About to Hire Your First Employee? Payroll Just Changed More Than You Think.

Hiring your first employee is one of the few genuinely irreversible-feeling decisions in a small business. Everything up to that point has been about you: your time, your capacity, your risk. Now someone else’s rent depends on you getting the admin right, and the admin has recently become less forgiving than it was even a year ago.

If you last looked into this before mid-2026, some of what you learned is out of date. The biggest change in employer super obligations in over a decade took effect on 1 July 2026, and it’s the sort of change that turns a manageable quarterly task into a discipline you need built into every pay run.

What has to be in place before the first pay run

None of this is difficult individually. The problem is that it all has to be done before you pay someone, not after, and the order matters.

• PAYG withholding registration. You need to be registered to withhold tax before you pay wages. It’s added to your existing Australian Business Number registration.
• Single Touch Payroll–enabled software. Not optional, even for one employee. Every pay run has to be reported digitally to the ATO on or before the day you pay.
• The employee’s details, including tax file number declaration information and their super fund choice, which are reported to the ATO through Single Touch Payroll rather than as separate paper lodgements.
• A superannuation standard choice form, offering the employee the right to nominate their fund. If they don’t choose, you have to request their stapled fund from the ATO before defaulting to your own.
• The Fair Work Information Statement, which must be given to every new employee. There’s a Casual Employment Information Statement as well, if the role is casual.
• The correct modern award and classification level, or a documented reason why no award applies.
• Workers compensation insurance, which is state-based and must generally be in place from the first day of employment.

The one that reliably causes trouble later isn’t on the compliance checklists at all: deciding how you’ll track hours. Casual and part-time employees under most awards attract penalty rates by time of day and day of week, and reconstructing six months of “roughly what they worked” is genuinely awful. Whatever method you choose, choose it before day one.

Payday Super: what changed on 1 July 2026

This is the part worth reading carefully, because it changed the shape of the obligation rather than just the numbers.

Before 1 July 2026, super guarantee was a quarterly task. You calculated 12% of ordinary time earnings and paid it by the quarterly deadline, which gave you weeks of slack and a natural batching point.

From 1 July 2026, three things are different:

1. Super is paid on every payday. The contribution goes out at the same time as the earnings it relates to. There is no longer a quarterly deadline to work back from.
2. It must be received by the fund within seven business days of payday. Received, not sent, which means clearing house and fund processing time is now your problem to plan around, not theirs.
3. It’s calculated on qualifying earnings, not ordinary time earnings. Qualifying earnings bring together ordinary time earnings plus all commissions, salary sacrifice contributions and other amounts that previously sat inside salary and wages for super purposes.

The rate itself is unchanged at 12%. For a lot of straightforward employees on a flat wage, the amount you pay won’t move much at all. It’s the timing and the reporting that changed. Where it does move is anyone on commission or with a salary sacrifice arrangement.

What this means for your reporting

Single Touch Payroll got heavier too. From 1 July 2026 you have to report, for each eligible employee, the year-to-date qualifying earnings and the year-to-date super liability, every payday. From 1 July 2027, reports that don’t include both will be rejected outright.

Practically, this means your payroll software needs to be current and configured correctly. A file that was set up two years ago and hasn’t been touched since is quite likely to be reporting on the old basis, which is one of the things worth checking if you’re not certain your Xero file is set up right.

The maximum contribution base also changed shape

For higher earners, the maximum contribution base moved from a quarterly figure to an annual one: $270,830 for 2026–27. If you’re paying someone above that, the calculation is now annual rather than reset each quarter, which changes the timing of when the cap bites.

The threshold question everyone still asks

There is no minimum monthly earnings threshold for super. The old $450 per month rule was removed on 1 July 2022, and it still comes up in almost every first-employee conversation we have.

So a casual working four hours a fortnight accrues super from the first dollar. The one significant remaining exception is employees under 18, who need to work more than 30 hours in a week to be entitled.

