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Working out the cost of hiring

3 minute read

You’ve done it. Your business is up, running and starting to thrive. Now you realise that one pair of hands isn’t enough and you’re ready to bring someone else on board. Congratulations! But before you post that job ad, you’ll need to work out what a new hire will really cost you.

Key take-outs

  • Hiring only makes up part of the cost of recruitment.
  • If you can’t afford to pay regular wages, you can’t afford to hire.
  • Don’t forget the hidden costs, such as meeting legal obligations.

Like it or not, the true cost of employing someone stretches well beyond what you pay them. And to keep your business going, you’ll need enough sales to cover the additional expenses your new employee brings as well as enough cash to pay them – this is where an employment costs calculator (XLS 116KB) can help.

If you haven’t factored in the full costs involved, you could be in for a bumpy ride. Here’s what to consider.

Wage costs

You’ll most likely have an idea of a new hire’s base salary, but what about all the associated costs? Annual leave might be built in, but you still need to remember that you’re effectively paying their salary for 48 weeks of the year. Then there’s sick leave – potentially another 10 days – superannuation and other costs like maternity pay. If you can’t afford all this, stop right now. Regardless of how your business is doing, an employee’s earnings need to hit their account on time, as agreed. Those seasonal ebbs and flows cannot be allowed to disrupt that security.

Make sure you’ve got the national minimum wage covered, too.

Bigger digs

Whether you’re taking on just one new hire or a small team, you don’t want everyone sitting on top of each other at the end of your recruitment drive. This may mean a new workspace. It could be an extra desk in your home office, or perhaps a bigger kitchen for your new pizza chef, or a waiting area for your incoming receptionist to seat people in. Either way, expansion comes with a price, so make sure you know how much.

New gear

Just as you need space for your new staff, you should think about the equipment they’ll need to do their new jobs: computers, tools, company vehicle. These must all be factored in, as well as the cost of insuring and maintaining them. Pay special attention to new recruits with accessibility needs, too – you might need to make adjustments to your workplace.

Staying on top of admin

Do you have the time to handle the extra administrative load that comes with being an employer? You’ll need to process all the onboarding paperwork for your new hire, set up payroll – either via an accountant or using online tools – and get to grips with your HR and Fair Work obligations. These additional tasks can eat into the time you have to generate the sales and revenue you need to prosper.

Staying on the right side of the law

You’ll have a host of tax responsibilities when you hire people for your business, including:

You need to be clear about this, so it might be worth budgeting for a session with an accountant, if you don’t already have one.

You’ll also need to take out workers’ compensation for your employees, in case they’re injured while at work.

The hiring process

If you do hire, you want to get the best candidate, and that means either investing a significant amount of your time (and the indirect costs that come with this) to finding the right fit, or paying for a recruitment agency. Think about the resources you’ll need to:

  • Write a job description.
  • Advertise the post on job boards.
  • Hire an agency to conduct the search for you.
  • Chat with people about the job and your business.
  • Communicate with candidates.
  • Screen and interview applicants.

All up, cost-per-hire estimates can range significantly depending on if you recruit through a job board or at the higher end via a recruitment agency. And what happens afterwards? Have you considered training? What about employee development? Will they be part of reward and recognition programs? Don’t let these costs sneak up on you, use cost of an employee calculator (XLS 116KB) to help you understand the true total cost of a new employee.


Get this process right, and you’ll be investing in your company’s most valuable assets: its people. The end-to end process can be expensive, even with thorough planning. But if you find the right people and look after them, they’ll help grow your business with you.

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Things you should know

This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. This information including any tax information provided in this article should be used as a guide only. We recommend that you seek independent professional legal and tax advice about your specific circumstances.