Global Payroll — 8 min
Australia — 10 min
Employment laws in Australia: how to hire and stay compliant
Written by
Shay Ogunsanya
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Australia is renowned for its highly educated and talented workforce, with a history of outstanding achievement in a diverse range of industries. The economy is stable and open to businesses from all over the world. The country is further supported by a well-established legal and regulatory framework that encourages business growth and development.
In addition, Australia's diverse and multicultural society makes it an attractive location for companies seeking top talent. However, managing hiring, payroll, and compensation plans while adhering to local employment law in Australia can be challenging.
This guide provides a comprehensive overview of Australian employment law. It also provides insights into statutory employment rights, managing employee offboarding, and employee misclassification risks in Australia.
Jump straight to a key chapter
Following these insights will enable you to attract and retain top talent in Australia while remaining compliant.
Understanding key labor laws in Australia
Australia has a robust system of labor laws in place to protect the rights of employees and ensure fair treatment in the workplace. Understand these laws to maintain workplace compliance and avoid legal issues. A few of the key labor laws in Australia are as follows:
Fair Work Act 2009: The Fair Work Act is the main federal legislation governing employment conditions and workplace relations in Australia. It includes provisions for minimum wages, leave entitlements, and dispute resolution.
National Employment Standards (NES): These standards are established under the Fair Work Act. They set out the minimum employment entitlements for all employees covered by the national workplace relations system (most private-sector employees in the country), such as annual leave, personal/carer's leave, and public holidays.
Work Health and Safety Act: The Work Health and Safety (WHS) laws were earlier referred to as Occupational Health and Safety (OHS) laws, which varied between states and territories in Australia. The goal of introducing WHS legislation was to standardize such laws across Australia. Most states have adopted the model WHS legislation. However, Western Australia has its version of the WHS legislation, and Victoria still follows OHS regulations.
Anti-discrimination laws: These laws protect employees from discrimination based on factors such as race, gender, age, and disability.
Privacy Act 1988: These laws govern the collection, use, and storage of personal information, including information about employees.
Superannuation Guarantee (SG) laws: It requires employers to make superannuation (pension) contributions to an employee fund.
Fair Work Information Statement (FWIS): Employers provide new employees with an FWIS at the time of commencing work. It contains information about the NES, individual agreements, and the Fair Work Commission (FWC).
Do employment laws in Australia vary by state?
Employment laws in Australia do vary by state. The Fair Work Act 2009 is the primary federal legislation governing employment in Australia, and it applies to all employers and employees across the country. This Act sets out the minimum terms and conditions of employment, such as wages, leave entitlements, hours of work, termination of employment, and more.
At the same time, each state has legislation that supplements or modifies the Fair Work Act 2009. For example, New South Wales has its Industrial Relations Act 1996, which provides additional protections for employees in areas such as unfair dismissal and anti-discrimination.
Other states have similar local legislation. Take these into account when hiring employees in the respective states.
What do you need to know before hiring an Australian employee?
There are a few employment conditions in Australia that you need to know before hiring an employee in the country. Firstly, you must maintain a safe workplace and meet Australian occupational health and safety requirements.
You should also keep records of employment and provide minimum statutory employee benefits such as annual leave and parental leave. You also have to ensure that employees have evidence of right-to-work in Australia and adhere to the NES requirements.
NES has set a few minimum standards of employment, which include the following:
Maximum working hours
Flexible work arrangements
Parental leave
Annual leave
Community service leave
Public holidays
Notice of termination
Fair Work Information Statement (FWIS)
Casual Employment Information Statement (CEIS)
Casual conversion
Furthermore, to employ someone legally in Australia, you need to set up a legal entity in the country. This requires registering with the Australian Taxation Office, obtaining an Australian Business Number (ABN), and paying taxes according to the relevant laws.
Alternatively, you can use the support of a global employment partner like Remote, who will assist with hiring, payroll services, compliance, taxes, and other HR-related tasks.
Employ in Australia with ease
Remote simplifies the process of employing in Australia. Remote's service includes localized contracts, streamlined invoice management, and unparalleled compliance support, enabling you to expand your global workforce with peace of mind.
Remote's local legal entity in Australia handles payroll, benefits, taxes, and compliance for your team in the country. Read Remote's guide about employing in Australia to explore your options for hiring employees in the country.
The Australia salary calculator: how to calculate the total cost of an Australian employee?
Remote's free Employee Cost Calculator is a valuable tool for understanding the costs involved in hiring employees in Australia and globally. The calculator breaks down each line item, including statutory benefits, according to Australian labor laws. This tool makes it easier for organizations to budget and plan for global hires.
