Complying with Australia’s payroll laws is a must if you want to hire and retain local talent. From superannuation and tax withholding to specific payslip requirements, there’s a lot to get right, and getting it wrong can lead to severe penalties.

Overseas companies can use an Employer of Record (EOR), like Payoneer Workforce Management (which supports with legally employing workers in Australia), to manage Australian payroll with compliance support, without the need to set up a local entity.

Australia payroll: Wages and other payments

In Australia, payroll management isn’t just about paying wages. It also includes meeting obligations around minimum pay, sick and parental leave, and termination payouts. 

Understanding these elements is key to staying compliant with local laws and supporting your Australian workforce.

Payroll cycle

In Australia, payroll cycles may vary. Workers are paid monthly, typically on the last day of the month. Employers aren’t legally required to adhere to a specific cycle, but payments must be made on a regular and predictable basis. 

Wages are typically paid by electronic funds transfer into the employee’s nominated bank account, and employers must issue a payslip within 1 working day of payment. Payslips must include details such as gross pay, net pay, tax withheld, and superannuation contributions.

Minimum wage

As of 2025, the national minimum wage in Australia is AUD 948 per week or AUD 24.95 per hour. Different minimum wage rates can apply to various industries or occupations, so that employees may have higher minimum wages depending on their role. 

There is no blanket law regulating overtime pay rates in Australia. Some awards include specific terms for overtime, including penalty rates (typically 150% to 200% of the base hourly rate). If no award or agreement applies, the employment contract should clearly outline how overtime is managed and paid.

Sick pay

Full-time employees in Australia are entitled to 10 days of paid personal/carer’s leave per year. This leave accrues over time and carries over from year to year if unused.

In Australia, sick pay is paid by the employer, not the government. Employers can request evidence, such as a medical certificate, if an employee takes more than 1 day off.

Maternity/parental pay

Australia’s parental leave system includes both unpaid leave and government-funded pay.

• Unpaid leave: Eligible employees can take up to 12 months of unpaid parental leave, and the option to request an additional 12 months, with a guarantee that their job will be there for them when they return. 

• Paid Parental Leave (PPL): The government funds up to 24 weeks of Parental Leave Pay at the national minimum wage for eligible primary carers.

• Employer obligations: Employers are not legally required to provide paid maternity leave beyond PPL, but many choose to offer it as a benefit.

For more information, read our guide to leave policy in Australia, which goes into additional detail.

Severance packages

Redundancy pay in Australia is based on an employee’s continuous years of service with the company. Here are the minimum redundancy pay rates as defined by Australia’s Fair Work Act:

Years of service with the company	Severance pay
1 to 2 years	4 weeks’ pay
2 to 3 years	6 weeks’ pay
3 to 4 years	7 weeks’ pay
4 to 5 years	8 weeks’ pay
5 to 6 years	10 weeks’ pay
6 to 7 years	11 weeks’ pay
7 to 8 years	13 weeks’ pay
9 to 10 years	16 weeks’ pay
10+ years	12 weeks’ pay*

*Note: There is a reduction in severance pay from 16 weeks to 12 weeks for employees with at least 10 years of continuous service. This is consistent with the 2004 Redundancy Case decision made by the Australian Industrial Relations Commission.

Severance pay does not include notice periods or any unused leave entitlements, which employers must pay out separately.

Payroll tax in Australia

Payroll also involves a range of tax obligations, including withholding income tax, contributing to superannuation, and deducting student loan repayments when applicable. Here’s what you need to know about managing payroll tax in Australia.

Income tax

In Australia, employers are legally required to withhold income tax (through PAYG withholding) from employee wages based on the individual’s income. These amounts must then be reported and given to the Australian Taxation Office (ATO).

Taxes that employers need to know about include:

• Personal income tax: Applied progressively based on income brackets ranging from 0% to 45%
• Medicare levy: Typically 2% of taxable income
• Medicare surcharge: May apply to high earners without private health insurance
• HELP/HECS repayments: For employees with student loans (more below)

The following taxes are paid by the employer and are not deducted from employee income.

• Payroll tax: A state-based tax on wages paid by employers once they exceed a certain threshold
• Fringe benefits tax: Paid by employers on certain non-cash benefits provided to employees (eg, company cars, health insurance, or housing)

Superannuation contribution

Australia’s superannuation system is a mandatory retirement savings scheme. Employers must contribute a minimum of 12% of an employee’s ordinary time earnings to a registered superannuation fund. Employees do not need to contribute themselves, although they may choose to make voluntary contributions.

Employers must make superannuation payments at least quarterly and report them through the ATO’s Single Touch Payroll (STP) system.

Student loan repayments

If an employee has a government student loan (called HELP or HECS), repayments become mandatory once their income exceeds the annual threshold. Employers automatically withhold repayments through payroll. The repayment rate increases progressively with income.

Australian payroll compliance best practices

Payroll compliance in Australia requires constant attention to detail because even small mistakes can lead to penalties or legal repercussions. 

To stay compliant, businesses should:

• Stay up to date with legal changes. Australian tax laws, superannuation rates, and labor regulations can change annually.
• Conduct periodic payroll audits to identify errors, missed payments, or outdated employee records before they become larger issues.
• Train payroll staff regularly, especially in industries with complex pay structures.

Or, you could use a global payroll provider. Partnering with an EOR, like Payoneer Workforce Management, helps lighten the burden for your internal team. An experienced EOR helps manage Australian payroll, taxes, benefits, and compliance for you, without the need for a local entity.

Your options for payroll services in Australia

If you’re hiring in Australia, there are three main ways to handle payroll.

Set up a local entity

Setting up a local entity in Australia allows you to hire employees directly, but it’s a complex, expensive, and time-consuming process. You’ll need to register with multiple government agencies, manage local tax and legal obligations, and set up payroll infrastructure from scratch.

Hire independent contractors

Hiring contractors in Australia is a fast and flexible solution, but it comes with compliance risks. Misclassifying an employee as a contractor may lead to severe penalties.

Use an Employer of Record (EOR)

An EOR acts as the legal employer on your behalf, handling payroll, taxes, benefits, and compliance, so you can focus on building your team while reducing administrative efforts.

Ready to simplify Australian payroll? Get started with Payoneer Workforce Management today.

FAQs

1) How does payroll work in Australia?

Employees in Australia are typically paid weekly, fortnightly, or monthly. Employers must withhold income tax, contribute 12% of an employee’s earnings to superannuation, and issue payslips. Additional deductions, like student loan repayments, can apply based on income.

2) Does your employer pay your tax in Australia?

Yes, employers are responsible for withholding income tax from employee wages and remitting it to the tax office. Australian employer payroll taxes also include mandatory superannuation contributions to a registered fund on the employee’s behalf.

3) What is the best payroll software in Australia?

For foreign companies hiring in Australia, using an EOR platform like Payoneer Workforce Management offers a streamlined and unified solution to hire, pay, and manage employees with compliance support.
Try Payoneer Workforce Management to streamline Australian payroll.