Anja Pich is a commercial lawyer and the Managing Lawyer at Lawpath. She practises across all areas of commercial law and advises businesses of every size, from first-time founders to established companies, on their legal, regulatory and commercial needs.
Can a sole trader have employees? Yes. A sole trader in Australia can have employees (full-time, part-time or casual) and there’s no limit on how many. The trade-off is that every employer obligation lands on you personally: minimum pay, super on every payday, tax withholding, workers’ compensation and records.
Most sole traders delay their first hire for months. Usually it’s because the admin looks bigger than it is. In practice it’s about ten setup tasks, most of which you do once, and the ones that actually hurt people are the two or three nobody warns you about. We’ll flag those as we go.
- Sole traders can legally employ staff, with no cap on numbers. “Sole trader” describes who owns the business, not how many people work in it.
- Super is now paid every payday, not quarterly. From 1 July 2026, contributions at 12% of qualifying earnings must reach the employee’s fund within 7 business days of each payday.
- The minimum wage is $26.44 an hour from 1 July 2026. Many roles are covered by a modern award with a higher rate, so check the award before you advertise.
- Workers’ comp must be in place before day one. It’s compulsory in every state and territory once you employ anyone, even one casual.
- Your personal assets back every employee obligation. Unpaid wages, super and injury claims are your debts, which is why many sole traders incorporate around their second or third hire.
Can a sole trader have employees in Australia?
Yes. A sole trader is simply one person who owns and runs a business under their own ABN. Nothing in that structure stops you taking on staff, and there’s no headcount at which the law forces you to become a company.
A common wrong assumption: “I’ll need to set up a company before I can hire anyone.” You don’t. Plenty of tradies, clinics and cafés run for years as sole traders with a handful of employees. What you can’t do is employ yourself. As a sole trader you and the business are the same legal person, so you take drawings, not a wage.
So the real question isn’t whether a sole trader can have employees. It’s whether you’re ready to carry the risk personally. That’s the next section.
What changes the day a sole trader hires staff?
Two things change. You become an employer under the Fair Work Act 2009 (Cth), with the same duties as a business with 200 staff. And because a sole trader has unlimited liability, every one of those duties is personal.
Here’s what that means in plain terms. If you underpay wages, miss super or an employee is injured without cover, the claim is against you, not a company. Your house, savings and car are all on the table. Since 1 January 2025, intentionally underpaying an employee is also a criminal offence under federal law.
One more trap most first-time employers miss. Your workers’ comp policy covers your employees. It doesn’t cover you, because a sole trader isn’t a “worker” under state schemes. If you get hurt on the job, you need separate personal accident or income protection cover.
How to employ someone as a sole trader in Australia: your first-hire checklist
Do these in order. Steps 1 to 4 need to be finished before your employee’s first shift. The rest happen in the first week.
- Check your ABN is active. Your payroll, super and PAYG registrations all hang off it.
- Register for PAYG withholding with the ATO. This has to happen before you make your first payment. You’ll report and pay the withheld tax through your BAS.
- Set up Single Touch Payroll software. Every employer reports wages, tax and super to the ATO each payday through STP. Plenty of low-cost options exist for businesses with one to four employees.
- Take out workers’ compensation insurance. Your state regulator runs the scheme (icare in NSW, WorkSafe Victoria, WorkCover Queensland and so on). Premiums depend on your industry and wage bill.
- Find the right modern award and classification. The award sets minimum pay, penalty rates, overtime and breaks. Get this wrong and you’re underpaying from week one.
- Put a written employment agreement in place. Our full-time employment agreement covers hours, pay, leave, confidentiality, IP and notice in one document.
- Hand over the Fair Work Information Statement. Every new employee gets one. Casuals also get the Casual Employment Information Statement.
- Collect a TFN declaration and super choice form. No choice form? Request the employee’s stapled super fund from the ATO rather than guessing.
- Confirm their right to work. For anyone who isn’t an Australian citizen or permanent resident, check VEVO. Our guide to hiring migrant workers legally covers visa conditions.
- Start your records on day one. Keep time and wage records for 7 years and issue a payslip within one working day of each payday.
Add a work health and safety policy once someone starts. Under WHS law you’re a “person conducting a business or undertaking”, and a written policy is the easiest way to show you’ve thought about the risks.
