Cost of hiring an employee for small business: what a $65K salary really costs you

9 April 2026

The cost of hiring an employee for small business is one of the most underestimated numbers in Australian business. You find someone good, you agree on $65,000, and you think that’s what they cost. It’s not. Not even close.

By the time you add superannuation, leave entitlements, workers compensation, payroll tax, equipment, training, and the time it takes to actually get them productive, that $65K salary is costing you somewhere between $85,000 and $95,000 a year. That’s 30 to 45 percent more than the number you shook hands on.

And if you’re a service business turning over $500,000 to $800,000, that one hire just ate up 12 to 19 percent of your total revenue. Before they’ve even picked up the phone.

35-45%

Hidden Cost On Top Of Base Salary

The average for Australian small businesses. A $65K employee really costs $85K-$95K per year.

Based on ATO, Fair Work and Safe Work Australia employer obligation data

Where the real costs hide

Most business owners budget for salary and super. Here’s everything else you’re actually paying.

Superannuation

12%

On a $65K salary, that's $7,800 a year. Non-negotiable. And from July 2026, you'll need to pay it on the same day as wages, not quarterly. That changes your cash flow timing significantly.

Leave entitlements

~$7,500/yr

Four weeks annual leave, ten days personal leave, and public holidays. That's roughly 30 days a year where you're paying someone who isn't producing revenue. For a small team, you feel every one of those days.

Workers compensation

1.5-5%

Depends on your state and industry. A desk-based business might pay 1.5%. Trades and construction can be 3 to 5% of wages. On $65K, that's anywhere from $975 to $3,250 a year.

Equipment, training & onboarding

$3,000-$8,000

Laptop or tools, uniforms, software licences, vehicle access, induction time, and the hours your existing team spends training them instead of doing billable work. The AHRI estimates onboarding alone costs small businesses around $4,700 per hire.

REAL SCENARIO

The $100K manager who couldn’t organise a hot lunch

You might have a laugh at this one, but it’s a story I see play out more often than you’d think.

A training organisation client of mine had built a solid business from the ground up. Great entrepreneur, sharp on strategy, but running himself into the ground doing everything. He wanted the Tim Ferriss four-hour work week dream. Fair enough. So he went out and hired a general manager at $100,000 a year to come in and take the business to the next level.

The resume looked brilliant. Big business experience. Managed this, managed that. All the right buzzwords. Gut feel was good. He came in, promised the world, and from day one it was clear something was off.

$100K

Base salary agreed

~$140K

True cost with loading, super & onboarding

Clear KPIs set before starting

He had the intelligence, no doubt about that. But when it came to operations and management, he was all movement and no direction. I watched him one day walking up and down the stairs, in and out of meetings, shuffling papers, looking busy but producing nothing. I sent the business owner a picture of a pigeon in the snow, footprints going absolutely everywhere but getting nowhere, and asked “is this your new GM?” That pretty much summed it up.

But here’s the real kicker. It wasn’t just the $100K salary. Add super at 12%, that’s another $12,000. Workers comp, leave entitlements, payroll tax. Then there’s the time the owner spent trying to get him up to speed, coaching him on operations, motivating him to drive sales. That’s the owner’s time not being spent on the business. The true cost was closer to $140K when you added the loading, and the return on that investment was effectively nothing.

Now, the owner had communicated the importance of new business. The outlook was for the GM to build out a growth plan and take the operations to the next level. But communicating a vision and clearly defining KPIs and role expectations are two very different things. Without that definition from day one, it fell away quick. You’d expect a GM-level hire to bring that structure themselves, but not having clear targets for new business development, no benchmarks for operational efficiency, and no measurable expectations for management overhead meant there was nothing to hold him accountable to. No early warning signs until it was obvious to everyone.

The same principle applies at any level. Whether you’re hiring a $55K admin or a $100K manager, you need to know exactly what success looks like before they walk in the door. And check references. Not just the ones they give you. Actually call around. A resume can say anything. The people who worked with them will tell you the truth.

THE LESSON

How to get the hire right from day one

Hiring is one of the best things you can do for your business. But only if you go in with your eyes open, your systems documented, and your expectations clear.

