A sole trader can have employees in Australia. business.gov.au says you can employ people under the sole trader business structure.
The answer to "can a sole trader have employees" is yes, but hiring makes you an employer. Before the first payday you register for PAYG withholding, set up super and Single Touch Payroll, check the award and arrange workers compensation. Hiring is also a common point to review your business insurance for sole traders.
Cover depends on the policy and insurer you choose. Check the policy wording and its terms and conditions for what is and isn't included.
Can a sole trader have employees without becoming a company?
A sole trader can have employees without becoming a company. Hiring staff makes the owner an employer, with tax, super, workplace and insurance obligations to each employee. The guide to what a sole trader is explains how the structure works.
In short: a sole trader with employees is still a sole trader. The structure stays the same, and the owner adds employer registrations, payroll reporting and workers compensation.
The table sets out the main steps, when each applies and where the rule comes from.
| Step | When it applies | Primary source |
|---|
| Register for PAYG withholding | Before the first payment you withhold tax from | business.gov.au: register for PAYG withholding |
| Collect a tax file number declaration | When the employee starts | business.gov.au: hiring employees guide |
| Give the Fair Work Information Statement | Before, or as soon as possible after, the employee starts | Fair Work information statements |
| Offer a super choice form | Within 28 days of the start date | business.gov.au: hiring employees guide |
| Pay the super guarantee at 12% of qualifying earnings | Received by the fund within 7 business days after each payday | ATO: paying super for your employees |
| Report pay through Single Touch Payroll | Each time you pay an employee | ATO: how to report STP data |
| Give a pay slip | Within one working day of paying the employee | Fair Work: pay slips |
| Arrange workers compensation | Where workers fall within your state or territory scheme | Safe Work Australia: workers compensation |
| Keep employment records | For 7 years | business.gov.au: employee records |
Swipe left or right to see the full table.
How does a sole trader register for PAYG withholding?
A sole trader registers for PAYG withholding before paying the first wage. According to business.gov.au, you must register for PAYG withholding before you make the first payment you withhold tax from.
Pay as you go (PAYG) withholding is the tax you take out of an employee's wages and send to the ATO. You ask each new employee for a tax file number declaration. The business.gov.au hiring guide says that without a tax file number, you withhold tax at the highest rate.
Your own drawings are treated differently. Money you take out of the business to pay yourself is a personal drawing, not a wage, so no withholding applies to it. The guide to how to pay yourself as a sole trader explains drawings in more detail.
Single Touch Payroll and your activity statement
Single Touch Payroll (STP) is the system employers use to report pay, tax and super to the ATO each time they pay staff. The business.gov.au guide says you use STP-enabled software or a service provider, and complete a finalisation declaration by 14 July each year.
You report the PAYG tax withheld from wages on your business activity statement. The step-by-step guide to registering for PAYG withholding walks through the registration screens.
How much super does a sole trader pay employees?
A sole trader pays the super guarantee at 12% of each eligible employee's qualifying earnings. The ATO sets out this super guarantee rate for employers.
Payday super started on 1 July 2026. From that date, the ATO says super must reach the employee's fund within 7 business days after each payday. You also report qualifying earnings and super liability through Single Touch Payroll.
For a new employee, the business.gov.au hiring guide allows 20 business days for the first contribution. Super is paid electronically through SuperStream, the ATO's data and payment standard.
What Fair Work rules apply to sole trader employees?
Sole traders with employees follow Fair Work rules on pay, leave and conditions. The rules come from awards, the National Employment Standards and record keeping laws.
Award rates and minimum entitlements
An award sets the minimum pay and conditions for an industry or occupation. The business.gov.au hiring guide says most employees are covered by an award. You can look yours up on the Fair Work list of awards or the Pay and Conditions Tool.
Employees not covered by an award or agreement are still entitled to a minimum wage and the National Employment Standards (NES). The NES include maximum working hours and leave entitlements. Fair Work publishes the current minimum wages on its website.
Information statements for new employees
The Fair Work Information Statement is a Fair Work document for new employees. You give it to each new employee before, or as soon as possible after, they start working for you. Casual and fixed-term employees also receive their own information statement, according to the business.gov.au guide.
Pay slips, pay frequency and records
The business.gov.au hiring guide says you must pay your employee at least monthly. It also says you must give a pay slip within one working day of paying them.
According to business.gov.au, you are legally required to keep some employment records for 7 years. Some records relating to an employee's tax and super are kept for 5 years.
Do sole traders with employees need workers compensation?
Workers compensation is required where workers fall within the relevant state or territory scheme. Safe Work Australia says employers must have insurance under Australian law. The insurance is for workers who get sick or injured because of work.
