The True Cost of Hiring an Employee in Australia (2026)

This article provides general information only and is not legal, tax or compliance advice. Requirements vary by jurisdiction, industry and engagement structure. Organisations should seek professional advice for their specific circumstances.

Why the base salary is the wrong number

When an Australian business decides what a role "costs," the number that usually gets used is the base salary.

It's the number in the job ad, the number in the offer letter, and the number in the budget line.

It is also, in almost every case, substantially less than what the role actually costs the business.

The gap between base salary and true cost is the sum of mandatory on-costs (superannuation, payroll tax, workers compensation, leave), one-off costs (recruitment, equipment, onboarding), and the soft-but-real cost of the productivity a new hire doesn't deliver while they're getting up to speed.

Added together, these typically push the real cost of a permanent professional hire to somewhere around 1.3 to 1.5 times base salary, with the higher multiple applying in year one once recruitment and ramp-up are included.

The mandatory on-costs

These are the costs you cannot avoid once you employ someone. They apply regardless of how the role performs or how long it lasts.

Superannuation: 12 percent

The Superannuation Guarantee rate reached 12 percent of ordinary time earnings on 1 July 2025.

From 1 July 2026, Payday Super requires employers to pay super at the same time as wages rather than quarterly, which doesn't change the cost but does change the cash-flow timing.

Payroll tax: high 4s to nearly 7 percent, above the threshold

‍Payroll tax is a state-based tax on total wages, and it's the on-cost businesses most often forget because it only applies once your total Australian wage bill crosses the state threshold.

Once you're over it, every additional employee's wages (including their super) are taxed at the state rate - 5.45 percent in NSW, 4.85 percent in Victoria, 4.75 to 4.95 percent in Queensland, 5.5 percent in WA, up to 6.85 percent in the ACT.

It's the most underestimated number in the whole calculation because it's invisible at the individual-hire level and only shows up at the aggregate wage-bill level.

Workers compensation: roughly 0.5 to 3 percent

‍Premiums vary by state and by the risk classification of the work. For a professional or office-based role, expect somewhere around 0.5 to 1.5 percent of wages. For higher-risk industries, it can be 5 percent or more.

Paid leave

‍Leave is a cost even though it doesn't look like a separate invoice, because you're paying the salary while no work is being done.

The National Employment Standards minimum is 4 weeks annual leave, 10 days personal/carer's leave, 10 to 13 public holidays depending on the state, and long service leave that accrues over time.

Many awards and agreements also include annual leave loading. Together, paid leave represents an effective cost of around 11 to 13 percent of base salary every year.

The one-off and first-year costs

Recruitment. If you use an agency, the standard fee is 15 to 25 percent of first-year salary.

If you recruit in-house, you avoid the agency fee but still carry the cost of job ads, assessment tools, and the considerable internal time spent screening and interviewing. Even a lean in-house process rarely costs nothing once that time is valued.

Equipment, software and setup. Laptop, monitor, phone, desk, software licences, and any role-specific tooling.

For a knowledge-worker role this is usually a few thousand dollars; for technical roles needing specialised software it runs higher.

Ramp-up productivity loss. This is the cost businesses rarely quantify but always pay.

A new hire typically produces 30 to 50 percent of their normal output for the first three months as they learn the systems, relationships and context. It's real money - work that didn't get done, or that someone else had to cover.

Putting it together: one example

Take a A$120,000 base salary professional role in NSW, for a business already over the payroll tax threshold.

Once super, payroll tax and workers compensation are added, the ongoing annual cost is roughly A$143,000. In year one, once recruitment, equipment and ramp-up are factored in, it's closer to A$180,000 - about 1.5 times the salary you budgeted for.

So a role you budgeted at A$120,000 actually costs you closer to A$180,000 in the first year. That's the gap most businesses miss, and it's before you account for the risk of the hire not working out.

Rather than reproduce every line for every salary and state, use the calculator below - it does the full breakdown for your specific role and shows what an equivalent contract engagement would cost alongside it.

True cost calculator

‍

The numbers it produces are estimates based on current 2025-26 rates and standard assumptions.

Your actual costs will vary with your specific awards, insurance classification, payroll tax position and recruitment approach. Treat the output as a planning guide, not a quote.

How this compares to contract talent

This is where the true-cost picture changes the decision. A contract specialist has a higher headline day rate but carries none of the on-costs above - no superannuation, no payroll tax, no workers compensation, no leave, no recruitment fee, and no exit liability.

You also lose almost none of the engagement to ramp-up, because you're engaging someone who is already an expert in exactly the thing you need.

But the comparison isn't "contract is always cheaper." For a genuinely ongoing, full-time role over a full year, a permanent employee is usually the more economical choice. A full year of contract work at a loaded day rate typically costs more than the equivalent salaried hire.

Where contract wins decisively is bounded, project-shaped work: a defined piece of work over three or six months, where you save the recruitment cost, the ramp-up loss, and all the ongoing on-costs, and you get someone delivering from week one.

There's also a third option the calculator doesn't model, and it's often the cheapest of all for senior roles: a fractional engagement.

The calculator assumes a full-time contractor - five days a week. But a lot of senior work doesn't need five days.

A fractional CFO, CMO, CTO, COO or CPO works one to three days a week on an ongoing basis for a monthly retainer, typically A$4,000 to A$25,000 depending on the role and scope.

Compare that to a full-time C-suite hire in Australia, which is a A$300,000 to A$650,000-plus commitment once salary, superannuation, bonus and equity are counted - plus months to recruit and more months to ramp.

For a business that needs genuine seniority and ownership of a function, but not a full-time executive sitting in the chair five days a week, fractional is frequently both cheaper than permanent and more senior than what the same budget would buy full-time. We cover when each fractional role makes sense in this guide.

The other half of the picture is time. The average time to hire a permanent role in Australia is around 5 weeks, and senior specialist roles routinely take 8 to 14 weeks.

A contract specialist can be working inside your business within days. If the work has a deadline, the cost of those weeks is part of the true cost of the permanent route too.

The calculator above lets you compare both side by side for your specific role - model the permanent cost, then see the contract equivalent over 3, 6 and 12 months and decide which fits the work in front of you.

The bottom line

The base salary is the most visible number in a hiring decision and the least complete.

Once superannuation, payroll tax, workers compensation, leave, recruitment, equipment and ramp-up are factored in, a permanent professional hire in Australia costs roughly 1.3 to 1.5 times the base salary, with the higher multiple applying in year one.

That doesn't mean permanent hiring is the wrong choice - for ongoing, integrated roles it's exactly right.

But it does mean the comparison against contract talent should be made on a true-cost basis, not a salary-versus-day-rate basis. When you compare properly, contract engagement is often the more economical option for bounded work, and almost always the faster one.

If you're weighing a specific role and want to see what senior contract or fractional talent would cost against the permanent number, a curated shortlist from Expert360 takes 48 hours and costs nothing to request.

It's the fastest way to put a real comparison in front of yourself before you commit.