What does it cost to hire an employee in Australia in 2026?
Australia's 12% Superannuation Guarantee is mandatory on top of every dollar of gross salary, with no ceiling. Add 20 days paid annual leave and 10 days personal leave, and a typical Australian hire lands at 112 to 115 percent of base salary before any benefits. The SG rate reached 12% in July 2025 and is now fixed. Budget the new floor before you send the offer.
· Australia guide
Illustration · Sydney, Australia
Every Australian employer must pay 12% Superannuation Guarantee on top of gross salary. There is no ceiling. It applies from the first dollar of ordinary time earnings.
On top of that, every full-time employee gets 20 days paid annual leave and 10 days paid personal leave per year. Both are the law. They apply from day one.
Income tax is withheld by the employer under PAYG. The tax-free threshold is A$ 18,200 a year. The top rate is 45% on income above A$ 190,000.
For most hires, the true employer cost is 112 to 115 percent of gross salary once super and leave are counted. The Teamed Employer Cost Calculator gives you the precise number for your role.
Superannuation Guarantee: the biggest employer cost line
The Superannuation Guarantee is 12% of ordinary time earnings. The employer pays it on top of gross salary.
It applies to every employee, at every salary level. There is no earnings ceiling. It is not optional and it cannot be included inside the agreed salary unless you use a specific salary-sacrifice arrangement.
The Superannuation Guarantee (SG) is the single largest mandatory employer cost in Australia. It is governed by the Superannuation Guarantee (Administration) Act 1992 and reached its current rate of 12% on 1 July 2025. That rate is now fixed by legislation.
Unlike superannuation contributions in some other countries, Australia's SG has no income ceiling. A hire on AUD 60,000 and a hire on AUD 200,000 both attract the same 12% rate, calculated on ordinary time earnings for each. This means the absolute cost rises linearly with salary and there is no cap to budget against for high earners.
The super guarantee rate is 12% for the 2025 to 2026 year. Employers must pay it to a complying super fund or retirement savings account by the quarterly due dates. Failure to pay on time triggers the SG Charge, which is non-deductible and includes interest and an administration fee.
Salary packaging and salary sacrifice
Some employers use salary sacrifice arrangements where part of gross is directed into super before PAYG tax is applied. This reduces the employee's taxable income but does not reduce the employer's SG obligation. The SG is calculated on the full ordinary time earnings including any salary-sacrificed amounts as required by the ATO's guidelines. Check the arrangement with your payroll provider before modelling a salary sacrifice package.
Employee super contributions
Employee contributions are voluntary. The 0% mandatory employee contribution rate simply means there is no compulsory employee deduction at the statutory level. The 12% employer obligation is the only mandatory figure in the payslip.
What a typical Australian hire actually costs
All figures in this section are illustrative. They are computed from verified cached statutory rates applied to a hypothetical salary. They are not statutory figures.
The table uses AUD 100,000 as the hypothetical gross to make the super arithmetic easy to follow. Your real cost will differ based on the agreed salary and any benefits you provide.
This example applies the 12% Superannuation Guarantee and the leave entitlements from Australia's National Employment Standards to a hypothetical AUD 100,000 gross salary. All figures are illustrative.
| Line | Illustrative cost on AUD 100,000 salary | Source |
|---|---|---|
| Gross salary | AUD 100,000 | Contract |
| Superannuation Guarantee at 12% (no ceiling) | AUD 12,000 (illustrative) | ATO: Super guarantee |
| Annual leave: 20 days included in gross salary cost | Included in salary | Fair Work Act 2009 s.87 |
| Personal leave: 10 days per year, employer-funded when taken | Variable; low average cost | Fair Work Act 2009 s.96 |
| Workers compensation insurance premium (rate varies by state and sector) | Varies; typically 1 to 3% of wages | State-based legislation |
| Total illustrative employer cost (super only, before workers comp) | AUD 112,000 illustrative | 112% of gross (illustrative) |
These figures are illustrative. The AUD 12,000 super line is derived as 12% of AUD 100,000. Workers compensation premiums are state-based and vary by industry risk classification. They are not included in the AUD 112,000 total above. Use the Employer Cost Calculator to model your own salary figures.
