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

Most Australian employees cost their employer 25-40% more than their base salary, depending on state, industry, and employer size. The major add-ons are: superannuation guarantee at 12% (from 1 July 2025), workers compensation insurance (~0.5% for office to ~5% for trades), payroll tax (4-7% above each state's threshold, typically $600K-$2M annual payroll), leave loading (17.5% on 4 weeks annual leave for many awards), and training/recruitment overhead.

Do I have to pay payroll tax on my employees?

Only if your total annual payroll exceeds your state's threshold. Each state sets its own: NSW $1.2M, Victoria $1M, Queensland $1.3M, WA $1M, SA $600K, Tasmania $1.25M, ACT $2M, NT $1.5M (2025-26 figures). Below the threshold, no payroll tax. Above it, you pay 4-7% of total wages above the threshold. Small businesses are typically exempt.

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.

Hiring Cost (TCO) Calculator

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.

The true cost to employ 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: 1 July 2025

Role details

Base salary (AUD/year)

Employment type

State

Industry risk tier

Your business

Total annual payroll (AUD)

Used to check payroll-tax threshold for your state.

Recruitment cost (one-off, AUD)

Expected tenure (years)

Training overhead (% of base)

Award/EA includes 17.5% leave loading

Total annual cost to employ

$96,076.92

20.1% overhead on a base of $80,000

Effective hourly cost: $48.62/hr (38h × 52w basis)

Breakdown

Base salary$80,000

Superannuation Guarantee @ 12%$9,600

Leave loading (17.5% on 4 weeks AL)$1,076.92

Workers compensation @ 0.50% (NSW, office)$400

Payroll tax — N/A (employer below NSW threshold of $1,200,000)$0

Training/onboarding @ 5%$4,000

Recruitment ($3,000 / 3y)$1,000

Total$96,076.92

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. The numbers below are approximate.

Employee TCO

$96,076.92

Contractor (1.5× @ 46wk)

$106,156.04

$60.73/hr invoice

Employee is cheaper

+$10,079.12 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
• Workers comp rates: state schemes (iCare NSW, WorkSafe Vic, WorkCover QLD, etc.) 2025-26 published industry rates
• Payroll tax thresholds + rates: each state Revenue Office, 2025-26
• Leave loading 17.5% under most modern awards (Fair Work Act 2009 s90)
• Last verified 2026-05-01 — re-check before relying on for material decisions.

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

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Contractor vs Employee Australia 2026: How to Classify Workers Correctly

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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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