Foreign companies hiring in Australia must register for PAYG withholding and superannuation (12% employer contribution), comply with the Fair Work Act (38-hour week, 4 weeks annual leave, Modern Awards), and obtain workers compensation insurance. Options include establishing a local entity or using an Employer of Record.
Last Updated: January 2026
By Aus Business Register
How to Hire Employees in Australia as a Foreign Company: Complete 2026 Guide
Australia has one of the most highly educated and productive workforces in the Asia-Pacific region. For foreign companies expanding into the Australian market, hiring local employees is often essential for establishing a genuine presence, understanding the local business culture, and delivering products or services effectively.
However, Australian employment law is significantly more complex and employee-protective than many other countries. The Fair Work Act 2009 establishes a comprehensive framework of minimum employment conditions, and the penalties for non-compliance are substantial. Foreign employers who assume they can apply their home country’s employment practices in Australia frequently find themselves in breach of Australian law.
This guide provides a complete roadmap for foreign companies looking to hire employees in Australia, covering everything from legal prerequisites to ongoing payroll and compliance obligations.
Legal Prerequisites for Hiring in Australia
Before you can legally employ anyone in Australia, your company must have several things in place:
1. Establish a Legal Entity in Australia
You cannot directly employ people in Australia through a foreign company that has no Australian legal presence. You need either:
- An Australian subsidiary (Pty Ltd) registered with ASIC (registration fee: $611), or
- A foreign company registration (ARBN) under Part 5B.2 of the Corporations Act 2001
Our company formation services can handle the registration process. Note that a Pty Ltd company requires at least one director who ordinarily resides in Australia. Our resident director services can fulfil this requirement.
2. Obtain an Australian Business Number (ABN)
An ABN is required for tax reporting, superannuation payments, and issuing pay slips. Learn more about ABN and GST registration.
3. Register for PAYG Withholding
You must register for Pay As You Go (PAYG) withholding with the ATO before making your first payment to an employee. PAYG withholding requires you to deduct income tax from employees’ wages and remit it to the ATO.
4. Register for GST (if applicable)
If your Australian turnover is or is expected to be $75,000 or more per year, you must register for GST. While GST registration is not directly related to employment, it is usually required alongside PAYG withholding registration.
5. Obtain Workers’ Compensation Insurance
Workers’ compensation insurance is compulsory in every Australian state and territory. You must have a policy in place before your first employee starts work. The scheme you need depends on which state or territory your employees work in.
Understanding Australia’s Employment Framework
Australia’s employment law system is primarily governed by the Fair Work Act 2009, which is administered by the Fair Work Commission (FWC) and the Fair Work Ombudsman (FWO). The key components are:
- National Employment Standards (NES): 11 minimum employment conditions that apply to all employees covered by the national workplace relations system.
- Modern Awards: Industry and occupation-specific instruments that set minimum pay rates, hours, rosters, allowances, and leave entitlements above the NES baseline.
- Enterprise Agreements: Company-specific agreements negotiated between employers and employees (or their unions) that must meet or exceed the relevant Modern Award.
- Employment Contracts: Individual agreements between the employer and employee that must meet or exceed the NES and applicable Modern Award.
The important principle is that each layer can only improve on (not reduce) the minimum conditions set by the layer below it. An employment contract can never provide less than what the applicable Modern Award and NES require.
The National Employment Standards (NES)
The NES establishes 11 minimum entitlements for all employees:
| Entitlement | Details |
|---|---|
| Maximum weekly hours | 38 hours per week for full-time employees, plus reasonable additional hours |
| Requests for flexible working | Certain employees can request flexible arrangements; employers can only refuse on reasonable business grounds |
| Parental leave | Up to 12 months unpaid parental leave (with right to request an additional 12 months), plus the government-funded Paid Parental Leave scheme |
| Annual leave | 4 weeks paid annual leave per year (5 weeks for shift workers) |
| Personal/carer’s leave | 10 days paid personal/carer’s leave per year, plus 2 days unpaid carer’s leave per occasion |
| Compassionate leave | 2 days paid compassionate leave per occasion |
| Family and domestic violence leave | 10 days paid family and domestic violence leave per year |
| Community service leave | Unpaid leave for voluntary emergency activities, plus paid leave for jury service (minus any jury duty pay) |
| Long service leave | Governed by state/territory legislation; typically 8.67 weeks after 10 years of service |
| Public holidays | Paid day off on public holidays (8 national, plus additional state/territory holidays) |
| Notice of termination and redundancy pay | Minimum notice periods (1-5 weeks depending on service) and redundancy pay (4-16 weeks depending on service) for employers with 15+ employees |
Key point for foreign employers: These are minimums that cannot be contracted out of. Even if your employment contract states otherwise, the NES entitlements still apply and are enforceable.
