Employee Cost Calculator

The cost of an employee is always higher than the sum of their wage, this includes expenses such as payroll tax and superannuation.

If you’re looking for an easy way to calculate employee costs, QuickBooks can help. Our calculator makes it possible to work out how much a new employee would cost your business, beyond their standard wages.

To get started, simply plug your information into the fields below:

What are employee costs?

The term ‘employee cost’ refers to the total cost of maintaining an employee on your payroll. The total cost of an employee can include the following:

• Wages
• Superannuation
• Training costs
• Staff benefits
• Commissions
• Equipment
• Insurance
• Payroll taxes

It’s important for business owners to calculate the costs of employees to ensure financial stability and profitability. 

Please also note that an employee is different from a contractor – you can read more about this topic here: Contractor Vs Employee – What's The Difference?

What does an employee cost calculator show?

A ‘cost of an employee’ calculator can help to determine an employee’s gross wages in addition to other employee-related expenses. It is sometimes also referred to as a payroll cost calculator, worker calculator, employment cost calculator, or labour cost calculator.

To calculate an employee cost, you’ll need to add gross wages, payroll taxes, benefits and other expenses to get a comprehensive view of the total cost per employee.

What are the benefits of understanding employee costs?

Determining the total amount of expenses associated with hiring an employee helps you set your prices high enough to cover these costs. It can also help you with business planning, so you can determine when it's the right time to hire a new employee.

When you have a sound understanding of employee costs, you’ll be better placed to assess affordability before expanding your workforce. Additionally, you can make informed hiring decisions to ensure your business remains healthy in the future.

What are examples of employee costs?

Here, we’ll look at some of the most common costs associated with employing a worker – on top of their gross salary.

Compensation

The term ‘compensation’ is used to refer to the total amount an employee is given in wages and benefits in exchange for their work. Compensation includes:

• Base salary (or hourly pay rate)
• Overtime
• Commissions
• Bonuses
• Payroll tax
• Superannuation

The minimum wage in Australia is increasing by 3.5% in FY25-26 to $24.95 oer hour or $948 per week. Employers must also pay their employees superannuation at least four times a year. As of FY25-26, the minimum super payment rate is will be 12% of your employee’s ordinary time earnings (OTE).

Insurance

When you’re running a business, you’ll also need to factor in insurance costs for your employees. These can include:

• Worker’s compensation: In Australia, it’s compulsory for businesses to provide worker’s compensation insurance for their employees.
• Superannuation: Australian employers are required to provide superannuation payments to their employees. Some superannuation companies include certain types of insurance such as Life Insurance and Total and Permanent Disability (TPD) Insurance as a default.

Public liability insurance: This is a type of business insurance that – while not mandatory for employee protection – covers injury to employees caused by business activities.

Leave

Employers in Australia are required to provide full-time and part-time employees with the following types of leave:

• Annual leave: Full-time employees are entitled to four weeks of paid annual leave per year. Part-time employees receive a pro-rated amount.
• Personal/carer's leave: Employees are entitled to 10 days of paid personal leave each year, which includes sick leave and caring for immediate family members.
• Compassionate leave: Two days of paid leave per occasion to attend to the death or serious illness of a close family member.
• Parental leave: Up to 12 months of unpaid parental leave, with the option to request an additional 12 months.
• Public holidays: Paid leave on public holidays, unless required to work.
• Long service leave: Varies by state but generally entitles employees to extended leave after 7-10 years of service.
• Community service leave: Unpaid leave for jury duty or voluntary emergency services.
• Family and domestic violence leave: 10 days of paid leave for full-time and part-time employees to address family or domestic violence situations.

Recruitment

In a recruitment report conducted by Employment Hero in 2023, the average cost to advertise a role in Australia is $5,380. This is just one of the costs associated with recruitment – employers may also need to pay recruitment agency fees and other direct and indirect costs. 

These are some of the costs associated with recruiting new staff:

• Advertising costs: These are the expenses for posting job ads on job boards, social media, or in traditional media. 
• Recruitment agency fees: Agencies typically charge a fee for finding candidates, often a percentage of the new employee's salary, usually between 10% and 25%.
• Referral fees: If a company offers an employee referral program, rewards can range from $500 to $5,000 depending on the role's seniority and how critical it is to fill the position.
• Time costs: Internal HR staff time spent reviewing applications, interviewing candidates, and performing background checks can add indirect costs. 
• Background checks: Many employers conduct background checks, which can cost anywhere from $50 to $200 per check, depending on the type of verification needed (criminal, credit, employment history, etc.).

Training

The cost of training employees is particularly important if your business operates within a specialised industry. These are some common training costs:

• Training program fees: Includes costs for formal courses, workshops, or certification programs. 
• Trainer fees: Hiring external trainers or consultants is another cost associated with training employees.
• Internal training costs: This includes the salaries of internal trainers or staff involved in training. 
• Training materials: Expenses for books, software, online resources, or other materials.