Award rates: the expensive thing to guess

Most first-time employers set a pay rate by working out what feels fair and what they can afford. That’s a reasonable way to arrive at a number and a poor way to arrive at a lawful one.

Australian employment is largely governed by modern awards, which set minimum rates by classification level, plus loadings and penalty rates that depend on when and how the work happens. Casual loading, weekend and evening penalties, overtime, allowances for specific duties, and minimum engagement periods all sit inside the award rather than inside your agreement with the person.

The consequential part is that paying above the minimum base rate doesn’t make you compliant. A generous flat hourly rate can still fall short once weekend penalties are applied to actual hours worked, and underpayment is assessed against the award, not against your intent. Where we most often find problems, it’s not stinginess. It’s a well-meaning flat rate that quietly fails on Saturdays.

Two things worth doing before you set a rate: identify the specific award and classification level that applies, and understand which penalty rates your intended roster will trigger. If you’re not certain which award covers the role, that’s worth resolving properly rather than assuming, because everything downstream depends on it.

What an employee actually costs

The wage is the number people plan around. It’s usually somewhere between 75% and 85% of the real figure, and the gap is made up of things that arrive on different schedules.

• Superannuation at 12% of qualifying earnings, now leaving your account every pay cycle rather than quarterly, which is a genuine cash flow difference even though the annual cost is the same.
• Paid leave. Full-time and part-time employees accrue annual leave and personal leave. It’s earned as they work and paid later, so it accumulates as a liability well before it shows up as a payment.
• Public holidays for permanent employees, which are paid without work being performed.
• Workers compensation premiums, set by your state scheme and based on your industry and wages.
• Payroll tax, also state-based, with thresholds that most single-employee businesses sit well below, but it’s worth knowing where the threshold is before you grow into it.
• Casual loading instead of leave, if the role is casual, which trades a lower long-term liability for a higher hourly cost.

Leave is the one that surprises people, because it’s invisible until it isn’t. An employee’s accrued annual leave is a real liability sitting on your balance sheet, and if you’ve never seen it presented that way it tends to appear all at once in January. It’s also a common reason a business that looks profitable doesn’t feel like it in the bank account.

Contractor or employee?

The tempting shortcut, when the payroll list above looks long, is to pay someone as a contractor instead. Sometimes that’s correct. Often it isn’t, and getting it wrong is more expensive than getting payroll wrong.

Whether someone is an employee or a contractor turns on the actual substance of the working relationship: how the work is controlled, who bears commercial risk, whether they can delegate, whether they’re genuinely running their own business. An invoice and an ABN don’t settle it, and an agreement that says “contractor” doesn’t either if the arrangement doesn’t behave like one.

The detail that catches people is that super applies to independent contractors paid mainly for their labour. So even a genuine contractor arrangement can carry a super guarantee obligation, which removes most of the perceived advantage of structuring it that way to avoid super.

What we’d do differently if you’re starting now

Set the payroll up properly before the first pay run rather than fixing it at the first BAS. Payroll errors compound in a way that transaction coding errors don’t. A wrong classification or a missed super payment replicates itself every cycle, and correcting it means correcting every affected period, adjusting Single Touch Payroll reporting, and sometimes having an uncomfortable conversation with the employee about back pay.

The narrower seven business day super window makes this more true than it used to be. Under quarterly payment, a badly configured file could be caught and fixed before anything was actually late. There’s much less room for that now.

If you’d like this handled rather than learned, payroll and superannuation is one of the things we do, and a free initial call is a reasonable place to work out whether the role is even award-covered before you commit to a rate.

The Lady Abacus takeaway

The thing to internalise about Payday Super isn’t the seven days. It’s that super has moved from being a task you do to being a property of your pay run. A quarterly obligation can be met by a diligent person with a calendar reminder. A per-payday obligation with a receipt deadline has to be met by a system.

Which is genuinely better for employees. They get their super as they earn it instead of up to three months later. But it does mean that “I’ll sort the payroll properly once we’re a bit more established” is no longer a survivable plan.