Modern Awards and Enterprise Agreements
Most Australian employees are covered by a Modern Award, which is an industry or occupation-specific legal instrument that sets minimum conditions above the NES. There are currently over 120 Modern Awards covering different industries and occupations.
How to Determine Which Award Applies
The applicable award is determined by the nature of your business (industry) and the type of work the employee performs (occupation). Common awards that foreign companies encounter include:
- Clerks – Private Sector Award 2020: Covers administrative and clerical employees in most industries
- Professional Employees Award 2020: Covers engineers, scientists, IT professionals, and similar roles
- General Retail Industry Award 2020: Covers retail employees
- Manufacturing and Associated Industries and Occupations Award 2020: Covers manufacturing sector employees
Some employees may be award-free if they earn above the high-income threshold (currently $183,100 per year as of 1 July 2024). However, the NES still applies to award-free employees.
What Awards Typically Cover
- Minimum pay rates for different classification levels
- Overtime and penalty rates (time-and-a-half, double time)
- Shift loading and allowances
- Hours of work and rostering requirements
- Breaks and rest periods
- Additional leave entitlements specific to the industry
Wages, Salary, and the Minimum Wage
Australia has one of the highest minimum wages in the world. The national minimum wage, set by the Fair Work Commission’s Annual Wage Review, is currently:
- $24.95 per hour (as of 1 July 2024)
- $948.10 per week for a full-time (38-hour) employee
However, most employees covered by a Modern Award will have a minimum rate higher than the national minimum wage, depending on their classification level within the award.
Payroll Frequency and Pay Slips
Employees must be paid at least monthly, though fortnightly pay is the most common arrangement in Australia. Within one working day of each payment, the employer must provide a pay slip containing:
- Employer’s name and ABN
- Employee’s name
- Pay period and date of payment
- Gross and net amounts paid
- Hourly rate or annual salary
- Hours worked (for hourly employees)
- Itemised deductions (PAYG tax, super contributions, etc.)
- Any allowances, loadings, overtime, or penalty rates paid
- Superannuation contributions paid
Superannuation Obligations
Superannuation (“super”) is Australia’s compulsory retirement savings system. As an employer, you must pay super on top of employees’ wages and salary.
Current Superannuation Rate
The Superannuation Guarantee (SG) rate for FY2025-26 (1 July 2025 to 30 June 2026) is 12% of an employee’s ordinary time earnings. This rate increased from 11.5% on 1 July 2025 as part of the legislated trajectory to 12%.
Note: For FY2024-25, the rate was 11.5%. The rate reached its final legislated rate of 12% from 1 July 2025.
Key Super Rules for Employers
- No minimum earnings threshold: Since 1 July 2022, super must be paid regardless of how much an employee earns (the previous $450/month threshold was removed).
- Payment frequency: Super must be paid at least quarterly, by the 28th day after the end of each quarter. Late payments trigger the Superannuation Guarantee Charge (SGC), which is not tax-deductible and includes penalties and interest.
- SuperStream: All super payments must be made electronically using the SuperStream standard.
- Choice of fund: Employees generally have the right to choose their own super fund. If they don’t nominate one, you must pay into a default fund that is a “stapled fund” (the fund linked to the employee from a previous employer) or, if no stapled fund exists, a fund you have selected as your default.
- Maximum super contributions base: For FY2025-26, you are only required to pay SG on earnings up to $62,500 per quarter (approximately $260,280 per year).
