The true cost of hiring an employee in Australia

Hiring your first employee — or your fifth — is one of the clearest signs a business is growing. It’s also one of the most expensive decisions an owner makes, and the headline wage is only part of it. This guide sets out every cost that comes with a new hire in 2026, what changed on 1 July, and how to plan the cash for the months before a new team member pays their way.

What are all the costs of an employee?

Cost	What it is	When you pay it
Wages	Base pay at or above the award or agreement	Every pay cycle
Super guarantee	12% of qualifying earnings	Every payday, under Payday Super
Workers compensation	Compulsory insurance for staff	Annually or by instalments
Payroll tax	State tax on wages above a threshold	Monthly or annually, if applicable
Leave	Paid annual leave and personal/carer’s leave accruing	When taken
Equipment and tools	Uniforms, laptop, vehicle, tools, licences	Up front
Recruitment	Ads, agency fees, interview time	Before they start
Training and induction	Your time and theirs while they learn	First weeks and months
Software and admin	Payroll software seats, extra licences	Monthly

The first three are the ones most owners underestimate.

How much is super, and what changed in 2026?

The super guarantee rate is 12%. The ATO’s rates table shows it at 12% for both 2025–26 and 2026–27, and from 1 July 2026 it’s calculated on each eligible employee’s qualifying earnings.

The bigger change is timing. Under Payday Super, which started on 1 July 2026, employers must pay super at the same time as wages, and the Fair Work Ombudsman explains that contributions need to reach the employee’s fund within seven business days of payday. Before this, many employers paid super quarterly, which gave them the use of that cash for weeks. Now it leaves with every pay run.

For cash flow, that means super behaves like wages: a cost that goes out every pay cycle. If you’re used to a quarterly super bill, build the new rhythm into your forecast.

What are the must-do steps before the first pay?

business.gov.au’s guide to hiring employees lists the essentials. In summary:

1. Check the award or agreement that applies and use Fair Work’s pay tools to confirm minimum rates.
2. Give the Fair Work Information Statement (and the casual statement for casual staff).
3. Register for PAYG withholding before you pay the employee for the first time.
4. Collect a tax file number declaration and the employee’s super fund details, offering a standard choice form within 28 days.
5. Take out workers compensation insurance.
6. Set up Single Touch Payroll so pay information is reported to the ATO each pay cycle.
7. Keep records — Fair Work requires time and wages records, and pay slips within one working day of paying wages.

None of these are optional, and several carry penalties if missed. They’re also worth doing before the first day so the new employee’s start is smooth.

Does payroll tax apply to you?

Payroll tax is a state and territory tax administered by each revenue office. It applies only once your total Australian wages pass your state’s threshold, and business.gov.au notes that thresholds and rates vary between states and territories — its own example contrasts Victoria’s and South Australia’s monthly thresholds for 2025–26. If you’re growing towards a threshold, or employ people in more than one state, check with your state revenue office or accountant before you hire.

What about leave?

Under the National Employment Standards, full-time and part-time employees accrue paid annual leave and paid personal/carer’s leave. Casual employees don’t accrue paid leave but receive a casual loading instead. Leave doesn’t cost cash until it’s taken, but it’s a real liability: when an employee takes four weeks off, you’re paying for four weeks without their output, and possibly for someone to cover them.

What does a new hire actually cost? (Illustrative)

Illustrative only; your award, state and industry will change the numbers. A landscaping business hires a full-time crew member on a base salary of $65,000.

Item	Approximate annual cost
Base salary	$65,000
Super guarantee (12%)	$7,800
Workers compensation (varies by state and industry)	Several thousand dollars
Uniform, PPE and tools	A few thousand dollars up front
Recruitment and induction time	A few thousand dollars
Payroll tax	Only if the business is over its state threshold

In round terms, the first-year cost can sit well above the salary figure. And for the first weeks, while the new crew member learns systems and sites, the business may be paying for a person who isn’t yet generating full revenue.

How do you plan the cash for the ramp-up period?

A new hire usually creates a cash dip before a cash gain. Plan it like any other investment:

1. Estimate the ramp-up period — how long before the role generates the revenue that pays for it. For sales roles this might be months; for a tradesperson on a full order book, it could be weeks.
2. Total the cost over that period — wages, super on each payday, insurance, equipment and training time.
3. Check your forecast for the low point during that period, including BAS dates.
4. Decide how to fund the dip — existing cash, slower drawings, or a facility sized to the gap.

For many businesses, a revolving line of credit or a short working capital loan fits well: draw what you need during the ramp-up, then repay as the new role starts paying for itself. If slow-paying customers are part of the problem, invoice finance can fund wages from the work being done. You can see what fits your business in about a minute.

Employee or contractor?

Some owners bridge the gap with contractors before committing to an employee. Contractors can suit uncertain or project-based work, but the distinction isn’t simply a matter of choice: whether someone is legally an employee or a contractor depends on the real working relationship, and misclassifying an employee can create back-payment obligations for wages, super and leave. Fair Work and the ATO both publish guidance, and your accountant can help you get it right.

When is it too early to hire?

Consider waiting, or using contractors, if:

• your cash forecast shows you can’t cover the ramp-up period even with a facility;
• the extra work is uncertain or seasonal;
• you’re relying on a single new customer who hasn’t signed;
• your margins are already thin, so the extra cost would erase profit rather than grow it.

Our guide to profit vs cash flow explains why growth can squeeze cash before it helps.

Worked example (illustrative)

Illustrative only. A bathroom renovation business has a four-month waiting list and turns work away. The owner wants to hire a second qualified tradesperson. Jobs are invoiced at completion, and customers pay within a week.

The owner maps the cost: salary, super paid each fortnight under the new rules, workers compensation, a second ute and tools. The first two months will be spent partly on training and shadowing, so revenue lags. He funds the ute through equipment finance and puts a modest line of credit in place to cover wages during the ramp-up. By month three, the second crew is completing jobs independently and the line of credit is cleared.

Growing your team? Make sure the cash grows with it.

Hiring is exciting, and it’s also the moment many businesses discover how tight their cash really is. A facility sized to your ramp-up can turn a stressful few months into a planned investment. The enquiry takes about 60 seconds, there’s no credit check when you first enquire, and your details aren’t handed out to a list of lenders. A real person looks at your plans and calls you. Please answer accurately — especially your turnover and what the funds are for — so we can match you properly first time.

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