There comes a moment in every small business journey when you realise you can’t do it all yourself. The orders are piling up, the client list is growing, and you’re stretched so thin that your “lunch break” is a few sips of coffee between Zoom calls. Hiring your first employee is a milestone worth celebrating – it signals that your business is thriving. But it’s also a turning point that comes with a serious shift in responsibility.
When you make your first hire, you’re no longer just a business owner; you’re an employer, and that title carries legal obligations. This doesn’t mean you should panic or get bogged down in legal jargon. With the right understanding of the rules, you’ll not only protect your business but create a professional and supportive workplace from day one.
Why Compliance Should Be Your First Priority
Small business owners often underestimate the extent to which employment is regulated in Australia. From the moment you write a job ad, you’re entering a space governed by multiple laws – the Fair Work Act, National Employment Standards, workplace health and safety legislation, tax and superannuation rules, and even anti-discrimination laws. These aren’t just boxes to tick; they’re designed to protect both you and your employee.
Consider this: underpaying a staff member – even by mistake – can lead to not just back pay, but hefty penalties exceeding $16,000 per breach for a small business. Failing to pay superannuation on time triggers interest and administrative charges, while neglecting workers’ safety can leave you personally liable if your employee is injured. It’s easy to see how a simple oversight can snowball into a legal and financial nightmare.
Compliance may feel like paperwork, but it’s also a sign of professionalism. It reassures your new employee that you’re serious about running a legitimate, ethical business. That kind of trust is invaluable when you’re building a team.
The Employment Contract: Your Foundation
Think of your employment contract as the blueprint for your working relationship. A handshake and a friendly “welcome aboard” might feel natural, but it won’t hold up in a dispute. A well-drafted contract sets expectations, clarifies obligations, and can save you from legal headaches later.
It’s not enough to copy a template you find online. Contracts need to reflect your industry, your employee’s role, and the relevant Modern Award or enterprise agreement. They should clearly define duties, set out pay and entitlements, outline probation and notice periods, and protect your intellectual property and confidential information. Even for a small team, these details matter.
For example, imagine you hire a junior marketing assistant to help grow your brand. Without clear terms about intellectual property, that employee could later claim ownership of the content or strategies they created for you. A few extra clauses in a contract can prevent messy disputes down the line.
Awards and Minimum Standards: The Legal Baseline
Many small business owners fall into the trap of offering what they think is “a fair wage,” only to discover later that they’ve underpaid because they didn’t check the right Award. In Australia, every employee is entitled to the National Employment Standards (NES) – 11 basic rights covering things like annual leave, maximum weekly hours, public holiday entitlements, and notice of termination.
But that’s just the baseline. Most employees are also covered by an industry-specific Modern Award, which sets out detailed pay rates, penalty rates, allowances, and break requirements. Misunderstanding or ignoring Awards is one of the most common compliance pitfalls for small businesses. Thankfully, tools like the Fair Work Ombudsman’s Award Finder make it easy to check. Spending a few minutes there can save you thousands later.
Health, Safety, and Duty of Care
Workplace Health and Safety (WHS) laws don’t just apply to factories or construction sites; they apply to every employer, even if your employee works from their own kitchen table. The Work Health and Safety Act 2011 makes it clear that employers have a duty to provide a safe working environment, which includes conducting risk assessments, providing ergonomic equipment, and offering training where needed.
In some cases, directors and business owners can be held personally liable for WHS breaches. This isn’t to scare you but to emphasise that safety is part of running a professional workplace, no matter how small your team is.
The Power of Policies
When you’re small, it’s easy to think, “We’ll just figure it out as we go,” but policies create structure and prevent disputes. Even a business with one employee benefits from written policies around anti-discrimination, leave management, performance expectations, and privacy.
Take harassment policies as an example: under the Sex Discrimination Act, businesses can be held responsible for workplace harassment if they can’t prove they took reasonable steps to
prevent it. Having a policy, sharing it with staff, and acting on it isn’t just best practice – it’s legal protection.
Similarly, privacy policies are becoming increasingly important. Even if your turnover is under the threshold for mandatory compliance with the Privacy Act 1988, having a clear approach to storing employee records securely (with restricted access and password protection) builds trust and helps avoid data breaches.
The Contractor Trap
You can’t “opt in” to a contractor label – the law looks at the real substance of the working relationship. If, in practice, you set hours and methods, fold the person into your roster and systems, supply tools, and there’s no genuine right to delegate or real profit/loss risk, they’re likely an employee regardless of what the contract says or whether they have an ABN. That’s classic sham contracting territory.
Getting it wrong is expensive: you can be hit with back pay, leave, interest and penalties – and you may still owe super to “contractors” you pay mainly for their labour. On top of that, from 26 Aug 2024 the Fair Work Commission can review unfair contract terms for contractors earning below the contractor high-income threshold (currently $175k). The practical safeguard: pick the right model for the work, reflect it in day-to-day reality (not just the paperwork), and sanity-check factors like control, delegation, tools, and integration before you engage.
Recruitment and Anti-Discrimination
When you hit “publish” on a job ad, you’re already in regulated territory. Keep the focus on the work, not the person: describe the inherent requirements and avoid language that hints at age, gender, race, religion, disability or family status (swap “young, energetic” for “can lift 15kg and work Saturdays,” and use “must have the right to work in Australia” rather than “must be Australian”).
The same mindset applies in interviews – ask everyone substantially the same, role-based questions and avoid small talk that drifts into protected attributes (e.g., family plans, health, age). Be ready to make reasonable adjustments so candidates with disability can demonstrate capability (extra time for a task, accessible location, captions on video calls), and if you run any trial shifts or skills tests, keep them short and directly relevant; once a trial produces real work, it generally needs to be paid under the applicable award.
Wrap the process in good hygiene: tell candidates what information you’re collecting and why, store applications securely, limit access, and don’t keep unsuccessful applicants’ data longer than necessary. If you use screening tech (AI résumé tools or one-way video), remember you still own the discrimination risk – monitor outcomes, offer a human review on request, and document how decisions map back to the selection criteria. In short, stay anchored to skills and experience, keep your process consistent and recorded, and you’ll both reduce legal exposure and make better hiring decisions.
Hire Your Next Staff Member with Confidence
Before you hand over the keys to your new hire, lock in the legal essentials: a tailored employment contract aligned with the correct Modern Award, clear workplace policies, and a legally compliant recruitment process. Sprintlaw can help pull this together quickly – so you can hire with confidence.
Your first hire should be a celebration, not a liability. If you’d like a second pair of eyes – or someone to handle it end to end in plain English – have a chat with us. We’ll tailor the docs to your industry, flag contractor-vs-employee risks early, and give you practical guidance so you can get back to growing the business.