For more details on managing super and other tax obligations, see our taxation services.
PAYG Withholding and Tax Obligations
As an employer, you are required to withhold income tax from your employees’ wages and remit it to the ATO. This is known as Pay As You Go (PAYG) withholding.
How PAYG Withholding Works
- Each employee completes a Tax File Number (TFN) Declaration when they start employment.
- You calculate the amount to withhold from each pay using the ATO’s tax tables or withholding schedules.
- You report and pay withheld amounts to the ATO via your Business Activity Statement (BAS), which is lodged either monthly or quarterly depending on your business size.
Australian Individual Tax Rates (2025-26)
| Taxable Income | Tax Rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,638 plus 45c for each $1 over $190,000 |
In addition, the Medicare levy of 2% applies to most taxpayers.
Single Touch Payroll (STP)
Australia uses Single Touch Payroll (STP), which requires employers to report payroll information (salaries, wages, PAYG withholding, and super) to the ATO in real time each time they pay their employees. This means you need STP-compatible payroll software. Popular options in Australia include Xero, MYOB, and QuickBooks.
Our bookkeeping services can handle your payroll processing and STP reporting.
Employment Contracts: What to Include
While Australian law does not mandate written employment contracts, they are strongly recommended and are standard practice. A well-drafted employment contract should include:
- Job title and description of duties
- Employment type (full-time, part-time, or casual)
- Start date and probation period (if any)
- Salary or hourly rate (must meet or exceed the applicable Modern Award rate)
- Hours of work
- Location of work
- Leave entitlements (must meet or exceed NES and applicable award)
- Superannuation fund details
- Notice period for termination
- Confidentiality and intellectual property clauses
- Post-employment restraints (if applicable; note these are interpreted narrowly by Australian courts)
- Reference to the applicable Modern Award (if relevant)
Employee vs Independent Contractor
One of the most significant risks for foreign companies is misclassifying employees as independent contractors. This is known as “sham contracting” and carries severe penalties under the Fair Work Act.
Following the High Court’s decisions in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) and ZG Operations Australia Pty Ltd v Jamsek (2022), the classification of a worker as an employee or contractor is primarily determined by the terms of the contract, not the practical reality of the working relationship.
Key Differences
| Factor | Employee | Independent Contractor |
|---|---|---|
| Control | Employer directs how, when, and where work is done | Contractor controls how they complete the work |
| Tools and equipment | Usually provided by the employer | Contractor provides their own |
| Financial risk | No financial risk; paid for time worked | Bears financial risk; paid for results |
| Ability to delegate | Cannot delegate work to others | Can hire others to complete the work |
| Superannuation | Employer must pay SG | Generally no SG obligation (exceptions apply) |
| Leave entitlements | Entitled to NES leave | No leave entitlements |
| Tax | PAYG withholding by employer | Contractor manages own tax |
Penalties for sham contracting: Up to $990,000 per contravention for individuals and $4,950,000 per contravention for body corporates (as of 2025-26).
Workers’ Compensation Insurance
Workers’ compensation insurance is compulsory in all Australian states and territories. The scheme you must register with depends on where your employees are based:
| State/Territory | Workers’ Compensation Authority |
|---|---|
| New South Wales | State Insurance Regulatory Authority (SIRA) |
| Victoria | WorkSafe Victoria |
| Queensland | WorkCover Queensland |
| South Australia | ReturnToWorkSA |
| Western Australia | WorkCover WA |
| Tasmania | WorkSafe Tasmania |
| Northern Territory | NT WorkSafe |
| ACT | Access Canberra |
If you have employees in multiple states, you may need to register with multiple workers’ compensation schemes. Premiums are typically calculated as a percentage of your payroll and vary by industry and claims history.
Termination and Unfair Dismissal
Australian employment law provides strong protections against unfair dismissal. Key points include:
Minimum Notice Periods (Under the NES)
| Period of Continuous Service | Minimum Notice |
|---|---|
| Up to 1 year | 1 week |
| 1-3 years | 2 weeks |
| 3-5 years | 3 weeks |
| 5+ years | 4 weeks |
An additional week of notice is required if the employee is over 45 years old and has at least 2 years of continuous service.