What does a first employee actually cost a sole trader?
More than the hourly rate. That gap is where cash flow goes sideways for new employers, so work it out before you post the job ad.
Take a part-time admin assistant on 20 hours a week at $30 an hour. That’s $600 a week, or $31,200 a year. Add 12% super and you’re at $34,944. Then add your workers’ comp premium, plus cover for four weeks of annual leave and ten days of personal leave a year (pro rata for part-timers), when you’re paying for hours nobody is working.
Payroll tax is the cost you probably won’t face. It only kicks in once your Australian wages pass your state’s threshold, which is $1.2 million in NSW and at least $1 million everywhere else. A sole trader with a few staff sits well below that.
Which type of employee should a sole trader hire first?
Pick the arrangement that matches the work, not the one that feels cheapest. Here’s how the options compare.
| Type | Best for | What to watch |
|---|---|---|
| Casual | Irregular, unpredictable hours | 25% loading on top of the base rate. A regular casual can ask to go permanent after 12 months (6 months for employers with 15 or more staff). |
| Part-time | Steady hours under 38 a week | Leave accrues pro rata. Write the minimum and maximum hours into the agreement. |
| Full-time | A core role you need every week | Full NES entitlements from day one, including notice on termination. |
| Apprentice or trainee | Trades and skills you want to build in-house | Training contract obligations, with government incentives in some cases. |
| Contractor | Defined projects or specialist skills | Not an employee. If you control how, when and where they work, they probably are one. |
Our take: most first hires should be part-time, not casual. Casual looks flexible, but the loading makes it dearer per hour. And if the hours turn regular, you’ve built a permanent role anyway, just without the paperwork to match. Our guide to the National Employment Standards sets out what each type is owed.
Employee or contractor? The mistake that costs sole traders most
Many sole traders try to dodge the employer checklist by calling their helper a contractor. It rarely holds up. Since 26 August 2024, the Fair Work Act looks at the real working relationship as a whole, not just what the contract says.
If you set the hours, supply the tools, supervise the work and the person has no other clients, a court will likely treat them as an employee. That exposes you to back-pay, unpaid leave and penalties for sham contracting. Super is also payable to contractors paid mainly for their labour, even when the contractor label is genuine.
Not sure which side of the line someone falls on? Read our breakdown of the difference between a contractor and an employee. If it’s a genuine contract, document it properly with a contractor agreement.
How does Payday Super change things for sole traders?
A lot of older advice (including our own previous version of this article) tells you to pay super quarterly. That’s no longer the rule. From 1 July 2026, you pay super at the same time as wages, and the money has to land in the employee’s fund within 7 business days of payday.
Three things to action now. Calculate 12% on each employee’s “qualifying earnings”, a new ATO term that combines ordinary time earnings with some other payments. Stop relying on the ATO’s Small Business Superannuation Clearing House, which closed permanently on 1 July 2026. And use payroll software that pays super in the same run as wages.
If a payment is late, the ATO now assesses the super guarantee charge for you. It has promised a softer approach for honest mistakes in the first year (to 30 June 2027), but not for employers who aren’t trying to pay each payday. Our explainer on how superannuation works for employers covers the basics.
Can a sole trader employ family members?
Yes, and it’s one of the most common first hires. Your partner, adult kids or a sibling can all be employees. The rules don’t soften because you share a surname: award rates, super, PAYG and workers’ comp all apply.
Where this goes wrong is the tax deduction. If you pay a family member more than the work is worth, the ATO can deny the deduction for the excess. Pay a market rate for real work, keep timesheets, and put it in writing like you would for anyone else. Hiring someone under 18 also triggers state child employment rules, so check those first.
What we see in Lawpath consultations
Our lawyers and accountants speak with small business owners about staffing every week. These are the patterns that come up again and again with first-time employers.
Wages get booked as a single expense
Our accountants regularly find pay runs coded straight to “wages” with nothing going to the liability accounts. Each pay run needs to split into wages payable, PAYG withheld and super payable. Skip that and your BAS figures drift, and you can’t see what you owe the ATO until it’s overdue.
