Can sole traders hire employees?

Your business is booming. Orders are coming in faster than you can fill them, and the late nights are starting to pile up. You’re ready to bring someone on board. But can you hire staff as a sole trader?

The short answer is yes. But hiring as a sole trader comes with new responsibilities. You’ll take on the legal obligations of an employer, from paying superannuation and getting Workers Compensation to meeting Fair Work standards. But with the right setup, hiring employees as a sole trader can help you scale faster, work smarter, and finally get some breathing room.

What is a sole trader?

A sole trader is an individual who runs and owns their business entirely on their own. It’s the simplest business structure you can choose in Australia and one that offers full control over how you operate. You make the decisions, manage the finances, and take responsibility for the outcomes.

As a sole trader, you and your business are one and the same. That means you’re personally responsible for the debts and obligations of the business. It’s easy to set up, cost-effective, and ideal for anyone starting small or testing a business idea before scaling further

Can a sole trader hire staff?

Yes, sole traders can legally hire employees in Australia. There’s no rule that says you have to run your business entirely on your own.

You can even employ family members, such as your spouse or children, as long as you follow the same legal and tax requirements that apply to any employer. You can also hire independent contractors or freelancers if that better suits your workload.

There’s no cap on how many people a sole trader can employ. You can build a team as big or as small as your business demands, as long as you stay compliant with Fair Work and ATO requirements.

What are a sole trader’s obligations as an employer?

Once you decide to hire staff as a sole trader, you’ll take on a few key legal and financial responsibilities designed to protect your employees. Here’s what you’ll need to cover before your first employee starts.

PAYG withholding

You’ll need to register for Pay As You Go (PAYG) withholding with the Australian Taxation Office (ATO). This allows you to deduct income tax from your employees’ wages and send it directly to the ATO on their behalf. It’s a key part of managing payroll correctly and keeping your business compliant.

Workers’ Compensation insurance

Workers’ Compensation insurance is mandatory in every state and territory. It protects both you and your employees if someone is injured or becomes ill due to their work. Make sure your policy is in place before your staff begin working and check your state or territory’s rules to make sure your policy meets local requirements.

Superannuation

Employers in Australia are required to pay superannuation contributions for eligible staff. These payments go into your employees’ nominated super funds and must be made regularly at the current Super Guarantee rate. Paying super on time is a legal requirement and helps your employees plan for the future.

Fair Work compliance

Every business, including sole traders, must follow Fair Work laws. This means paying at least the minimum wage, providing correct leave entitlements, and issuing payslips. You should also be aware of any industry-specific awards that apply to your employees. Staying compliant keeps your team happy and your business out of trouble.

Workplace safety

As an employer, you’re responsible for providing a safe and healthy work environment. This means identifying risks and following your state’s Work Health and Safety (WHS) regulations. Safe workplaces help prevent injuries and support productivity.

Hiring employees vs contractors

You might find yourself wondering whether to hire an employee or bring in a contractor. Both options can help your business grow, but they come with different responsibilities and legal obligations.

Employees are part of your business. They follow your direction on how, when, and where work is done. You’re responsible for their tax, superannuation, and entitlements like annual leave, personal leave, and notice of termination. This option works best when you need regular, reliable help and want someone who can grow with your business long term.

Contractors are independent operators. They manage their own tax, insurance, and super, and they usually work for multiple clients. They’ll invoice you for their services and decide how the work gets done, as long as it meets your agreed outcome. Contractors are ideal for short-term or project-based work, especially when you need specific expertise without the long-term employment costs.

It’s important to get this distinction right. Treating a worker as a contractor when they should be an employee is known as “sham contracting”, and could lead to serious penalties or claims.

Set yourself up for success with the right cover

Bringing on your first employee is a big step, as it also means new risks to consider. Before your team gets to work, it’s important to make sure your insurance is up to date and suited to your growing business.

Workers’ Compensation insurance is mandatory if you employ staff in Australia. It provides financial protection if an employee suffers a work-related injury or illness. Workers’ Comp could help cover medical bills, wages, and rehabilitation costs.

It would also be a good idea to review your existing business insurance to make sure it extends to employee activities. If your current cover only protects you as an individual, it may need updating before your team officially starts.

With BizCover, you can review and update your cover with just a few clicks. Compare multiple quotes online, customise your policy to fit your unique business needs and get covered in minutes. It’s fast, simple and drama-free.

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