What is the total cost of hiring an employee in Australia?

Most Australian employees cost their employer 20-40% more than their base salary — the widely used rule of thumb is a true cost of about 1.2x to 1.3x salary, and higher for high-risk industries or casuals. So a $70,000 salary often costs around $85,000-$90,000 all-in. The major on-costs are: superannuation guarantee at 12% (from 1 July 2025), workers compensation insurance (~0.5% for office to ~5% for trades), payroll tax (4-6.75% above each state's threshold, only for larger payrolls), leave loading (17.5% on 4 weeks annual leave for many awards), casual loading (25% for casuals), and training, equipment and recruitment overhead.

What is the 1.2 to 1.3 times salary rule of thumb?

A common shortcut is that the true annual cost of an employee is roughly 1.2x to 1.3x their base salary once you add super, leave loading, workers comp, payroll tax (if you're over the threshold), training and equipment. A $70,000 hire at 1.26x is about $88,000. Office/low-risk employers with a small payroll (no payroll tax) sit near the bottom of that range; high-risk industries like construction, or employers over the payroll-tax threshold, push toward 1.3x or beyond. Casuals cost the 25% loading instead of paid leave.

Do I have to pay payroll tax on my employees?

Only if your total annual Australian wage bill exceeds your state's tax-free threshold. FY2026-27 thresholds: NSW $1.2M, Victoria $1M, Queensland $1.3M, WA $1M, SA $1.5M, Tasmania $1.25M, ACT $1.75M, NT $2.5M. Below the threshold, no payroll tax at all — which is most small employers. Above it, you pay the state rate (4% to 6.75%) on wages above the threshold. ACT changed on 1 July 2026 to 6.75% with a $1.75M threshold.

How much is workers compensation insurance in Australia?

Workers comp premiums vary by state and industry risk. Office workers typically incur 0.4-0.6% of wages. Retail and hospitality 1-1.5%. Trades and construction 4-5%. Warehousing/transport 2-3%. Healthcare 1.5-2%. Each state runs its own scheme: NSW iCare, WorkSafe Victoria, WorkCover QLD, etc. Premiums also vary by claims history and employer size.

What is leave loading and do I have to pay it?

Leave loading is an extra 17.5% paid on top of the wage during the four weeks of annual leave each year. It's required by most modern awards and many enterprise agreements, but not all. It applies only to permanent employees (full-time and part-time), not casuals. Check the relevant award or EA — if it requires loading, you must pay it. Annualised, leave loading adds about 1.35% to the wage bill.

Cost to Hire Calculator — True Cost to Employ

Q: Is it cheaper to hire a contractor instead of an employee?

Sometimes — but usually contractors invoice 1.3-1.7× the equivalent employee hourly rate to cover their own super, leave, workers comp, and business overhead. For genuine project work or specialist skills, contracting is often cheaper. For ongoing labour, employment usually wins on TCO. The bigger risk is sham contracting — under the 2024 Closing Loopholes reforms, the courts apply a substance-over-form test. Use FWM's Contractor-or-Employee classifier first to confirm the relationship is genuinely commercial.

Work out the real cost to hire someone in Australia. Add super, leave loading, state-specific workers comp + payroll tax, training and recruitment overhead. Plus a contractor-vs-employee comparison so you can pick the cheaper path.

Last verified: 21 May 2026

Role details

Base salary (AUD/year)

Employment type

State

Industry risk tier

Your business & on-costs

Total annual payroll (AUD)

Used to check the payroll-tax threshold for your state. Below it, payroll tax is $0.

