When to hire your first employee: a financial checklist

The wage is the smallest part of the cost, and the obligations start the day they do. Here is what to work through before you make the offer.

Hiring your first employee is one of the bigger decisions a small business makes, and the wage is the least interesting part of it.

Here is what to work through first.

Work out the real cost, not the wage

The salary is the starting point, not the number. On top of it sit superannuation at 12 percent of qualifying earnings, workers compensation insurance, payroll tax if you cross your state's threshold, leave that accrues from day one, and the equipment, software and space the person needs to do the job.

Then add the invisible one: your time. A new employee needs training, direction and management, and in the first months that comes out of the most valuable hours you have.

A reasonable planning assumption is that an employee costs meaningfully more than their wage. Build your numbers on the full figure.

Check the cash flow shape, not just the annual sum

A business can afford a salary across a year and still fail to afford it in October.

Wages are one of the most rigid commitments you can take on. They go out on the same day whether or not your customers have paid you. Before you hire, look at your cash position week by week across your worst months, not your average ones, and confirm you can carry the cost through a slow patch without relying on a debtor paying on time.

If it only works when everyone pays promptly, it does not work.

Understand what starts the day they do

Employing someone brings a set of obligations that begin immediately, not when you get around to them.

PAYG withholding. You withhold tax from their pay and report it to the ATO.

Single Touch Payroll. Pay details are reported to the ATO each pay run, not annually.

Superannuation, on the new timing. Since 1 July 2026, super has to reach the employee's fund within seven business days of payday, with a longer window of 20 business days for a new employee's first payment. This is a real change from the old quarterly cycle, and it applies to businesses of every size.

Fair Work obligations. The correct award, the correct rate, record keeping, and the Fair Work Information Statement.

Workers compensation. Required from the first employee.

None of this is unmanageable. All of it is worth having set up before the person starts rather than after.

Sanity check the decision itself

Three questions worth sitting with.

Is the work permanent, or is it a busy patch? A contractor or a temporary arrangement may fit better than a permanent hire. Be careful here though, because the difference between an employee and a contractor is a matter of the actual working relationship, not what the agreement calls it, and getting it wrong is expensive.

Will this person generate revenue, or free you to? Both are legitimate. But you should be able to say which, and roughly what it is worth.

What happens if it does not work out? Have a view on probation, on what good looks like at three months, and on what you would do if the answer is no.

The short version

If the full cost works in your worst month, the obligations are set up before day one, and you can say clearly what the role is for, you are ready. If any of those are shaky, the hire is probably a few months early rather than wrong.

Worth modelling properly before you commit. It is a much easier conversation before the offer than after it.