How to Set Up Compliant Payroll for a New Cafe in Australia

Opening a cafe is exciting. Setting up payroll is not. But getting payroll wrong from day one creates problems that compound over months and years -- underpayments that accrue into five- or six-figure liabilities, ATO penalties for late or incorrect super, and (since 1 January 2025) the possibility of criminal prosecution for intentional underpayment.

Step 1: Identify the Correct Award

This is the most important step and the one most often done wrong. Your cafe likely falls under one of three awards:

Restaurant Industry Award 2020 (MA000119)

Covers businesses in the "restaurant industry," which includes:

• Restaurants
• Cafes and coffee shops
• Catering businesses
• Takeaway food outlets (that are not fast food chains)

This is the most likely award for a standalone cafe. If your cafe serves food and coffee, operates independently (not as part of a hotel, pub, or club), and is not a fast food franchise, you are almost certainly under the Restaurant Award.

Hospitality Industry (General) Award 2020 (MA000009)

Covers businesses in the "hospitality industry," which includes:

• Hotels, motels, and resorts
• Pubs, taverns, and bars
• Clubs (RSL, leagues, sporting)
• Casinos

If your cafe operates within or as part of a hotel, pub, or club, this award may apply instead of the Restaurant Award.

Fast Food Industry Award 2020 (MA000003)

Covers fast food and quick-service restaurants. If your cafe is a franchise outlet of a quick-service chain, this award may apply.

Step 2: Classify Your Employees

Under the Restaurant Industry Award, employees are classified by their duties (not their job title) into two streams:

Food and Beverage Stream (Front of House)

Kitchen Stream (Back of House)

All rates are effective 1 July 2025.

Common Classification Mistakes in Cafes

The "all-rounder" problem: Many cafe employees do a bit of everything -- they make coffee, serve food, clear tables, and wash dishes. Under the award, they should be classified based on the highest level of duties they regularly perform, not the lowest. A barista who also clears tables is a Grade 2, not a Grade 1.

The "kitchen hand who cooks" problem: If a kitchen hand regularly prepares food beyond basic assembly -- making sandwiches to order, cooking eggs, plating dishes -- they are likely a Kitchen Attendant Grade 3 or Cook Grade 1, not a Kitchen Attendant Grade 1.

The working owner: If you, as the cafe owner, also employ staff, you are not covered by the award yourself (as a sole trader or business owner). But your employees are. Do not use your own pay arrangements as a benchmark for staff.

Step 3: Set Up Employment Type

For each employee, determine whether they will be:

Full-Time

• 38 ordinary hours per week
• Accrues annual leave, personal leave, and other NES entitlements
• Receives notice of termination and redundancy pay
• Best for: head chefs, senior baristas, managers -- anyone working consistent full-time hours

Part-Time

• Fewer than 38 ordinary hours per week
• Agreed pattern of hours and days, set in writing (clause 11.2)
• Pro-rata leave accrual based on ordinary hours
• Minimum 3 hours per shift (clause 11.3)
• Best for: employees who work consistent but reduced hours

Casual

• No firm advance commitment to continuing work
• 25% casual loading on the base rate
• No annual leave, personal leave, notice, or redundancy pay
• Minimum 2 hours per shift (clause 12.3)
• Best for: weekend cover, busy period extras, trial shifts, genuinely irregular work

Step 4: Register for PAYG Withholding

Before paying any employee, you need to register for Pay As You Go (PAYG) withholding with the ATO. This allows you to withhold tax from your employees' pay and remit it to the ATO.

How to register: Through the Australian Business Register (ABR) at www.abr.gov.au or when you register for your ABN. If you already have an ABN, you can add PAYG withholding through the ATO's Business Portal.

You need:

• An ABN
• A PAYG withholding registration
• Tax file number declarations (TFN declarations) from each employee before their first pay

Employee paperwork on day one:

1. TFN declaration -- the employee provides their tax file number and claims the tax-free threshold (if applicable)
2. Superannuation standard choice form -- the employee nominates their super fund (or you use the default fund specified in your award or enterprise agreement)
3. Fair Work Information Statement -- you must give every new employee the Fair Work Information Statement before or as soon as practicable after they start. It is available on the Fair Work Ombudsman's website
4. Casual Employment Information Statement -- for casual employees, you must also provide the Casual Employment Information Statement

Step 5: Set Up Superannuation

All employees (including casuals, regardless of earnings) are entitled to compulsory superannuation at 12% of ordinary time earnings (from 1 July 2025).

Ordinary time earnings (OTE) for super purposes includes:

• Base hourly rate
• Casual loading (the 25%)
• Shift loadings and penalty rates for ordinary hours
• Allowances that are part of OTE (such as uniform allowances in some cases)

OTE does not include:

• Overtime payments
• Reimbursements
• Lump sum termination payments (in most cases)

Super calculation example (casual, Level 1):

A casual works 15 hours on weekdays at $30.06/hr and 8 hours on Saturday at $34.85/hr.

• Weekday OTE: 15 x $30.06 = $435.60
• Saturday OTE: 8 x $34.85 = $278.80
• Total OTE: $714.40
• Super: $714.40 x 12% = $85.73

Payment deadlines: Super must be paid to the employee's fund at least quarterly, by the 28th day after the end of each quarter. Many employers pay super more frequently (monthly or even per pay cycle) to avoid the risk of missing quarterly deadlines. Late super payments attract the Superannuation Guarantee Charge (SGC), which includes the unpaid super, interest, and an administration fee -- and is not tax-deductible.