Budget your next hire with our free Cost of Employment Calculator
Use the calculator to find the total cost to hire an employee in a new country including all government mandated contributions.
Statutory employment rights in Australia
Employees in Australia are entitled to certain rights, such as workers' compensation, basic health insurance, and the statutory minimum wage.
It is important to note that while the primary means of regulating the employment relationship is through contract law, Australian labor laws must always be considered. By understanding these rights and laws, you can ensure a safe and fair workplace for your employees.
What is the minimum wage in Australia?
As of 1st July 2023, the minimum wage in Australia stands at AUD 23.23 per hour or AUD 882.80 per 38-hour week. Remember that the minimum wage is just that, a minimum, and does not necessarily reflect the right compensation justifying a worker's skills and experience.
You should consider paying higher wages if you can afford it, as this will help attract and retain quality team members who can contribute to the success of your business.
What are the standard working hours in Australia?
The standard work week in Australia is 38 hours, generally spread across five days from Monday to Friday, with the average work day clocking in at 7.6 hours.
This standard is in accordance with the maximum weekly hour fact sheet provided by the Fair Work Ombudsman. You can ask an employee to work reasonable extra hours in a particular week, but the average during four weeks should not exceed 38 hours per week.
What is the overtime rate in Australia?
Overtime pay in Australia is one and a half times the employee's ordinary rate of pay for the first two hours of overtime worked. After this, you must pay employees 200% of the minimum hourly rate for additional hours worked.
In Australian labor parlance, modern awards are documents that outline legal minimums for entitlements and working conditions. Industry or job-specific awards may apply to you and your employee. Depending on the award, you should also pay penalty rates for employing odd hours on any day. It is important to note that you cannot legally refuse to pay overtime rates if required by an applicable award or agreement.
How do probation periods work in Australia?
The employer determines how long the probationary period will be. It could be anywhere from a few weeks to a few months. Generally, a probation period in Australia ranges between three and six months.
The Fair Work Act also outlines a minimum employment period before an employee can access an unfair dismissal claim. For companies with more than 15 employees, the minimum period is six months; for small businesses with 15 or fewer employees, it is 12 months.
What discrimination protections does Australia provide for workers?
Australia provides various discrimination protections for workers, including federal, state, and territory laws that protect people from discrimination and harassment.
For example, the Sex Discrimination Act 1984 (SDA) makes it illegal to discriminate against people because of their sex, gender identity, sexual orientation, marital status, pregnancy, or because they are breastfeeding.
The Fair Work Act 2009 prohibits employers from subjecting employees or potential employees to unfavorable treatment based on discriminatory grounds.
Can employees in Australia join unions?
In Australia, employees have the right to join or refuse to join a union under the principle of freedom of association. This right is protected by the Fair Work Act 2009, which grants both employees and independent contractors such workplace rights.
Are there collective bargaining agreements in Australia?
Yes, collective bargaining agreements are in place in Australia for many industries, including health care, hospitality, and retail. These agreements can cover wages, working hours, overtime pay, job security, and other benefits.
Collective bargaining agreements offer protection to employers and employees by setting the terms of employment, which include rules about wages, conditions, and entitlements.
In Australia, the Fair Work Act 2009 gives employees and unions the right to negotiate with an employer for a collective agreement. An application for approval of a collective agreement is negotiated between the unions or employee representatives and the employer before submitting it to the Fair Work Commission for approval.
Can companies drug test employees in Australia?
In Australia, you do not have an automatic right to drug test your employees. You have to establish a comprehensive drug and alcohol policy for the workplace before conducting such drug tests.
Drug tests are typically conducted using either a urine or saliva sample, with urine being the “gold standard” and more cost-effective. You must ensure that any drug test is conducted following all relevant laws and regulations.
What is the relevant workers' compensation legislation in Australia?
Workers' compensation is a compulsory statutory form of insurance for all employers in every state and territory in Australia.
Australia has 11 main workers' compensation schemes, each governed by different laws. These schemes may differ in the way they are operated and implemented but cover most employees who are injured or get sick at, or because of, their work.
Under these schemes, you are required to take out workers' compensation insurance to cover such incidents at work. This insurance protects employees by covering medical bills and wages if they are unable to work following an injury or illness related to the job.
What are the unique considerations for employers hiring in Australia?
Hiring employees in Australia comes with a unique set of considerations. You must be familiar with modern awards, enterprise (collective bargaining) agreements, and employment contracts.
