How to Hire Your First Employee as a Tradie

Hiring your first employee is the moment your trade business stops being a solo operation and becomes a real business. It's also the moment your compliance obligations multiply, your costs go up, and your margin for error shrinks. Get it right, and you unlock the ability to take on more work, serve more customers, and build something that isn't dependent on your own two hands.

But getting it wrong, misclassifying a worker as a contractor when they're really an employee, failing to pay the correct award rate, skipping superannuation payments, can result in back-pay bills, penalties, and ATO scrutiny that can take years to resolve. The Fair Work Ombudsman and the ATO actively target trade businesses for compliance audits on these exact issues.

This guide covers the decision framework for hiring your first team member, the legal obligations you need to meet, and the true cost of employment that most tradies underestimate. We'll cover when to hire, how to classify workers correctly, and how to manage a small team without losing your mind.

Employee vs Subcontractor, Why the ATO Cares

The most expensive mistake tradies make when hiring is calling someone a subcontractor when the ATO and Fair Work would classify them as an employee. The difference matters because employees have rights and entitlements that contractors don't: minimum wage, superannuation, leave, and workers comp coverage. Misclassifying an employee as a contractor can result in back-pay claims for years of unpaid entitlements plus penalties.

The ATO's multi-factor test

The ATO uses a multi-factor test to determine whether a worker is an employee or contractor. The key factors include:

• Control, who directs the work? If you tell them when, where, and how to do the work, they're likely an employee. Contractors control their own method of work.
• Delegation, can they send someone else? If the worker must perform the work personally, that points to employment. Contractors can delegate or subcontract.
• Equipment, who provides the tools? You providing all tools and materials suggests employment. Contractors bring their own significant equipment.
• Risk, who bears the financial risk? Contractors bear commercial risk, quote for jobs, and can make a profit or loss. Employees are paid regardless.

The ATO has an online Employee/Contractor Decision Tool that walks through these factors. Use it before engaging anyone, and keep a screenshot of the result for your records.

When to Hire (And When to Subcontract Instead)

Before you hire an employee, consider whether a subcontractor arrangement would serve you better. Many tradies move too quickly to hiring when a subcontractor would be more flexible and lower-risk.

When to use subcontractors

Subcontractors are ideal for covering specific projects, seasonal surges, or specialised work you don't do regularly. They bring their own tools, manage their own tax, and you pay for output rather than time. If you need extra capacity for a 3-month project or want to add a skill you don't have (like a plumber who occasionally needs a plasterer), subcontract first.

The risk with subcontractors is that the ATO reclassifies them as employees. To protect yourself, make sure they have their own ABN, invoice you for work completed, provide their own tools, control their own work schedule, and work for multiple clients, not just you exclusively.

When to hire an employee

Hire an employee when you have consistent work volume, you need someone working alongside you regularly, and the worker doesn't bring significant tools or business infrastructure. Trade assistants and apprentices are classic first-employee hires because they work under your direction with your tools on your jobs.

Other signs it's time to hire: you're consistently turning down work because you can't do it alone, you're working 60+ hour weeks and burning out, or you've had a consistent revenue stream above $200,000 for more than a year.

Award Rates, Superannuation, and PAYG in 2026

Once you decide to hire, you enter a world of minimum entitlements that are non-negotiable. These are the key numbers for 2026.

Award rates

Most trade employees fall under the Building and Construction General On-Site Award 2020 (MA000020). The minimum hourly rate for a full-time employee in 2026 depends on their classification level. A Level 1 employee (labourer/entry-level) earns approximately $24–$26/hr, while a Level 4 employee (qualified tradesperson) earns approximately $30–$33/hr. These rates increase on 1 July each year with the annual wage review.

Use the Fair Work Ombudsman's Pay Calculator to determine the correct award classification and minimum rate for your specific situation. The award also specifies penalties for overtime, weekend work, and public holidays, all of which apply to tradie employees.

Superannuation

The superannuation guarantee rate in 2026 is 11.5%, paid on top of your employee's ordinary time earnings. You must pay super at least quarterly by the cut-off dates (28 October, 28 January, 28 April, 28 July). Late payment attracts the super guarantee charge, which is not tax-deductible, so pay on time.

Super is not required for contractors paid under an ABN, but if you classify a worker as a contractor and the ATO reclassifies them as an employee, you'll owe back super plus penalties and interest.

PAYG withholding

As an employer, you must register for PAYG withholding, withhold tax from your employee's wages according to the ATO tax tables, and report it through your BAS. You also need to issue payment summaries (now called "income statements" through ATO online services) at the end of each financial year.

Your payroll obligations are ongoing, not annual. Late PAYG withholding payments attract the General Interest Charge (GIC), and directors can be held personally liable for unpaid amounts.

Onboarding, Apprentice Programs, and Team Management

Hiring is the first step. Keeping your employee productive and happy is the real work. Here's what matters after you sign the employment contract.

Onboarding checklist

Before your employee starts a single day on the tools, you need to handle the basics:

• Employment contract, written agreement covering duties, hours, pay, leave, and termination. The Fair Work Ombudsman provides templates.
• Superannuation choice form, give them a choice of super fund (or use your default fund).
• Tax file number declaration, for PAYG withholding purposes.
• Workers compensation registration, must be in place before day one.
• Safety induction, site-specific safety briefing, PPE requirements, emergency procedures.
• Tool and equipment check, what you provide, what they need to bring, condition of shared gear.

Apprentice programs

Taking on an apprentice is one of the smartest moves a tradie can make. Apprentices are paid a percentage of the qualified trades rate (increasing each year of their apprenticeship), and the government provides financial incentives including:

• Australian Apprenticeship Incentives Program, payments to employers for hiring eligible apprentices, up to several thousand dollars per year.
• Group training organisations (GTOs), organisations that employ the apprentice and place them with host employers, handling the payroll and compliance for you.

Apprentices require supervision and training time that reduces your own productive hours. But over 3–4 years, you develop a tradesperson who knows exactly how you work, which is worth more than any external hire.

The True Cost of an Employee, Budget for It

Most tradies calculate the cost of an employee by looking at the hourly wage and calling it done. The real cost is significantly higher, and failing to budget for it is how tradies end up with unprofitable employees.

Total cost of an employee earning $35/hr (qualified tradesperson):

• Base wage: $35.00/hr
• Superannuation (11.5%): $4.03/hr
• Workers comp (7% approx): $2.45/hr
• Leave loading and accruals (~8%): $2.80/hr
• Payroll admin and overhead (~3%): $1.05/hr
• Total effective cost: ~$45.33/hr

That's a 29.5% on-cost above the base wage. For a full-time employee working 38 hours/week for 48 weeks/year, the annual cost is approximately $82,700, not the $63,840 you'd calculate from the base wage alone.

The insight: Your employee needs to generate at least 2–3x their base wage in billable revenue to be profitable. If you're paying someone $35/hr, they need to be on tools generating $70–$105/hr of billable work. If they're spending significant time on travel, cleanup, or non-billable tasks, that margin disappears fast.

Don't let the numbers scare you away from hiring. The tradies who build businesses that work without them all started with one good hire. But go in with eyes open: know the award rate, budget for the on-costs, use the ATO decision tool, and get an employment contract written properly. The cost of getting it wrong is higher than the cost of doing it right.