Australian Employee Cost Calculator
Calculate the total cost of employing staff in Australia, including salary, superannuation, payroll tax, workers' compensation, and other hidden costs for the 2024-2025 financial year.
Notes:
- This calculator provides estimates only and should not be used for accounting or legal purposes.
- Calculations use projected 2024-2025 rates and thresholds.
- Payroll tax varies by state and only applies when your total Australian wage bill exceeds the threshold.
- Workers' compensation rates vary significantly by industry and risk profile. The estimates provided are indicative only.
- This calculator doesn't include training costs, recruitment costs, or equipment/office space expenses.
Understanding the True Cost of Employment in Australia
The Hidden Costs of Employment
When hiring employees in Australia, the salary figure is just the starting point. The true cost of employment can be 20-30% higher than the base salary due to mandatory superannuation contributions, insurance, taxes, and other expenses. Understanding these costs is essential for accurate budgeting and business planning.
This calculator helps businesses estimate the total employment costs for different salary levels and across different Australian states and territories. Let's explore the main components that contribute to your total employment costs:
Superannuation Contributions
Superannuation is Australia's compulsory retirement savings system. Employers are legally required to contribute a percentage of an employee's ordinary time earnings to their chosen superannuation fund.
For the 2024-2025 financial year, the Superannuation Guarantee (SG) rate is 11% of an employee's ordinary time earnings. This rate is scheduled to increase to 11.5% from July 2025 and will continue to rise incrementally until it reaches 12% in July 2026.
For example, for an employee earning an $85,000 salary:
- Superannuation contribution = $85,000 × 11% = $9,350 per year
These contributions must be paid at least quarterly, with penalties applying for late payments. Many employers choose to pay superannuation monthly to simplify their accounting processes.
Payroll Tax
Payroll tax is a state-based tax on the wages paid by employers. Each state and territory has different thresholds and rates, which are applied when your total Australian wage bill exceeds the threshold amount.
| State/Territory | Threshold (2024-2025 projected) | Tax Rate |
|---|---|---|
| New South Wales | $1,200,000 | 4.85% |
| Victoria | $700,000 | 4.85% |
| Queensland | $1,300,000 | 4.75% |
| Western Australia | $1,000,000 | 5.5% |
| South Australia | $1,900,000 | 4.95% |
| Tasmania | $1,250,000 | 4.0% |
| Australian Capital Territory | $2,000,000 | 6.85% |
| Northern Territory | $1,500,000 | 5.5% |
Calculation example: If your business has a total annual wage bill of $1,500,000 in New South Wales:
- Taxable wages = $1,500,000 - $1,200,000 = $300,000
- Payroll tax = $300,000 × 4.85% = $14,550 per year
Note that different states have different calculation methods, and some offer reductions for regional employers or small businesses.
Workers' Compensation Insurance
Workers' compensation insurance is mandatory in Australia and provides coverage for employees who suffer work-related injuries or illnesses. The cost varies significantly based on:
- Your industry classification and associated risk levels
- Your claims history
- The size of your payroll
- The state or territory where your employees work
Premium rates are expressed as a percentage of your payroll. Some typical ranges by industry:
| Industry | Approximate Premium Rate Range |
|---|---|
| Professional Services | 0.3% - 0.9% |
| Retail | 0.6% - 1.5% |
| Hospitality | 1.2% - 2.5% |
| Healthcare | 1.5% - 3.0% |
| Manufacturing | 2.0% - 4.0% |
| Construction | 3.0% - 9.0% |
| Mining | 4.0% - 15.0% |
For an accurate premium calculation, you should consult with your state's workers' compensation authority or insurance provider. Our calculator provides estimates based on industry averages.
Annual Leave and Loading
Full-time employees in Australia are entitled to 4 weeks (20 days) of paid annual leave per year. Many awards and enterprise agreements also include annual leave loading, typically 17.5% on top of the employee's regular wage during leave periods.
Calculating annual leave loading:
- For an employee earning $85,000 per year:
- Daily rate = $85,000 ÷ 260 (working days) = $326.92
- 4 weeks leave = 20 days × $326.92 = $6,538.40
- 17.5% loading = $6,538.40 × 17.5% = $1,144.22
While this may seem like a small amount, it represents an additional cost that employers must factor into their budgeting.
Other Employment Costs
Beyond the major costs calculated by our tool, employers should also consider:
1. Long Service Leave
Long service leave entitlements vary by state but typically provide employees with paid leave after 7-10 years of service. This creates a future liability that should be accrued over time.
2. Sick Leave and Personal Leave
Full-time employees are entitled to 10 days of paid personal/carer's leave per year, which accumulates if unused. This creates both a direct cost when used and a potential liability if accumulated.
3. Training and Development
Ongoing training costs can range from 1% to 3% of an employee's salary, depending on the industry and role requirements.
4. Recruitment Costs
Initial recruitment can cost 15-30% of the annual salary for mid-level positions, and higher for senior roles. This includes advertising, agency fees, interviewing time, and onboarding.
