the best chance to succeed in your business.

Here are some of the things you need to do (and do well):

5. Create and issue a compliant employment contract

You need to give your new hire a written employment contract. The contract should clearly spell out their pay, hours, duties, and employment conditions.

The contract must follow the National Employment Standards (NES) and any relevant award or enterprise agreement. You can’t offer less than what the law requires. This is true even if the employee agrees to it.

Feeling doubtful about how to structure the contract? Use the Employment Contract Tool on the government's business website. It can guide you through building a compliant contract for common roles. Great HR software with built-in recruitment and onboarding tools can also help you create legally sound employment contracts.

6. Collect employee details

Next, collect the details you need to pay your employee correctly and meet your reporting obligations. These details include:

• Their tax file number
• Bank account details
• Their chosen super fund
• A signed tax declaration form

You must report most of this to the Australian Taxation Office (ATO). The easiest way to collect this information is to use a Human Resources Information System (HRIS). A good one can prompt your new hire to fill out and submit everything before their first day.

7. Set up payroll and super

If you haven't already, register for Pay As You Go (PAYG) withholding with the ATO. You need to do this to be able to withhold tax from your employee’s pay. You must also set up Single Touch Payroll (STP) reporting. This is mandatory, even for small business employers. STP reports pay, tax, and super to the ATO every time you run payroll.

The best way to run this is through payroll software built for Australian small businesses. The software will take care of the reporting and tax calculations for you. This can save you a lot of time and stress each pay run.

You must also make superannuation contributions, even if you only hire one person. Set up super payments in your payroll system so you process and report them correctly and on time.

8. Set up employee record and onboarding

You must keep accurate employee records from day one. The Fair Work Ombudsman (FWO) and ATO both require this. Create a record for your new staff member. It must include their signed contract, tax and super forms, bank details, and any other documents you collect during onboarding.

Plan their first days carefully. Carry out an induction, set them up with equipment, and walk through workplace policies. And don't forget to introduce them to the team. Nailing the onboarding phase can help you build a good working relationship from the beginning.

An HRIS makes this much easier. It can help you stay on top of onboarding tasks so you don’t miss anything when welcoming someone new.

Manage the employee lifecycle

By now, your new hire is probably settled in. But, your job doesn’t stop there. You need to keep managing their employment well all the way through to when they eventually leave.

Here’s what you need to do:

Track leave and entitlements

You need to track and manage all leave accurately. This includes annual leave, personal/carer’s leave, compassionate leave, and any other entitlements under the NES or an award. Your payroll system should calculate and show this clearly on payslips. If it doesn’t, it’s probably time to upgrade.

Manage pay changes, promotions, and role changes

If you give an employee a pay rise, change their role, or promote them, update their contract and your payroll records straight away. And make sure the new pay rate still meets or exceeds the correct award or enterprise agreement. You're likely to slip up if you rely solely on email or verbal agreements. Get it in writing.

A good HR system that runs off a single source of truth makes this much less of a feat. When you update an employee’s details once, it'll push those changes across your payroll, leave balances, records, and reporting automatically.

Maintain ongoing compliance

Every pay run, you must issue a payslip (with the necessary details). As mentioned, you must also report through STP and make super contributions on time. Then there's the requirement for you to keep clear, accurate records of hours worked, pay, leave balances, and employment history. Don't take this part lightly, as the ATO can ask to see these records at any time.

Innovative HR software can really help here. It can keep everything in one place and update records automatically. This is huge when it comes to staying compliant and avoiding admin mistakes that can create issues down the track.

Plan for offboarding when needed

Offboarding is just as critical as onboarding. Slacking off during this phase can result in you facing legal claims, compliance issues, or a bad reputation with former staff. When an employee resigns or you end their employment, there's a process to follow.

You need to handle their final pay correctly. This includes paying out any unused annual leave, redundancy pay (if applicable), and any other entitlements. You also need to finalise STP reporting for that employee and provide any required separation documents.

The same HRIS that helps you onboard new hires can also guide you through offboarding, so you don’t miss a thing when someone leaves. It can make sure that the same records you relied on for onboarding and payroll stay up-to-date all the way through to the employee’s last day.

Remember, getting offboarding right protects your business and gives your employee a clean and professional exit. And this is how you want your company to be remembered.

