Employer costs in Australia

What does an Australian hire cost an employer in total?

There is no single all-in loading for Australia, because payroll tax, workers' compensation and long service leave are set by the state where the work is performed and superannuation, annual leave, personal leave, notice, redundancy and casual loading stack on top of them nationally.

A useful way to hold it is in three layers. The national layer is superannuation at 12% of qualifying earnings and it is the same in Darwin as in Sydney. The state layer is payroll tax and workers' compensation: payroll tax standard rates run from 4% to 8.75%, with concessional regional rates as low as 1.2125%, while workers' compensation is priced by industry classification rather than by geography, so the variation is between industries more than between states. The accrual layer is leave, long service leave and termination entitlements, which cost nothing in the first month and a great deal in the fifth year.

Two lines on that table need explaining. PAYG withholding is not an employer cost at all; it comes out of the employee's gross pay and the employer merely remits it. Casual loading is not an addition to the other entitlements but a substitute for them, so a casual costs 25% more per hour. A casual working the same weeks as a permanent employee costs about 5% more over a year, not less. Casuals are cheaper only where the work is genuinely irregular, which is a question of how many hours are actually used rather than of the rate.

How much superannuation does an employer pay?

Superannuation is 12% of qualifying earnings for 2026-27 and 2027-28, paid on every payday, and it must reach the employee's fund within seven business days.

That position changed on 1 July 2026 and a cost model built before then will be wrong.

The base was redefined. Superannuation used to be calculated on ordinary time earnings. It is now calculated on qualifying earnings, a single defined term that gathers ordinary time earnings, all commissions, directors' fees, payments under labour-only contracts and salary sacrificed amounts into one base. For most employees the number is unchanged, because commissions and salary sacrifice were already counted. What changed is that the definition closes the arguments about what was in and what was out.

The timing tightened. Contributions were previously due within 28 days of the end of a quarter. They are now due on each payday, with the money in the employee's fund within seven business days. Some exceptions apply, including for a new employee's first contribution. The Small Business Superannuation Clearing House, which many small businesses used to remit contributions, closed to all users on 30 June 2026, so an alternative SuperStream-compliant route has to be in place.

The cap changed shape. Employer superannuation stops for the year once qualifying earnings reach $270,830, an annual maximum contribution base that replaced the previous $62,500 per quarter. That caps employer superannuation at $32,499.60 for the year, against $30,000 under the old quarterly cap, so the employer maximum rose by $2,499.60. The practical difference also matters for high earners paid unevenly: under the old quarterly cap, a large bonus quarter was capped in that quarter alone.

The penalty for getting it wrong was also rebuilt and in an unfamiliar direction. The superannuation guarantee charge is now assessed by the ATO automatically rather than self-reported, is calculated on qualifying earnings, carries interest that compounds daily and became tax deductible, having been non-deductible for most of its life. The penalty on top no longer runs on the size of the charge: it is a percentage of whatever is still unpaid when the ATO's notice payment period ends, set at 25% or 50%, with a nil case in exceptional circumstances. The exposure has moved from occasional and large to frequent and small, and from a size problem to one of monitoring. The working-capital effect of that on businesses running weekly payroll against slow-paying clients is set out in Payday Super for recruitment and labour-hire agencies.

What does payroll tax add, state by state?

Payroll tax adds a standard rate of between 4% and 8.75% of wages once the threshold is crossed, with concessional regional rates as low as 1.2125% and every jurisdiction apportions that threshold against the group's total Australian wages rather than granting it in full in each state.

The thresholds are not per-state allowances. Grouping provisions pull related entities together, so a company that already has Australian operations can be liable on its first hire in a new state while a standalone local business paying the same salary pays nothing. For a foreign parent expanding into a second or third state, payroll tax is often the largest single surprise in the budget.

Only New South Wales has a single headline rate and even that is subject to grouping. Every other jurisdiction adds a second layer and three of those are worked through here. Western Australia's threshold phases out gradually between $1m and $7.5m of Australian taxable wages rather than switching off, so the effective rate climbs across that band. The Australian Capital Territory recut its regime on 1 July 2026, dropping the threshold from $2m to $1.75m and moving to five bands set by Australia-wide wages, rising to 8.75% above $150m. The Northern Territory introduced a 6.5% rate on the same date for employers and groups with Australia-wide wages of $100m or more, having previously charged 5.5% to everyone above its threshold.

Victoria applies two surcharges above the ordinary rate, a mental health and wellbeing surcharge and a temporary COVID-19 debt surcharge running to 30 June 2033, which together add 1% above $10m and 2% above $100m. Queensland's mental health levy adds 0.25% above $10m and a further 0.5% above $100m. These sit on top of the figures above rather than replacing them.

What does workers' compensation cost?

Workers' compensation is compulsory, arranged separately in each state or territory where employees usually work and priced by industry classification rather than by a national rate.

That means the answer to "what does workers' compensation cost" is a range that depends on what the employees do. A construction or resources employer and a software employer paying identical salaries in the same city pay materially different premiums, because the classification reflects claims risk. Victoria's scheme average is 1.8% of rateable remuneration for 2026-27, with a minimum premium of $400 plus GST and New South Wales held its industry classification rates unchanged for the 2026-27 policy period. Those are scheme-level figures, not quotes: an individual employer's rate sits above or below the average according to its classification and claims history.

The obligation is also front-loaded in a way that catches new entrants. The deadlines are set scheme by scheme and they differ: Queensland allows registration within five business days of employing and Victoria within sixty days of becoming liable. In practice cover is arranged before the start date and a distributed team needs a policy in each state its people usually work in rather than one policy nationally.

What do leave and termination entitlements accrue to?

Leave and termination entitlements are a real cost from the first day of service even though most of the cash leaves the business much later.

Annual leave accrues at four weeks a year, five for defined shiftworkers and carries over rather than lapsing. Personal and carer's leave accrues at ten days a year for a full-time employee, pro-rata for part-time and is also cumulative. Long service leave accrues under separate state and territory legislation with different qualifying periods and accrual rates and it starts building from the first day of service even though nothing is drawn for years, so a first-year budget that ignores it understates the cost.

Termination has two different bases and confusing them is a common and expensive error. Notice is paid at the employee's full rate, which includes loadings, monetary allowances, overtime, penalty rates and bonuses. Redundancy pay is calculated on the base rate only, excluding all of those. Notice runs from one week to four weeks by length of service, with an additional week for employees over 45 who have completed at least two years. Redundancy pay runs from four weeks at one year of service up to sixteen weeks at nine to ten years, then steps back down to twelve weeks at ten years or more. Employees with under twelve months' service get no redundancy pay and employers with fewer than fifteen employees are generally exempt from it altogether.

What does employing through an Employer of Record add?

An Employer of Record adds a service fee on top of the statutory costs and none of the underlying obligations goes away because the employment sits with a different entity.

Superannuation is still 12%. Payroll tax is still payable where the work is performed. Workers' compensation is still required in each state where employees usually work. Leave still accrues. What the fee buys is that those obligations are met by an entity that already exists, already holds the registrations and already runs the reporting, rather than by a company that has to be built first.

Fee structures differ and the two common models price the same service very differently as salaries rise. The trade-offs between a flat monthly fee and a percentage of salary are set out in EOR pricing: flat fee versus percentage of salary.

For the setup time, the break-even headcount and the control trade-offs, see EOR versus an Australian subsidiary. For the wider employment-law context around these costs, see the complete guide to hiring employees in Australia.