5. Workspace and Equipment
Office space, computers, software licenses, phones, and other equipment represent significant additional costs, often ranging from $5,000 to $15,000 per employee annually depending on your location and industry.
6. Administrative Overhead
HR administration, payroll processing, legal compliance, and other overhead costs associated with employment typically add 2-5% to the total employment cost.
State-Specific Employment Considerations
Strategies to Manage Employment Costs
While employment costs are substantial, there are legitimate strategies to manage and optimize these expenses:
- Consider the right employment model: Full-time, part-time, casual, contractor, or labor hire arrangements have different cost implications and flexibility.
- Explore government incentives: Various federal and state programs offer subsidies, tax breaks, or support for hiring specific groups such as apprentices, trainees, or previously unemployed people.
- Implement effective safety programs: Reducing workplace injuries can significantly lower your workers' compensation premiums over time.
- Optimize your location strategy: Consider regional locations with lower costs or states with more favorable payroll tax arrangements if suitable for your business.
- Review your superannuation strategy: While you must meet minimum obligations, how you structure and administer superannuation can impact your overall costs.
- Invest in retention: Reducing turnover can substantially lower recruitment, training, and productivity loss costs.
- Embrace technology: Automation and digital tools can reduce administrative overhead and increase employee productivity.
- Consider salary packaging options: Providing tax-effective benefits can help attract and retain staff without increasing your total employment costs.
Frequently Asked Questions About Employment Costs in Australia
How much does it really cost to employ someone in Australia?
The total cost of employment in Australia typically ranges from 1.2 to 1.5 times the base salary, depending on the industry, location, and specific role. For example, an employee with a $85,000 salary might cost between $102,000 and $127,500 annually when all mandatory contributions, insurances, leave entitlements, and administrative costs are included.
Do I have to pay superannuation on all employee earnings?
Superannuation is generally payable on an employee's ordinary time earnings (OTE), which includes regular wages, commissions, bonuses, and allowances. However, some payments are excluded, such as overtime (in most cases), reimbursements, and redundancy payments. The ATO provides a comprehensive guide on which payments are considered OTE for superannuation purposes.
How can I reduce my payroll tax liability?
Strategies to manage payroll tax include: structuring your business across multiple entities (subject to grouping provisions); employing people in states with higher thresholds or lower rates; qualifying for industry-specific exemptions; utilizing employee share schemes that may not attract payroll tax; and taking advantage of state government incentives for creating jobs in particular regions or industries.
What's the difference between employing someone and using a contractor?
When you employ someone, you're responsible for PAYG withholding, superannuation, leave entitlements, workers' compensation, and potentially payroll tax. With genuine contractors, many of these obligations don't apply. However, the distinction is based on the true nature of the relationship, not just contractual terms. Incorrectly classifying employees as contractors can result in significant penalties and back-payments.
Do I need to pay superannuation for casual employees?
Yes, casual employees who earn more than $450 per month (before tax) are entitled to superannuation contributions. From July 1, 2025, all employees regardless of their monthly earnings will be entitled to superannuation. The casual loading (typically 25%) that casual employees receive does not offset your superannuation obligations.
How do I calculate workers' compensation premiums?
Workers' compensation premiums are calculated by multiplying your total payroll by the premium rate for your industry classification. This rate is often adjusted based on your claims history through an experience modifier. For example, if your annual payroll is $500,000 and your industry rate is 1.5%, your basic premium would be $7,500. However, if you have a poor claims history, your experience modifier might increase this by 20% or more.
Is annual leave loading mandatory in Australia?
Annual leave loading (typically 17.5%) is not universally mandatory under Australian employment law, but it is included in many modern awards and enterprise agreements. You should check the specific award or agreement covering your employees to determine if you're required to pay leave loading. Even where not strictly required, many employers offer it as a standard benefit to remain competitive in the job market.
What happens if I miscalculate employee entitlements?
Underpaying employee entitlements, even unintentionally, can result in significant consequences. These may include back-payments with interest, penalties of up to $66,600 per contravention for corporations ($13,320 for individuals), damage to your business reputation, and ongoing scrutiny from the Fair Work Ombudsman. Implementing robust payroll systems and conducting regular compliance audits can help prevent these issues.
Understanding Your Total Employment Costs is Essential for Business Success
As this calculator demonstrates, the true cost of employment in Australia extends well beyond the base salary figure. By accurately accounting for superannuation, payroll tax, workers' compensation, leave entitlements, and other expenses, business owners and managers can make better-informed decisions about:
- Hiring new employees and expanding teams
- Setting appropriate charge-out rates for services
- Calculating the true return on investment from your workforce
- Developing accurate business forecasts and budgets
- Comparing the costs of employment versus automation or outsourcing
- Evaluating different business locations and structures
While employment costs are significant, remember that your employees are also your greatest asset. Investing in recruiting the right people, providing proper training, and creating a positive work environment can yield substantial returns through increased productivity, innovation, customer satisfaction, and reduced turnover.
Use this calculator as a starting point, but consider consulting with an accountant, HR professional, or employment lawyer for advice specific to your business circumstances and industry.