When you think of staff costs, what comes to mind? You shouldn’t just think of salary and wages as something you must pay your people. Beyond the foundational payment, there are additional expenses such as payroll taxes, discretionary benefits, and various other costs borne by the employer upon hiring or retaining an individual. The reward for failing to monitor your costs? Significant financial challenges down the line.

Let’s examine the hidden costs to assist you in calculating the potential cost of a single employee so that you’re setting a budget that’s realistic, feasible, and dependable.

The true cost of an employee

Many HR experts agree the true cost of employees is 1.25 to 1.4 times the salary afforded them. Here’s how this approximate number is arrived at, and why you should budget 1.25 to 1.4 times the person’s salary.

What is the average cost of hiring a new employee in Australia (onboarding costs)? We can begin by looking at salary – though salary is just the starting point in a list of expenses. In 2023, the average annual salary of an Australian full-time employee was $90,000 – so budgeting $112,500 to $126,000 is wise.

Let’s look at examples of employee costs to understand why.

1. Salary is the first cost to the business when employing an individual, whether paid weekly, fortnightly, or monthly.
2. Annual leave, whilst already factored into a salary, in essence, an employer is reimbursing a salary for 48 weeks of work throughout the year. This implies that the accurate annualised salary for the employee comes out to an additional value.
3. Personal/carers leave (of 10 days per year for a full-time employee). If applicable, this would add an additional cost in the same way as annual leave.
4. Public holidays off are the next cost. In the following article, enableHR gives key public holiday dates for business.
5. Compulsory superannuation of 11 per cent is the next factor to consider. This is paid in addition to an employee’s base salary. Your Employers’ guide to superannuation changes effective 1 July 2023 should be read here.
6. Payroll tax is the next most important cost. This is a state-based tax imposed on employers for the wages they pay to their employees. The specific rules, rates, and thresholds for payroll tax vary from state to state and territory, as it is a state-level tax rather than a federal tax. Employers become liable for payroll tax when their total taxable wages (the wages paid to their employees) exceed a certain threshold set by the respective state or territory. The tax rate is then applied to the amount of taxable wages that exceed the threshold.
7. Workplace equipment. There may be penalties if you ask an employee to do a job without equipping them correctly with tools, a uniform, and potentially a vehicle – or simply office furniture and space. This all increases your overhead costs.
8. Recruitment is the final cost to consider. Inclusive of time spent recruiting, onboarding, and training provided additional costs to businesses.

Lastly, there is the cost of HR for business – which is significantly more affordable when you rely on intuitive HR software to assist a professional HR person.

It’s up to you whether insurance and bonuses become additional costs. When it comes to hiring costs for remote employees, enableHR has many tools to minimise the HR admin.

Reduce your HR admin time. Make the most of enableHR’s tech tools.

enableHR was created to make business easier, by giving you plans, templates and processes to make staffing decisions as smooth as possible so you can focus on more meaningful HR activities like creating culture!

We’re here to answer your questions, guide you towards compliance, and point out all the helpful tricks and tools within enableHR. Please contact us to find out how we can make your inevitable staff expenses more efficient.