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Compliance
Published:
January 20, 2026
Last updated:
January 19, 2026
Understanding the complete cost of employing full-time workers in Australia extends far beyond base salaries. For organizations expanding into Australia or managing local operations, accurately budgeting employer costs—mandatory superannuation contributions, payroll taxes, statutory leave entitlements, and market-driven benefits—becomes critical for financial planning, competitive compensation strategies, and sustainable growth.
Australia's highly regulated employment market provides robust worker protections through comprehensive mandatory contributions, generous leave entitlements, and industry-specific Modern Awards setting wages above the national minimum. Total employment costs typically range from 120-130% of base salary when accounting for all statutory obligations and typical benefits.
This guide provides detailed breakdowns of Australian employment costs, enabling informed budgeting decisions for hiring and scaling operations.
Salary levels vary significantly based on role, experience, industry, and location (Sydney/Melbourne command premiums over regional centers):
Salary Benchmarks (Monthly):
Important considerations:
Modern Awards: Australia uses industry-specific Modern Awards setting minimum wages, penalty rates, allowances, and conditions above the national minimum wage. Over 120 Modern Awards cover different industries and occupations. Employers must identify applicable Award when budgeting salary ranges—many Awards require significantly higher wages than national minimum.
National Minimum Wage: AUD 23.23/hour or AUD 882.80/week as of July 2024 (subject to annual Fair Work Commission reviews each July).
Annual wage reviews: Fair Work Commission conducts annual minimum wage reviews typically effective July 1, requiring budget adjustments for Award-covered employees.
Salary packaging: Some employees (particularly non-profit, healthcare, education sectors) may access salary packaging arrangements allowing pre-tax payment of certain expenses, reducing tax liability while maintaining take-home pay.
Mandatory retirement savings: Employers must contribute 11% of ordinary time earnings (OTE) to complying superannuation fund as of 2025, increasing to 11.5% in July 2025 and 12% in July 2026.
Ordinary Time Earnings (OTE): Includes salary, wages, commissions, bonuses, allowances, and some paid leave. Excludes overtime (unless part of ordinary hours under contract).
Quarterly payment deadlines: Must be paid quarterly by 28th day after quarter end (28 October, 28 January, 28 April, 28 July).
Superannuation Guarantee Charge (SGC): Late or unpaid contributions trigger SGC—employer must pay unpaid super, nominal interest, administration charge (AUD 20/employee), and SGC is not tax deductible.
Example (AUD 8,000/month base):
State-based employment tax: Applies when total Australian wages exceed state-specific annual thresholds. Rates and thresholds vary by state.
2024-25 Examples:
Example (NSW, total annual wages AUD 2.5M):
Income tax withholding: Employers withhold tax from employee wages and remit to Australian Taxation Office (ATO) based on tax tables.
Single Touch Payroll (STP): Must report payroll information (wages, PAYG withholding, super) to ATO through STP system at each pay run. Failure creates penalties.
Mandatory workplace injury insurance: All employers must maintain workers' compensation coverage.
Premiums: Based on industry classification, claims history, wage bill. Rates vary significantly—low-risk office work (~1-2% of wages), high-risk construction/manufacturing (5-10%+).
Example (office-based, 1.5% rate):
Statutory entitlement: 20 days (4 weeks) paid annual leave per year for full-time employees under National Employment Standards (NES).
Accrual: Approximately 1.67 days per month.
Leave loading: Some Modern Awards provide 17.5% leave loading, though not universally required.
Annual leave payout on termination: Must pay out all accrued unused annual leave—creating significant liability for long-tenure employees.
Cost (20 days annual leave, AUD 8,000/month): ~AUD 615/month
Statutory entitlement: 10 days paid personal/carer's leave per year.
Accrual: Accrues progressively, unused leave accumulates year-to-year (no cap).
No payout on termination: Unlike annual leave, personal/carer's leave is not paid out.
Cost (10 days, AUD 8,000/month): ~AUD 308/month
Statutory paid public holidays: 7-13 days annually depending on state/territory including New Year's Day, Australia Day, Good Friday, Easter Monday, ANZAC Day, Queen's Birthday, Christmas Day, Boxing Day, plus state-based holidays.
Payment obligation: Employees ordinarily rostered receive paid day off. If working, receive penalty rates (typically 150-250% depending on Award).
State-based entitlements: Accrues after continuous service, typically:
Entitlement: Typically 8.67 weeks (2 months) after 10 years service.
Payment on termination: Must pay out accrued long service leave (subject to minimum service requirements).
Example: Employee with 10 years earning AUD 8,000/month:
Unpaid parental leave: 12 months unpaid for employees with 12+ months service.
Government-funded: Australian Government provides up to 18 weeks paid parental leave at national minimum wage (~AUD 882.80/week)—paid through employer payroll.
Employer top-up (optional): Many employers provide additional paid parental leave (e.g., 12-16 weeks at full pay) as competitive benefit.
Competitive Australian employers commonly offer:
These benefits typically add 5-15% to total employment costs but enhance attraction and retention.
Employee Profile: Mid-level technology professional, SydneyBase monthly salary: AUD 8,000 (AUD 96,000 annually)
Breakdown:
Minimum statutory costs alone (super, payroll tax, workers' comp, leave accruals) add approximately 28% above base salary.
Recruitment:
Onboarding and equipment:
Compliance and administration:
Leave payout liability:
Penalties for non-compliance:
1. Identify Applicable Modern Award
Determine which Modern Award covers your employees using Fair Work Ombudsman's Find My Award tool. Awards specify minimum wages, penalty rates, allowances, and specific leave entitlements beyond NES minimums.
2. Ensure Payroll Accuracy
Payroll errors create significant liability. Underpayment scandals have resulted in multi-million dollar back payments. Implement robust payroll systems and consider professional payroll services for complex Award calculations.
3. Single Touch Payroll (STP) Compliance
All employers must report wages, PAYG withholding, super at each pay run. Finalize declarations by July 14 after financial year end. Ensure payroll software is STP-enabled.
4. Superannuation Contribution Timeliness
Prioritize quarterly super payment deadlines. Late contributions trigger non-deductible SGC with interest and penalties.
5. Monitor Fair Work Commission Annual Wage Reviews
Budget for annual wage increases (typically July 1). 2024 review: 3.75% increase to minimum wages.
6. Manage Long Service Leave Liability
Track LSL accruals in financial statements. Budget for LSL payouts when employees separate after 7-10 years service.
For organizations expanding into Australia without dedicated in-country HR and payroll infrastructure, accurately calculating and managing employment costs across superannuation, payroll tax, Modern Awards, leave entitlements, and STP reporting creates significant operational burden.
AYP Group's Employer of Record (EOR) services in Australia provide transparent, comprehensive employment cost management.
How AYP simplifies Australian employment cost management:
By partnering with AYP's EOR services, your organization gains predictable, transparent Australian employment costs enabling accurate budgeting while focusing on talent strategy rather than payroll compliance complexity.
Explore AYP's EOR services across 14+ APAC markets, or learn about compliance challenges across Asia Pacific.