Workers compensation insurance is designed to pay benefits if a worker is injured or becomes ill because of work. There are 11 main schemes, and each state and territory runs its own. The table shows who to contact and when a policy is generally needed.
| State or territory | Who issues workers compensation policies | When a policy is generally needed |
|---|
| New South Wales | icare is the contact for taking out a policy | Employers, unless exempt: annual wages of $7,500 or less, no apprentice or trainee and not part of a group |
| Victoria | WorkSafe Victoria, with its agents helping employers register | Employers of workers in Victoria, unless remuneration is $7,500 or less in a financial year and there are no apprentices |
| Queensland | WorkCover Queensland or a self-insurer | Queensland-based employers who employ workers |
| South Australia | ReturnToWorkSA | Employers of workers based in South Australia, unless total payments to workers are under $16,806 for 2026-27 |
| Western Australia | Insurers approved by WorkCover WA | Employers, as a legal requirement under the WA scheme |
| Tasmania | A licensed insurer, or the employer holds a self-insurance permit | Employers, under section 97(1) of the Tasmanian Act |
| Northern Territory | Insurers approved by NT WorkSafe | Employers, who obtain a compulsory policy from an approved insurer |
| Australian Capital Territory | An approved insurer | Employers, with a current policy covering their workers in the ACT, including Pty Ltd companies with one or more workers |
Swipe left or right to see the full table.
Thresholds and rules can change, so check the scheme for your state before your first payday. The guide to whether workers compensation is compulsory explains each state in more detail.
Does workers compensation cover the sole trader?
Workers compensation generally does not cover the owner of a sole trader business. business.gov.au says that if you're a sole trader, workers compensation insurance doesn't cover you. In New South Wales, icare says sole traders cannot take out workers compensation to cover themselves for injuries.
Is your worker an employee or a contractor?
Whether a worker is an employee or a contractor depends on the working arrangement, not the label in the agreement. The ATO says employers are responsible for classifying each worker for tax and super purposes and need to get it right.
business.gov.au explains the difference in plain terms. Contractors work for themselves and are their own boss. Employees work in someone else's business, and the employer controls how, where and when they do their work.
A business incorrectly telling an employee they are a contractor is called sham contracting. Workers compensation schemes also use their own definitions of a worker, so the state scheme in the table above may apply a different test.
When might a sole trader consider a company structure?
Some sole traders review their business structure when they start hiring, because the owner carries the business's risks personally. business.gov.au says a sole trader has unlimited liability and all your personal assets are at risk if things go wrong.
Hiring staff does not oblige you to change structure. A company is a separate legal entity with its own registrations, costs and reporting.
The guide to changing from a sole trader to a company sets out the steps. An accountant can talk through whether a company fits your situation.
Insurance to consider when a sole trader hires employees
Insurance to consider when hiring commonly includes workers compensation for staff, public liability for the business and personal accident and sickness insurance for the owner. business.gov.au says employers must get workers compensation insurance from an authorised insurer.
Workers compensation insurance: Designed to pay benefits to your workers if they are injured or become ill because of their work. upcover may be able to help with workers compensation insurance in states and territories where employers choose an approved or licensed insurer.
Public liability insurance: Designed to cover claims if someone is injured or their property is damaged in connection with your business. An example is a customer tripping over an employee's equipment. Public and products liability insurance also includes products liability. Products liability is designed to cover claims for injury or damage caused by a product you sold or supplied.
Personal accident and sickness insurance: Designed to help protect your income if injury or illness stops you working. It may pay a weekly benefit, subject to the policy terms. Some owners arrange personal accident cover for themselves.
Public liability insurance commonly responds to claims from third parties such as customers, while an injured employee's claim generally falls under workers compensation. The guide to public liability insurance for sole traders explains common limits and contract requirements.
How upcover can help
upcover arranges business insurance for sole traders, including public liability and personal accident and sickness insurance. upcover works with 80+ insurance partners and can arrange quotes from a range of insurers.
- 70,000+ businesses covered
- 4.9/5 customer rating
- Certificate of currency available once your policy is confirmed
You can request a quote for sole trader insurance online. An upcover representative or a broker can talk through the options for your business.
Frequently asked questions
Can sole traders have employees on a casual or part-time basis?
A sole trader can have employees on a full-time, part-time, fixed-term or casual basis, the employment types listed in the business.gov.au hiring guide. Casual employees receive some, not all, National Employment Standards entitlements. Pay slip and record keeping rules apply to each type.
How many employees can a sole trader have?
The business.gov.au guidance on the sole trader structure says you can employ people and does not set a staff number. Other thresholds may apply as you grow, such as state payroll tax, which business.gov.au says applies above state or territory thresholds.
When does a sole trader register for PAYG withholding?
A sole trader registers for PAYG withholding before making the first payment they withhold tax from. You then report the tax withheld through Single Touch Payroll and on your business activity statement.
How much super do sole traders pay employees?
Sole traders pay the super guarantee at 12% of an eligible employee's qualifying earnings, according to the ATO. Since payday super started on 1 July 2026, contributions are due to reach the fund within 7 business days after each payday.
Can a sole trader claim workers compensation for their own injury?
A sole trader generally cannot claim workers compensation for their own injury. business.gov.au says workers compensation insurance doesn't cover sole traders. Some owners arrange personal accident and sickness insurance, which is designed to help protect income if injury or illness stops them working.
Does a sole trader need public liability insurance when hiring staff?
Public liability insurance is not a general legal requirement for sole traders, but clients, leases and contracts may ask for it. The business.gov.au hiring guide says employers should consider public liability insurance.
The information in this article is general information only and does not take into account your objectives, financial situation or needs. It is not legal, tax or financial advice. Employment, tax, super and workers compensation rules are set by the ATO, the Fair Work Ombudsman and each state and territory scheme and can change, so check business.gov.au, the ATO, Fair Work or your scheme for current requirements. Before deciding whether a product is right for you, read the policy wording and its terms and conditions. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.
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