Choosing a default fund: If an employee does not nominate a super fund, you must pay into your nominated default fund. Under the Restaurant Award, the default fund must be a fund that offers a MySuper product. Common choices in hospitality include HOST-PLUS (Hostplus) and REST (Retail Employees Superannuation Trust).

Step 6: Build Your Pay Rate Schedule

Create a reference table of every rate your employees could be paid. For the Restaurant Award, Level 1:

Permanent (Full-Time and Part-Time)

Casual

Step 7: Choose a Payroll System

For a new cafe, you do not need enterprise-grade payroll software. But you do need a system that:

1. Handles multiple pay rates: Your system must apply different rates for weekday, Saturday, Sunday, public holiday, and overtime hours. A system that only tracks "hours worked" without distinguishing when they were worked will produce incorrect pay.

2. Calculates super automatically: Manual super calculations are error-prone. Use software that calculates the 12% automatically based on OTE.

3. Generates pay slips: Under the Fair Work Act, you must provide pay slips within 1 business day of payment. Pay slips must itemise gross pay, net pay, tax withheld, super contributions, and the rate of pay for each hour worked.

4. Tracks leave accruals: For permanent employees, the system must track annual leave and personal leave accruals and deductions.

5. Integrates with Single Touch Payroll (STP): Since 1 July 2019, all employers must report payroll information to the ATO through STP each time they pay employees. Your payroll software should handle STP reporting automatically.

Step 8: Run Your First Pay Cycle

Pay frequency: The Restaurant Award does not mandate a specific pay frequency. Weekly and fortnightly are most common in hospitality. Whichever you choose, be consistent -- and pay on time, every time.

First pay run checklist:

1. Confirm each employee's classification level, employment type, and pay rates
2. Enter actual hours worked, broken down by day and time
3. Apply the correct rate for each period (weekday, Saturday, Sunday, etc.)
4. Calculate gross pay
5. Apply PAYG withholding based on the employee's TFN declaration
6. Calculate superannuation on OTE
7. Check minimum engagement: casuals must be paid for at least 2 hours per shift, even if they worked less
8. Generate and distribute pay slips
9. Lodge STP report with the ATO

Step 9: Set Up Record-Keeping

Under the Fair Work Act and Fair Work Regulations, you must keep the following records for 7 years:

• Employee details: Name, date of birth, commencement date, employment type, classification level
• Pay records: Gross and net pay, PAYG withheld, pay rates, hours worked (broken down by when they were worked), overtime, penalty rates applied
• Leave records: Leave accrued, leave taken, leave balance
• Super records: Amount paid, fund details, payment dates
• Employment agreements: Copies of employment contracts, casual conversion notifications, and any variations

Records must be:

• In English
• Legible
• Readily accessible for inspection by a Fair Work Inspector
• Not false or misleading

Step 10: Ongoing Compliance

Annual rate update

Every year, the Fair Work Commission announces new minimum rates following the Annual Wage Review. New rates take effect on 1 July. Set a calendar reminder for late June to download the updated pay guide for the Restaurant Award and update your payroll system before the first July pay run.

Quarterly super deadlines

Super must be paid by the 28th of the month following each quarter:

Payroll self-audit

Every 3 months, run a report comparing the actual hourly rate paid to each employee against the rate they should have received under the award, broken down by day and time. Look for patterns like:

• Flat rates being applied across all days (penalty rates missing)
• Casuals being paid the permanent rate instead of the casual rate
• Classification levels that do not match actual duties
• Missing minimum engagement payments

Frequently Asked Questions

Do I need to pay my staff super if they earn less than $450 per month?

No, the $450 per month threshold was removed on 1 July 2022. All employees, regardless of how much they earn, are entitled to super. This includes casuals who work a single 2-hour shift per month.

Can I use a flat hourly rate that covers everything?

Some awards allow for "loaded rates" or annualised salaries that are intended to cover all entitlements. The Restaurant Award does not have an annualised salary provision for non-managerial staff. You must pay the correct rate for each type of hour worked (weekday, Saturday, Sunday, etc.).

What if my barista does both cooking and coffee?

Classify based on the highest level of duties regularly performed. If the employee spends most of their time making coffee (Grade 2 barista work) but occasionally does basic cooking (Kitchen Attendant Grade 3), they should generally be classified at the Grade 2 level. However, if the cooking duties are a regular and significant part of their role, the higher classification may apply. The key is "regularly performed," not "occasionally performed."

Do I need to pay penalty rates on public holidays if I close the cafe?

If you close on a public holiday, permanent employees who would ordinarily have worked that day are entitled to their base rate for the hours they would have worked. Casuals are not paid for public holidays they do not work.

How do I handle tips?

Tips are not part of the award pay rate. They are separate from wages and do not reduce your obligation to pay the minimum award rate. How tips are distributed (kept by individual employees, pooled and shared, or retained by the business) is a matter for the business to decide, but tips cannot be used to offset award entitlements.

What happens if the Fair Work Ombudsman audits my cafe?

The FWO conducts targeted audits of hospitality businesses. They will request payroll records, time sheets, and employment contracts. If underpayments are found, they will require back-payment (potentially going back 6 years) and may issue compliance notices or infringement notices. For serious or intentional breaches, they may commence court proceedings.

[Check all Restaurant Award rates with the AirComply Calculator](https://aircomply.app/chat) -- enter the classification level and shift time to see the exact rate payable, including casual loading and penalty rates.