Why using HR software makes hiring easier (and safer) for small businesses

Hiring employees is one thing. Managing everything that comes after is another. It's also where many small businesses trip up. HR software with effective Human Capital Management (HCM) and HRIS features built in can take a massive amount of admin off your plate. Essentially, it can help you cross your t's and dot your i's from day one, without breaking a sweat. Here's how:

• Streamlines hiring and applicant tracking: A great HCM with native recruitment software can post jobs, track where every applicant is up to, and send offers. And it can do it all in one place, eliminating the need to bounce between emails, spreadsheets, and job boards.
• Automates onboarding and document collection: Once someone accepts your offer, the right software can send out the contract, collect their tax file number, bank details, super choice, and signed policies. This means no running after paperwork and worrying about missing something.
• Simplifies payroll and STP compliance: An effective all-in-one workforce management software enables you to run payroll, calculate tax, generate payslips, and submit your STP reports through the same system. This can give you peace of mind knowing you're meeting your ATO requirements.
• Centralises employee data and lifecycle management: A solid HR system keeps everything up to date throughout the entire employee lifecycle. If you change pay, roles, or entitlements, those updates flow straight through to payroll and records. This means you don't have to remember to update five different systems or fret over the potential of manual errors.

Manage the full employee lifecycle with Rippling

Rippling gives you a connected platform to manage every stage of the employee lifecycle, from hiring to offboarding, and everything in between.

It combines all your HR, payroll, IT, and finance tools in one system. This means the days of jumping from one platform to another and risking manual errors can be over! Built on a single source of truth, you only need to update something once. It then flows through automatically to payroll, tax reporting, leave balances, and more.

Here’s just some of what you can do in Rippling:

• Post jobs and manage applications with applicant tracking built into the platform's recruitment software.
• Onboard new hires with automated contracts, forms, super selection, and policy sign-offs.
• Create and manage employee records in a fully integrated HRIS.
• Run payroll and report to the ATO through STP-compliant payroll tools.
• Track leave, update pay rates, and manage promotions without having to manually sync systems.
• Scale with ease whether you have one employee or 50.

Using a connected platform like Rippling from day one isn't just a significant time saver. It helps you stay compliant, avoid common admin mistakes, and create a setup that bolsters your business through every phase of growth.

Small business hiring FAQs

What do I legally need to hire my first employee?

Before you can legally hire your first employee, you need to set up a few things first:

• Register for PAYG withholding with the ATO: You need this in place before you can pay wages and withhold tax.
• Set up STP reporting: This is a non-negotiable for all employers, even if you’re only hiring one person.
• Check that your role complies with the NES and any relevant award or agreement: You can’t offer terms below the legal minimums under any circumstances.
• Prepare a compliant employment contract: You must give the employee a written contract before they start working for you.
• Check work rights: It’s your legal responsibility to confirm the employee has the right to work in Australia before they begin work.
• Set up payroll and record keeping: You must have a system that's ready to pay super, issue payslips, and keep accurate employee records once the new hire starts.

Once these things are all sorted, you can legally offer the job and bring your first employee on board.

Do I need to register for payroll tax as a small business?

Only if your total Australian wages exceed the payroll tax threshold for your state or territory. It's important to note that each state has its own threshold, rates, and registration rules. For instance, in NSW, you only have to register for payroll tax if your wages exceed $1.2 million per year. In WA, it’s if your wages exceed $1 million per year.

Payroll tax is separate from PAYG withholding and STP, though. All employers need to set these up irrespective of wage size.

Can I manage payroll manually as a small business?

Technically, yes. But it’s risky (and exasperating). You’d need to:

• Calculate wages, tax, and super 'by hand' (and get it right every time)
• Generate payslips that include all necessary details under the Fair Work Act
• Submit accurate STP reports to the ATO every single time you run payroll
• Keep tabs on leave balances, entitlements, and hours worked
• Keep compliant employee records, updated in real time

If you mess any of this up, even by accident, things can become problematic from an employee satisfaction and legal standpoint. That's why many small businesses turn to payroll software to simplify this and reduce compliance risk.

What should be included in an employment contract?

An employment contract needs to outline what you're hiring the employee to do, how you'll pay them, and the conditions of their employment. At a minimum, it needs to cover:

• Employment type (full-time, part-time, casual, or fixed term)
• Pay and ordinary hours of work
• Duties and responsibilities
• Leave and notice entitlements
• The award or agreement that applies (if applicable)

As mentioned, employment contracts in Australia comply with the NES and any applicable award. You can’t agree to terms that fall below these minimum standards.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.