Your first hire is a milestone. It is also the moment your business takes on a set of obligations that go well beyond the salary you agreed to. The headline wage is only part of the picture, and underestimating the rest is one of the most common cash flow shocks for a growing business.
This guide walks through the real cost of employing someone in Australia. Knowing the full number before you sign helps you price your work, protect your margin and avoid penalties down the track.
Wages Are Just The Starting Point
The salary or hourly rate you offer is the visible cost. On top of it sit superannuation, insurance, leave and a layer of administration that quietly adds to the total.
A useful rule of thumb is to budget meaningfully above the base wage once you load in super, workers compensation and leave. The exact loading depends on the role, the award and your state, so treat the sections below as the components you need to cost out before you commit.
Superannuation: 12% On Top Of Wages
The superannuation guarantee (SG) is the compulsory contribution you pay into an employee’s super fund on top of their wages. As at the date of this article, the SG rate is 12% of ordinary time earnings, and this is the final scheduled increase confirmed by the ATO from 1 July 2025.
It is worth being clear that super sits on top of the wage, not inside it, unless the employment agreement is expressly written as a total remuneration package. For a worker on $60,000 in wages, that is around $7,200 a year in super before you count anything else. You can sense-check the figure with the Foothold super guarantee calculator, and always verify the current rate against the ATO.
PAYG Withholding And Single Touch Payroll
When you pay an employee, you generally withhold tax from their wages and send it to the ATO. This is PAYG withholding. It is not an extra cost to you, but it is your responsibility to calculate, withhold and remit it correctly.
Most employers report this through Single Touch Payroll (STP), which sends wage, tax and super information to the ATO each time you run payroll. You will need STP-enabled payroll software, so factor a subscription into your running costs. A new starter also triggers a tax file number declaration and a stapled super fund request, both of which establish the employment link with the ATO.
Workers Compensation Insurance
Workers compensation is a legal requirement once you employ staff, and it covers wages and medical costs if an employee is injured at work. It is arranged through your state or territory scheme, so the premium and the rules differ depending on where your people work.
The premium is typically a percentage of your total wages, weighted by the risk of the occupation. A desk-based role costs far less to cover than a trade or a role involving machinery. Get a quote early, because the cost varies widely and needs to be in your budget before day one.
Payroll Tax: Only Once You Cross The Threshold
Payroll tax is a state and territory tax on wages, and it only applies once your total wages cross the threshold for your jurisdiction. For a genuine first hire, you are very unlikely to be near it, which is often a relief to first-time employers.
The point to understand is that thresholds and rates differ by state, and they are assessed on your Australia-wide wages, not just the wages paid in one location. Growing businesses with several staff across more than one state can cross a threshold sooner than expected. The Foothold payroll tax calculator helps you see where you stand, and you should confirm the current threshold with your state or territory revenue office.
Leave And Fair Work Obligations
Permanent employees accrue paid leave, and that accrued leave is a real liability even before it is taken. Full-time staff are generally entitled to four weeks of annual leave a year plus personal and carer’s leave, and these accrue from the first day.
Fair Work sets the floor for pay and conditions through the National Employment Standards and the relevant modern award. You need to identify the correct award, pay at least the minimum rate, keep proper records and give every new employee the Fair Work Information Statement. Getting the classification wrong is a frequent and expensive mistake, so it is worth checking before you advertise the role.
Payday Super Starts 1 July 2026
A significant change is almost here. From 1 July 2026, employers will need to pay super at the same time as wages rather than quarterly, with contributions generally required to reach the fund within seven business days of payday. A first-hire carve-out applies for a brand-new employee: their first super contribution has a longer window of up to 20 business days, after which the seven-business-day rule applies. This measure is now law, so verify the timing with the ATO before your first pay run.
For a first-time employer this is good news, because it builds the right habit from the start. It does mean your cash flow needs to carry the super cost with every pay run, so plan for super to leave your account alongside wages, not months later.
Plan The Full Cost Before You Hire
A first employee can transform what your business is able to take on. The businesses that handle it well are the ones that cost the whole obligation, not just the wage, and set up clean payroll from day one.
If you are weighing up your first hire, Foothold Advisory can help you map the true cost, choose the right structure and get your payroll and super obligations in order before you commit. Book a consultation, and use the Foothold super guarantee and payroll tax calculators to pressure-test the numbers.
General information only. This article provides general information about Australian tax and business concepts and is current as at its publication date. It does not take into account your objectives, financial situation or needs. It is not tax, financial or legal advice. Foothold Advisory is not a registered tax agent. Tax laws and figures change and apply differently depending on your circumstances. Before acting, obtain advice from a registered tax agent and verify all figures against the ATO.