Start with the loaded cost, not the salary

Take the base salary and add 12% for super, then add your workers comp rate (check your state and industry), then add roughly 10% for leave entitlements. That gives you the minimum annual employment cost before you even think about equipment or training. For a $65K salary, you're looking at roughly $82K to $85K just in mandatory costs.

Budget for the first 90 days separately

The first three months are your most expensive. You're paying full wages while they're learning your systems, your clients, and your way of doing things. If they need equipment, tools, a vehicle, uniforms, or software access, most of that hits in month one. Budget $3,000 to $8,000 on top of wages for setup costs depending on your industry.

Set clear KPIs before they start

This is the one most small businesses skip, and it's the one that costs them the most. Before your new hire walks in the door, define exactly what success looks like. If it's a manager, what are their targets for new business, operational efficiency, and team performance? If it's a cabinet maker, how many kitchens are they building per week and what quality measures are in place? Every role has measurable outputs. Without clear KPIs, you've got no way to measure whether the hire is working until it's painfully obvious it isn't.

Have documented systems and processes

It's hard to scale a business when there's no clear process for doing things your way. Before you bring someone in, document how you want things done. Job workflows, client communication standards, quality checklists, reporting expectations. If it only lives in your head, your new hire is guessing, and you're going to spend your time micromanaging instead of growing. Systems are what let you step back without things falling apart.

Work out how much revenue they need to generate

If the true cost of your new hire is $90K a year and your gross margin is 50%, they need to bring in $180K in revenue just to break even. That's $15K a month. Know this number before you place the ad. If the work isn't there or won't ramp up fast enough, you might be better off with a contractor or part-timer first.

Plan for the cash flow lag

You start paying your new person from day one. But the revenue they generate might not land in your account for 30 to 60 days depending on your invoicing and payment terms. For a trades or services business, that means having two to three months of their full cost sitting in reserve before they start. If you're already tight on cash, this is the hire that breaks you.

Regular check-ins and recognition

There's an old saying in people management: people take jobs, but they leave managers. Don't be the reason good people walk out the door. Have regular check-ins, not just when something goes wrong. Ask how they're settling in, what's working, what's not. And when they do a good job, tell them. Recognition goes a long way. Replacing a staff member is always more expensive than retaining one, so a quick "you nailed that" costs you nothing and saves you thousands down the line.

Check references properly

A resume can say anything. Don't just call the two referees they hand you. Call around. Ask people in your network. Ask specific questions: how did they handle pressure, what was their follow-through like, would you hire them again? The people who actually worked alongside them will tell you the truth. This applies at every level, from a $55K admin to a $100K manager. Ten minutes on the phone can save you six months of pain.

Not sure if you can afford to hire?

I'll help you map the true cost, work out the revenue target, and figure out whether a full-time hire, part-timer, or contractor makes the most sense for where your business is right now.

Let's work it out together

Hiring your first or next employee is a massive step. It means your business is growing, and that’s a good thing. But the businesses that do it well are the ones that plan for the real number, not the salary on the contract. Build the true cost into your forecast, have the cash buffer ready, set clear KPIs before they start, and check references properly. Not the two mates they hand you. The people who actually worked alongside them.

The worst time to find out you can’t afford your new hire is three months after they’ve started. And the worst time to find out they can’t do the job is six months in with nothing to show for it.

Sources:
Australian Taxation Office – Super guarantee obligations
Fair Work Ombudsman – National Employment Standards
Australian Human Resources Institute – Recruitment cost benchmarks
Safe Work Australia – Workers compensation premiums by industry

Dave Barr

Dave Barr is a digital strategist and growth consultant based on the Sunshine Coast. Across 15+ years of business transformation and growth, he's streamlined sales, marketing, people, and process for organisations of all sizes, from government contracts and large-scale operations through to building digital strategies for local trades, health, professional services, and hospitality businesses across Australia. He's not a 25-year-old agency account manager reading from a playbook. He's a business owner who speaks business owner. Every recommendation ties back to what actually matters: more enquiries, better clients, and a business that works harder for you, not the other way around. When he's not auditing ad accounts or building strategies, you'll find him on the Sunshine Coast working on his calisthenics, training BJJ, surfing, or hunting down a good coffee.

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