Payroll tax: a state-level cost that surprises some hirers
Australia also has a state and territory payroll tax system. Each state sets its own rate and tax-free threshold. If your total Australian wages bill across all states exceeds the relevant state threshold, you may owe payroll tax to one or more state revenue offices. The threshold and rate vary by state. This is a business-level obligation, not a per-employee line in the payslip, but it becomes material once your Australian headcount grows. Ask your payroll provider which states apply to your workforce from the start.
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Agree the gross salary
Confirm the gross salary with the candidate. Check it clears the national minimum wage. This is the base number every other line builds on.
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Add the super guarantee
Apply the super rate to ordinary time earnings on top of gross. There is no ceiling, so the cost rises linearly with salary.
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Check the state payroll tax threshold
Identify which states your employees work in. Confirm whether your total wages bill crosses any state payroll tax threshold. This is a business-level cost, not a per-payslip line.
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Register for workers compensation
Every Australian employer needs workers compensation cover from the first hire. The premium depends on your industry classification and which state the employee works in.
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Run the full cost model
Use the Teamed Employer Cost Calculator to bring together salary, super, leave loading, and any applicable levies into one confirmed cost figure before you send the offer.
Leave entitlements that add to the employer cost
Every full-time employee gets 20 days paid annual leave per year. This is built into the gross salary cost.
Every employee also gets 10 days paid personal and carer's leave per year. This is separate from annual leave.
Australia's National Employment Standards (NES) set minimum leave entitlements that apply to all employees. These are not optional and cannot be traded away in the employment contract.
| Entitlement | Amount | Statute |
|---|---|---|
| Annual leave (full-time employees) | 20 days per year | Fair Work Act 2009 s.87 |
| Personal and carer's leave | 10 days per year | Fair Work Act 2009 s.96 |
| Public holidays | 8 national plus additional state and territory holidays | Fair Work Act 2009 s.114 to 116 |
| Parental leave (government-funded) | 26 weeks funded by Services Australia from 1 July 2026 | Paid Parental Leave Act 2010 |
| Maximum ordinary weekly hours | 38 hours | Fair Work Act 2009 s.62 |
Annual leave loading
Many modern awards and enterprise agreements require an annual leave loading of 17.5% on top of the base rate of pay when annual leave is taken. Not every employee is covered; it depends on their award or enterprise agreement. If the loading applies, it adds to the cost of each leave week. Check the applicable award at onboarding, before the employee's first leave booking.
Parental leave from July 2026
From 1 July 2026, the government-funded Parental Leave Pay expands to 26 weeks, shareable between parents. The government pays this at the national minimum wage rate, not the employee's salary. The employer's obligation during paid parental leave is to keep the role available and continue super contributions where required. The government payment flows to the employee via Services Australia. This means the employer-funded cost of parental leave itself is low, but the backfill and continuity cost is real.
Unpaid parental leave
Employees with at least twelve months of service can take up to twelve months of unpaid parental leave. They can request a further twelve months. The employer must hold the position during the initial twelve months. This is a position-hold cost, not a direct wage cost, but it affects headcount planning and backfill budgets.
Employee income tax and what it means for your offer
The employer withholds income tax under PAYG. Earnings below A$ 18,200 a year are tax-free.
Income above A$ 18,200 is taxed at rates rising from 16% to 45% at the top band.
Australian income tax is collected through the Pay As You Go (PAYG) withholding system. The employer withholds the estimated tax liability from each pay run and remits it to the ATO. The employee's final liability is reconciled at the end of the financial year via their tax return.
Income tax bands for FY 2025 to 2026
| Income band (AUD) | Rate |
|---|---|
| Up to A$ 18,200 | 0% (tax-free threshold) |
| A$ 18,200 to A$ 45,000 | 16% |
| A$ 45,000 to A$ 135,000 | 30% |
| A$ 135,000 to A$ 190,000 | 37% |
| Above A$ 190,000 | 45% |
These rates are confirmed for FY 2025 to 2026 by the PwC Tax Summaries (Australia). The 16% second band rate reduces to 15% from 1 July 2026 under the Tax Cuts for Working Australians Act 2024. This means take-home pay improves for employees earning between A$ 18,200 and A$ 45,000 from the next financial year.