You should also consider creating written employment contracts for employees. Although an employment contract is not mandatory in Australia, it can provide clarity for both the employer and the employee.
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Managing employee offboarding in Australia
Properly managing the offboarding process for employees is crucial for any organization. Offboarding helps to ensure a smooth transition for both the employee and the company. When done correctly, it can be a positive experience for all parties involved.
By understanding the employee offboarding requirements in Australia, you can also ensure that you are compliant with Australian employment laws.
Does at-will employment exist in Australia?
At-will employment does not exist in Australia. According to the Fair Work Commission, there is no contractual right to dismiss an employee at-will. Instead, your employees are entitled to a minimum notice period between one and four weeks, depending on the length of employment. A longer notice period can be contractually agreed upon.
How do you terminate an employee in Australia?
Terminating employees in Australia is subject to the National Employment Standards, which are set out by the Fair Work Act 2009. Generally, it is necessary to provide written notice of the final day of employment before terminating an employee's contract.
An employee can challenge the dismissal with the Fair Work Commission. The Fair Work Commission considers all relevant circumstances when determining if a dismissal is harsh, unjust, or unreasonable.
However, if you're a small business owner and your business has fewer than 15 employees, different rules for dismissal may apply.
Are terminated employees in Australia entitled to severance pay?
According to Section 119 of the Fair Work Act 2009, if your employee becomes redundant, you must pay the redundancy pay, also known as severance pay. It is applicable when you terminate an employee's tenure at your initiative because you no longer require the service.
This payment is based on the number of years worked and can range from four weeks' salary up to 16 weeks' salary.
Differences between an employee and contractor in Australia
When hiring employees and contractors in Australia, it is important to understand the regulations that differentiate the two.
What regulations separate employees and contractors in Australia?
The Independent Contractors Act 2006 (ICA) is a federal legislation that outlines the legal responsibilities, liabilities, and rights of independent contractors and clients in service agreement arrangements.
The ICA distinguishes between employees and independent contractors by defining an independent contractor as someone engaged under a services contract, which outlines the work to be provided. An employee, on the other hand, is defined as someone who works under an employment contract and is subject to certain rights and entitlements such as minimum wages, annual leave, sick leave, etc.
The ICA also provides a national unfair contracts remedy scheme for independent contractors in cases where they feel they have been treated unfairly.
Can employers hire employees on fixed-term contracts in Australia?
Yes. A fixed-term contract is an employment agreement that lasts for a specific period and ends when the agreed-upon date arrives.
Fixed-term contracts are usually used to employ staff for a specific project/task or period. Employees on a fixed-term contract have the same rights as permanent employees, including entitlements such as leave and superannuation.
However, there are restrictions on how long a fixed-term contract can last, and you must ensure you comply with relevant laws when entering these agreements with your employees.
What are the misclassification laws and penalties in Australia?
In Australia, the Fair Work Act 2009 extends its protections and labor standards to all workers, including on-demand contracting arrangements.
Misclassification of employees as independent contractors can lead to significant financial penalties for employers, including fines and back-payments of employee entitlements and interest.
In addition, your company may be held liable for the misclassification of employees as contingent workers, as your company is legally responsible for meeting pay-as-you-go (PAYG) obligations.
The fast, simple, compliant way to hire in Australia
Australia is known for its highly skilled workforce, but it also has strict regulations governing the hiring process. These employment laws and hiring requirements can be challenging to navigate. However, you must still ensure compliance to avoid potential legal consequences.
Partnering with a company like Remote can greatly simplify the process of expanding hiring efforts into new countries, including Australia. Remote offers a range of services that can handle hiring, payroll processing, benefits management, employee onboarding, taxes, and more. This allows businesses to focus on other important aspects of operations.
G2's Spring Report 2023 has ranked Remote as no. 1 in the G2 multi-country payroll, contractor management, and contractor payments software categories.
Remote has an extensive employer of record (EOR) service for full-time and part-time employees, as well as paying workers as contractors. Using Remote as an EOR allows you to pay your Australian employees while reducing the risk of compliance issues. With expertise in setting up a global compensation plan, international payroll, and benefits, Remote can assist with every step of your hiring process in Australia.
Don’t let compliance in Australia be a burden. With Remote's expert team by your side, you can confidently take the first step toward expanding your business into the country.
Check out Remote’s EOR services to learn how we can make it easy for you to build and expand your Australian workforce! Or, try our Employee Cost Calculator for insights into the potential expenses of hiring remote workers in Australia.
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