Unfair Dismissal
Employees who have completed the minimum employment period (6 months for employers with 15+ employees, or 12 months for small business employers with fewer than 15 employees) can lodge an unfair dismissal claim with the Fair Work Commission if they believe their termination was harsh, unjust, or unreasonable. Compensation can be up to 26 weeks’ pay (capped at approximately half the high-income threshold).
Step-by-Step Hiring Checklist
- Register your Australian legal entity (Pty Ltd or ARBN)
- Obtain your ABN and register for GST (if applicable)
- Register for PAYG withholding with the ATO
- Set up workers’ compensation insurance in the relevant state(s)
- Determine the applicable Modern Award for your employees
- Draft employment contracts that meet NES and award requirements
- Set up STP-compatible payroll software
- Set up a default superannuation fund
- Collect TFN Declarations and superannuation choice forms from new employees
- Check for stapled super funds via ATO online services
- Commence employment, processing payroll with correct PAYG withholding and super
- Lodge BAS on time (monthly or quarterly) and pay super quarterly by the due dates
Frequently Asked Questions
Can a foreign company hire employees in Australia without a local entity?
Not directly. To legally employ someone in Australia, you need an Australian legal entity (Pty Ltd or ARBN). The alternative is to engage an Employer of Record (EOR) service, where the EOR entity employs the worker on your behalf. However, an EOR is typically a temporary solution, and most companies establish their own entity once they are committed to the Australian market. Our company formation services can get you set up.
What is the cost of hiring an employee in Australia beyond their salary?
As a general rule, the total cost of an employee is approximately 15-25% above their base salary. This includes superannuation (12% of ordinary time earnings), workers’ compensation insurance (0.5-5% depending on industry), payroll tax (if your total payroll exceeds the state threshold, typically 4.85-6.85%), leave loading (17.5% of annual leave pay, if applicable under the relevant award), and administrative costs (payroll processing, compliance, etc.).
Do I need to provide health insurance for employees in Australia?
No. Unlike some countries, Australian employers are not required to provide health insurance. Australia has a universal public healthcare system (Medicare) funded through taxation. Private health insurance is a personal decision for each employee, though some employers offer it as an optional benefit to attract talent.
Can I hire employees on a casual basis to reduce obligations?
Yes, casual employment is common in Australia. Casual employees are engaged on a shift-by-shift basis with no guaranteed hours and no entitlement to paid annual leave or personal leave. However, casuals must receive a casual loading (typically 25% on top of the base hourly rate) to compensate for the lack of leave entitlements. Also be aware that casual employees who have worked a regular pattern for 12 months or more may have the right to convert to permanent employment under the Fair Work Act.
What payroll tax do I need to pay in Australia?
Payroll tax is a state/territory tax on wages, and each jurisdiction has its own rate and threshold. For example, in New South Wales the rate is 5.45% on wages above a monthly threshold (annual equivalent approximately $1.2 million). If your total Australian payroll is below the threshold in a particular state, you may not owe payroll tax there. As a foreign company with a small initial team, you may be below the threshold in most states.
How do public holidays work for employees in Australia?
There are 8 national public holidays, and each state and territory has additional public holidays (typically 1-3 extra). Full-time and part-time employees are entitled to a paid day off on public holidays that fall on days they would normally work. If an employee works on a public holiday, they are generally entitled to penalty rates (typically double time or double time and a half) under the applicable Modern Award.
Ready to Build Your Australian Team?
Hiring employees in Australia as a foreign company involves navigating a complex web of employment law, tax obligations, and compliance requirements. Getting it right from the start is essential, as the costs of non-compliance can be substantial.
At Aus Business Register, we provide end-to-end support for foreign companies entering the Australian market. From company formation and resident director services to taxation, bookkeeping and payroll, and ongoing compliance management, we handle the complexity so you can focus on growing your business.
Contact us today to discuss your Australian hiring plans and get expert guidance on setting up your employment infrastructure.
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