Medicare Levy
Most Australian residents also pay the Medicare Levy. The standard rate is 2% of taxable income. High earners without private hospital insurance may pay an additional Medicare loading on top of the standard levy. Neither levy is an employer cost directly, but both reduce employee take-home pay and can affect how candidates compare offers. Include the Medicare Levy in any net-salary illustration you share with candidates.
PAYG withholding obligations
The employer calculates withholding using ATO tax tables for the employee's earnings and tax residency status. Withholding is remitted to the ATO monthly or quarterly depending on the employer's registered withholding category. End-of-year PAYG payment summaries are replaced by Single Touch Payroll (STP) reporting, which sends payroll data to the ATO in real time on each pay run.
How Teamed handles the Australia employer cost for you
Teamed becomes your legal employer of record in Australia for from $599 per employee per month, with zero FX mark-up in any currency.
Super, PAYG withholding, Single Touch Payroll, leave tracking, and the full Australian employment law stack run on one platform.
Real HR and legal experts handle your Australian hires, from the first offer letter through every STP submission, quarterly super payment, and workers compensation registration. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice, so you see the super line, the leave liability, and the workers comp premium separately, never blended into an opaque margin.
EOR payroll, contractor onboarding, and entity setup all live on one platform. An Australian contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own Australian entity without switching systems. EOR is the right model for a first Australian hire, until it isn’t. Start from the Australia hiring overview or run the Employer Cost Calculator to see the full picture before you make an offer.
Frequently asked questions
What does an employer pay on top of gross salary in Australia?
The main mandatory cost on top of gross salary is the Superannuation Guarantee at 12%. This applies to all ordinary time earnings with no income ceiling. On a gross salary of AUD 100,000, that is AUD 12,000 in super alone (illustrative). Workers compensation insurance premiums and, once your wages bill crosses the threshold, state payroll tax add further costs at the business level.
What is the Superannuation Guarantee rate in Australia in 2026?
The Superannuation Guarantee rate is 12% of ordinary time earnings. It reached this level on 1 July 2025 under the schedule in the Superannuation Guarantee (Administration) Act 1992. The rate is now fixed. There is no earnings ceiling, so the absolute cost grows proportionally with salary.
How much paid leave does an Australian employee get?
Full-time employees are entitled to 20 days of paid annual leave per year and 10 days of paid personal and carer's leave per year under the National Employment Standards. Annual leave is four weeks based on the 38 hours ordinary week. There are also 8 national public holidays, plus additional state and territory holidays.
What income tax does an Australian employee pay in 2026?
Earnings up to A$ 18,200 are tax-free. Above that, the rate rises from 16% on income between A$ 18,200 and A$ 45,000, then 30% up to A$ 135,000, then 37% up to A$ 190,000, and 45% above A$ 190,000. Most employees also pay a 2% Medicare Levy. Income tax is withheld by the employer under PAYG and reported to the ATO via Single Touch Payroll.
When does an Australian employee qualify for redundancy pay?
Employees with at least one year of continuous service are entitled to redundancy pay if their role is made redundant. The amount rises with tenure: 4 weeks for one to two years, 6 weeks for two to three years, and up to 16 weeks for nine to ten years of service, under Fair Work Act 2009 s.119. Budget this as a deferred cost from the first year of any hire.
The most common gap we see in Australian cost models is the state payroll tax threshold. Employers focus on super, and rightly so, it is the biggest line. But payroll tax can add two to five percent of total wages once you cross the threshold for your state. If your first Australian hire is going to be one of several, get the payroll tax picture right from hire one, not once you have crossed the line.
Australia's 12% Superannuation Guarantee applies on top of every salary dollar, with no ceiling.
Add 20 days paid annual leave, 10 days personal leave, and state payroll tax once your headcount grows.
Know the full number before you make an offer. Run it, then send it.
