Employment Cost Calculator

Understanding the True Cost of Employment

When budgeting for a new hire, the base salary is just the starting point. Australian employers face a range of mandatory and customary on-costs that typically add 20-40% to the base salary figure. Understanding these costs is critical for accurate financial planning, pricing decisions, and contractor vs employee comparisons.

How to use this employment cost calculator

1. Enter the employee's base salary (annual gross figure before tax).
2. Select the state or territory to apply the correct payroll tax rate and threshold.
3. Adjust optional on-costs such as workers compensation rate, leave loading, and training budget to match your industry.
4. Review the total employment cost breakdown, including the percentage loading above the base salary.

Key on-costs explained

• Superannuation Guarantee (12%): Mandatory employer contribution paid on top of ordinary time earnings, effective 1 July 2025.
• Payroll Tax: A state/territory tax on total wages once your payroll exceeds the threshold. Rates range from 4% to 6.5% depending on jurisdiction.
• Workers Compensation: Compulsory insurance covering workplace injuries. Premiums vary dramatically by industry - from 0.5% for office work to 5%+ for high-risk industries like construction and mining.
• Leave Loading (17.5%): An additional payment on annual leave, required by most modern awards and many enterprise agreements.
• Training & Equipment: While not mandatory, most employers budget for professional development and provide necessary tools and equipment.

Australian payroll tax thresholds by state

Payroll tax is one of the most variable employment costs across Australia. In NSW, the threshold is $1.2 million with a 5.45% rate. Victoria applies 4.85% above $900,000 (plus a surcharge for larger payrolls). Queensland uses a tiered rate from 0% to 4.95% above $1.3 million. WA charges 5.5% above $1 million. South Australia sits at 4.95% above $1.5 million. These thresholds mean a small business with a $900,000 payroll may pay zero payroll tax in most states but face a liability in Victoria. Always check your state revenue office for the latest figures.

Employee vs contractor cost comparison

Understanding true employment costs helps you make informed decisions about whether to hire an employee or engage a contractor. While contractors may appear more expensive on a per-hour basis, they do not attract super, payroll tax, workers comp, or leave entitlements - making the total cost comparison closer than it first appears. For industrial businesses processing contractor invoices alongside payroll, automating accounts payable ensures both streams are handled accurately and on time.