The Cost of Having Employees in Your Small Business - dummies

By Paul Maguire

Part of HR for Small Business For Dummies Cheat Sheet (Australian Edition)

Do you know the real cost to your small business in employing one person? Well, if you don’t know the answer, here’s a hint. It’s substantially more than the hourly wage or yearly salary that you pay them.

Here are some of the items that contribute to the real cost of employment. Apply the percentages to salaries you pay staff to obtain an indication of what percentage of the yearly salary you will pay each year to employ a person working in your business in addition to their salary.

Employee-Related Item Percentage of Salary
Ordinary salary or wage 100%
Four weeks annual leave 7.7%
Annual leave loading 1.3%
10 days personal leave if ill or caring for immediate family
Superannuation 9.25%
Long service leave 1.7%
Workers compensation 3%
Payroll tax 0%

Add penalties of between 10 per cent and 150 per cent for work performed on evenings, weekends and public holidays, and you start to get an idea of the real cost. Fringe benefits tax on any non-salary benefits — such as private use of a business vehicle — is paid by you as employer at the top marginal rate of 46.5 per cent. The only upside is you will generally be exempted from payroll tax as a small business.