Changing hours or pay later needs consent
Employers often assume they can trim hours or pay when things get quiet. You can’t do it on your own. Reducing either needs the employee’s agreement, documented in a signed variation, and it can never drop below award or NES minimums. If you want flexible part-time hours, set a guaranteed minimum and a maximum in the agreement from the start.
“Work experience” that’s really work
A consistent risk our lawyers flag: unpaid placements where the person does productive work. If they’re serving customers or finishing jobs you’d otherwise pay for, they’re likely an employee. Worse, an unpaid non-employee may fall outside your workers’ comp policy, leaving an injury gap that sits with you.
Switching to a company with staff already on board
When a sole trader incorporates, the company becomes the new employer. Staff need new employment agreements with the company, and you need to decide how their accrued leave is handled. Money you move from the old business into the company is usually a loan, not an expense, so tell your accountant before you start shifting funds.
When should a sole trader with employees switch to a company?
There’s no legal trigger. Still, the case for a company gets stronger with every person you add, because every hire adds personal exposure. Here’s the short version.
| Sole trader with staff | Company with staff | |
|---|---|---|
| Liability for employee claims | Personal and unlimited | Generally limited to the company (directors can still be liable in some cases) |
| Tax on profit | Your personal marginal rate | 25% for base rate entities |
| Admin | Lower | ASIC annual review, director duties, separate accounts |
| Paying yourself | Drawings only | You can be an employee of your own company |
Signs it’s time: you’re hiring a second or third person, your work carries injury or property risk, clients want to contract with a company, or your profit has climbed into the higher personal tax brackets. Our step-by-step guide to changing from a sole trader to a company walks through the switch, and you can register a company online in one sitting.
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Frequently asked questions
Can a sole trader have employees?
Yes. A sole trader can have employees in Australia and there’s no limit on how many. You take on the same obligations as any employer, including award wages, super each payday, PAYG withholding and workers’ compensation, and you’re personally liable for all of them.
How many employees can a sole trader have?
As many as you need. No law caps the headcount or forces you to incorporate at a set number. The practical limit is risk: with more staff, your personal exposure grows, so many owners switch to a company once the team grows past two or three.
Can a sole trader pay themselves a wage?
No. You and your business are the same legal person, so you can’t employ yourself. You take drawings from the business profit and pay tax on that profit through your personal return. Super for yourself is optional but worth setting up.
Do I need workers’ compensation for one casual employee?
Yes. Workers’ comp is compulsory in every state and territory once you employ anyone, whatever their hours. Take out the policy before their first shift. It won’t cover you as the owner, so arrange personal accident cover separately.
Do sole traders have to pay super for employees?
Yes. From 1 July 2026, you pay 12% of qualifying earnings each payday, and it must reach the employee’s fund within 7 business days. This applies to full-time, part-time and casual staff, and to contractors paid mainly for their labour.
Can a sole trader employ their spouse?
Yes. Your spouse can be a genuine employee with a written agreement, award wages, super and PAYG. Pay a market rate for real work and keep timesheets, because the ATO can deny deductions for payments to relatives that exceed what the work is worth.
Do I need a written employment contract?
It’s not strictly required, but you’d be taking a big risk without one. A written agreement sets out pay, hours, duties and notice, protects your confidential information and IP, and gives you something to point to if a dispute comes up.
Can I run an unpaid trial shift?
Only in narrow cases. The Fair Work Ombudsman’s view is that an unpaid trial must be limited to showing the person’s skills, last only as long as needed, and happen under your direct supervision. If they do productive work, pay them.
Does the Small Business Fair Dismissal Code apply to sole traders?
Yes, if you have fewer than 15 employees. Staff can’t make an unfair dismissal claim in their first 12 months, and following the Code gives you protection when a dismissal is challenged. You still need a valid reason and a fair process.
Do sole traders pay payroll tax?
Only above your state’s threshold. Payroll tax is a state tax on total Australian wages, and thresholds start at $1 million, with NSW at $1.2 million. Most sole traders with a small team never reach it.
You’re ready for this
Needing help is a good problem. It means the business is working. Every employer you admire started exactly here, with one hire and a checklist, and most of it is set-and-forget once it’s done.
Get the foundation right and the rest follows. If you’d like a lawyer to check your award, contract or structure before day one, our employment lawyers can help. Otherwise, start with the one document every employee needs: create your employment agreement today.