Recruitment cost (one-off, AUD)

Expected tenure (years)

Training overhead (% of base)

Equipment / software per head (AUD/yr)

Your WorkCover rate (%) — optional

Use my own workers-comp rate instead of the industry defaultAward/EA includes 17.5% leave loading

Total annual cost to employ

$98,076.92

1.23× base — 22.6% on-costs on $80,000

Cost / paid hour

$49.63

38h × 52w basis

Cost / hour worked

$58.93

paid leave removed

True cost to employ a $80,000.00 full-time hire in NSW

$98,076.92/yr (1.23× base)

Breakdown

Base salary (ordinary rate)	$80,000.00
Superannuation Guarantee @ 12%	$9,600.00
Leave loading (17.5% on 4 weeks AL)	$1,076.92
Workers compensation @ 0.50% (NSW, office)	$400.00
Payroll tax — N/A (payroll below NSW threshold of $1,200,000)	$0.00
Training/onboarding @ 5%	$4,000.00
Equipment / software per head	$2,000.00
Recruitment ($3,000 / 3y)	$1,000.00

Total annual cost to employ	$98,076.92
On-cost multiplier	1.23× base
Overhead above base	22.6%
Effective cost / paid hour (38h × 52w)	$49.63/hr
True cost / hour actually worked	$58.93/hr

Notes

*On-costs add 22.6% to base — the AU rule of thumb is a true cost of about 1.2×–1.3× salary, and higher for high-risk industries or casuals.
*No payroll tax — total payroll is below the NSW tax-free threshold of $1,200,000.00. Most small employers sit under it.
*Workers compensation (0.50%) is indicative — your actual premium depends on your ANZSIC class, claims history and state scheme.
*The "cost per hour worked" removes ~8.2 weeks/year of paid-but-non-productive time (annual leave, personal leave, public holidays).
*Estimate only — super, leave loading and casual loading are legislated; workers comp and payroll-tax thresholds are sourced per state and were last verified 2026-07-05.

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Carries your $98,076.92/yr (1.23× base) result + breakdown so the answer stays in context.

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Compared to engaging a contractor

Contractors typically invoice 1.5× the equivalent employee hourly rate to cover their own super, leave, workers comp and business overhead. We've assumed 46 billable weeks/year (6 weeks unbilled) and a 1.5× markup. Indicative only.

Employee TCO

$98,076.92

Contractor (1.5× @ 46wk)

$106,156.04

$60.73/hr invoice

Employee is cheaper

+$8,079.12 per year

For ongoing labour, employment usually wins on TCO. For genuine project work or specialist skills, contracting often wins. The bigger risk: sham contracting under the 2024 Closing Loopholes reforms — courts now apply a substance-over-form test. Use the Contractor-or-Employee classifier to confirm the relationship is genuinely commercial before going contractor.

Sources

• Super Guarantee 12% from 1 July 2025 — ATO. Casual loading 25% + leave loading 17.5% — Fair Work Act 2009.
• Workers comp: indicative state-scheme industry averages (icare NSW, WorkSafe Vic, WorkCover QLD, ReturnToWorkSA, WorkCover WA, WorkSafe Tas, ACT, NT) — 2025-26/2026-27. Enter your own rate for accuracy.
• Payroll tax thresholds + rates: each state Revenue Office, FY2026-27 (incl. ACT's 1 Jul 2026 change to 6.75% / $1.75M).
• Last verified 5 July 2026 — re-check before relying on this for material decisions.

Payroll Tax Australia 2026: State-by-State Thresholds & Rates for Employers

Complete 2026 guide to payroll tax in Australia. State-by-state thresholds (NSW $1.2M, VIC $900K, QLD $1.3M) and rates (4.85-6.85%), what's included in taxable wages, grouping rules, and how to register — everything employers need to know.

Small Business Fair Work Guide 2026: Simple Compliance for Under 15 Employees

Straightforward Fair Work compliance guide for Australian small businesses with fewer than 15 employees. Covers the small business fair dismissal code, casual conversion, simplified record keeping, common mistakes, free resources, and when to seek legal advice.

Contractor vs Employee Australia 2026: How to Classify Workers Correctly

How to correctly classify workers as contractors or employees in Australia in 2026. Covers the ATO multi-factor test, sham contracting indicators, penalties for misclassification, super obligations, recent court cases, and a practical checklist for employers.

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General information and estimates only — not legal, financial or tax advice. Always check your specific award, agreement or contract, or a qualified professional, before you rely on the result.

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