Equipment

It’s also important to make sure your employees have the right equipment to work productively. Equipment expenses can include:

• Computers and software: Includes the cost of purchasing laptops, desktops, or tablets, along with necessary software licences and subscriptions.
• Office furniture: You may need to buy new desks, chairs, filing cabinets, and other office furnishings for new employees.
• Phones: Smartphones, landline phones, and related communication equipment.
• Office supplies: General supplies such as stationery, printers, and other peripherals.
• Safety gear: Some roles may require safety equipment such as helmets, gloves and goggles.
• Maintenance and upgrades: Ongoing costs for maintaining and upgrading equipment, which can be around 10-20% of the initial purchase price annually.
• Technology infrastructure: Expenses for IT infrastructure, including networking equipment, servers, and cybersecurity measures.

Variables that can impact employee cost

Here we’ll explore some other variables that should be considered when you calculate the cost of employees in your business:

• Turnover rates: High staff turnover increases recruitment, training, and onboarding costs. Frequent hiring and replacing employees can also lead to productivity losses.
• Industry: Different industries have varied wage standards and compliance requirements. For example, tech and healthcare sectors often have higher salaries due to specialised skills, while retail may have lower wages but higher turnover.
• Level of experience: More experienced employees might demand higher salaries and benefits, but often require less training. Entry-level employees have lower salaries but higher onboarding costs. 
• Location: Wages and benefits are influenced by geographic factors. Cities with a high cost of living (e.g. Sydney, Melbourne) tend to have higher salary requirements compared to rural areas or smaller towns.
• Job market: A competitive job market drives up wages, benefits, and recruitment costs. Employers may offer additional perks to attract talent in industries or locations where there's a shortage of skilled workers.
• Unionised employees: Unionised employees often have higher wages, better benefits, and more structured work conditions due to collective bargaining agreements, which can increase overall employee costs.
• Employee performance (bonuses): Performance-based incentives such as bonuses, commissions, or profit-sharing can increase employee costs but may also boost productivity and employee retention.

How to minimise employee costs

Reducing unnecessary expenses makes it possible to allocate resources more efficiently, allowing business owners to invest in growth. Here are some ways to minimise employee costs and boost profitability:

1) Optimise scheduling hours

Implementing flexible hours can significantly minimise employee costs by ensuring that staff are only scheduled when their work is most needed. By aligning employee hours with peak business times, employers can avoid paying for idle time and increase productivity per shift.

Additionally, effective scheduling can lower overtime costs and improve efficiency, as well as reduce employee burnout – which in turn decreases turnover rates and associated recruitment and training costs.

Learn more and get useful tips in our guide to employee scheduling.

2) Leverage technology

Leveraging technology can minimise costs by automating repetitive tasks and streamlining workflows. Tools like cloud services, payroll systems, and project management platforms can help manage administrative tasks more efficiently, cutting down on manual work.

Additionally, technologies such as AI and machine learning can optimise processes like data analysis and customer service, improving productivity.

3) Cross-training and upskilling

Cross-training and upskilling employees can minimise employee costs by increasing workforce flexibility and reducing the need for additional hires. When employees are trained to perform multiple roles, your business can better adapt to shifting demands and cover absences without resorting to temporary or replacement workers. 

Upskilling also enhances employee capabilities, allowing businesses to promote internally rather than hiring externally – saving on recruitment, onboarding, and training costs.

Discover more in our guide: Five types of training to help boost employee productivity.

4) Outsource non-core functions

Outsourcing non-core functions can minimise employee costs and help your business focus on key operations while delegating tasks like IT support, payroll, or customer service to external specialists. This eliminates the need to hire, train, and manage in-house staff for roles that aren’t directly tied to the company's main revenue-generating activities.

By outsourcing, businesses can reduce overhead expenses such as salaries, benefits, and office space, while benefiting from the expertise and efficiency of external providers. Our guide to outsourcing payroll provides useful insights into the advantages of outsourcing some of your business functions.

5) Review compensation and benefits

Implement performance-based pay, limit overtime, and streamline benefits.

Employee costs can be reduced by implementing performance-based pay structures, limiting overtime, and streamlining benefits. Regularly assessing and adjusting these offerings helps to maintain competitiveness while controlling expenses, ensuring that rewards are only tied to performance and value.

Additionally, streamlining benefits to focus on what employees truly value – such as flexible work arrangements or professional development – can reduce costs while still attracting and retaining talent.

How QuickBooks can help

QuickBooks allows you to track employee costs so you can easily analyse your total direct costs. By using the QuickBooks employee calculator, costs can be accounted for and factored into your long-term financial planning.

Sign up for QuickBooks today to begin using our powerful and reliable cost-tracking software.