What it really costs to hire your first employee in Australia (2026 breakdown)
Gross wages are only ~80-85% of the true cost. The other 15-20% — super, workers comp, leave accrual, payroll tax — catches every first-time AU employer off guard. Here's the honest breakdown.
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The headline number: 14-22% above gross wage
If you pay an employee $1,000 in gross weekly wages, the real weekly cost to your business is roughly $1,140-$1,220. The extra $140-$220 covers superannuation, workers' compensation insurance, and (for permanent employees) accrued leave entitlements.
Most first-time employers budget for the wage and forget the rest. Then the first workers' comp premium notice arrives, the super needs paying quarterly, and they realise their actual employee cost is materially higher than the contract says. Here's the line-by-line.
Superannuation Guarantee — 12% of OTE (mandatory)
From 1 July 2025, the Superannuation Guarantee rate is 12% of ordinary time earnings (OTE). That's payable on top of every gross wage payment to your employee's nominated super fund. From 1 July 2026, Payday Super starts: SG must be paid each pay cycle (not quarterly).
OTE includes base wages, commissions, shift loadings and most allowances. It excludes overtime, one-off reimbursements and certain bonuses. For a $1,000 weekly wage that's $120/week in super on top — $6,240 a year.
Workers' compensation — 1-2% of wages (mandatory in every state)
Every employer in every Australian state must hold workers' compensation insurance. Premiums are set by the state scheme insurer (icare NSW, WorkSafe Vic, WorkCover Qld, etc.) based on your industry classification and total wages bill.
Average premiums by industry classification:
- Office / professional: 0.4-0.8% of wages
- Retail / hospitality: 1.0-1.8% of wages
- Trades / construction: 2.5-5.5% of wages
- Aged care / disability: 1.5-3.0% of wages
For a $1,000/week employee in retail, that's roughly $14/week or $730/year.
Leave accrual — 7.7% on top for permanent employees only
Permanent (full-time and part-time) employees accrue 4 weeks paid annual leave + 10 days paid personal leave per year. That's the equivalent of 7.7% of base wage in accrued entitlements you'll pay later when leave is taken.
Casual employees don't accrue leave — their 25% casual loading is meant to compensate. So a $1,000/week casual is just a $1,000/week cost (plus super + workers comp). A $1,000/week permanent is closer to $1,077/week when you account for accrual.
Payroll tax — only above the state threshold (rarely first-hire)
Payroll tax kicks in only once your annual wages bill exceeds the state threshold:
- NSW: $1.2M+ → 5.45% of excess
- VIC: $700k+ → 4.85% of excess
- QLD: $1.3M+ → 4.75% of excess
- WA: $1M+ → 5.5% of excess
- SA: $1.5M+ → 4.95% of excess
One employee at $52k/year doesn't trigger payroll tax in any state — you'd need 14-25 employees before it bites. Worth knowing for the future, irrelevant for your first hire.
The realistic total — case study
Single permanent employee, $1,000/week gross wages, retail in NSW:
- Gross wages: $1,000.00
- Superannuation (12%): $120.00
- Workers' comp (~1.4%): $14.00
- Annual leave accrual (7.7%): $77.00
- Personal leave accrual (3.8%): $38.00
- Total weekly cost: $1,249.00 (24.9% on top of wages)
Casual at the same $1,000/week gross: total cost ~$1,134/week (13.4% on top, no leave accrual).
Use the First Hire Checklist + Cost Calculator to model your own scenario, including the 12-step compliance setup checklist. For specific situational questions, ask FairWork Mate AI free.
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General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
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Nine years in Australian workplace relations — Queensland hospitality HR, then retail ER in Brisbane and Northern NSW. Graduate Diploma in Employment Relations (Griffith University, 2018). Writes about award interpretation, underpayment recovery, and casual conversion. Member of the AHRI since 2019. Based in Paddington, Brisbane.
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