Quick answer
A new employee costs more than their wage: add super, leave, workers compensation, tools and training, then add the months before they are productive. Fund that gap with a revolving facility or short working capital loan sized to the ramp-up, not a long loan for a cost that should repay itself within a year.
Key points
- Budget the full cost of employment, including 12 per cent super, leave and workers compensation, not just the wage
- From 1 July 2026 super must reach the fund within seven business days of payday, so it comes out of your cash sooner
- Award rates rose 4.75 per cent from 1 July 2026, so check the rate before you cost the role
- Staff costs are recurring, so a line of credit usually fits better than a long fixed-term loan
- Hiring only works if the extra work or capacity is real, which means the payback test matters more than the loan type
The pay rate on the offer letter is the smallest surprise in hiring. The bigger one arrives about six weeks later, when the employee has been paid three times, super has gone out the door, the new laptop is on the credit card and the extra work you hired them for hasn’t quite shown up yet.
None of this means you shouldn’t hire. Most growing businesses have to, and many are held back by the lack of one more pair of hands. But a hire is a commitment that repeats every week, and it needs a funding plan that matches. This guide walks through the real cost, the timing gap, and which finance suits each version of it.
What does a new employee really cost?
Start with the wage, then add what sits on top. The figures below are an illustrative full-time role at $75,000 a year. Your own numbers will differ by award, state and insurer.
| Cost | Illustrative annual amount |
|---|---|
| Base wage | $75,000 |
| Super at 12% | $9,000 |
| Paid leave (annual, personal, public holidays) | built into the above, but you pay for cover when they’re away |
| Workers compensation insurance | varies by industry and wage bill |
| Payroll tax (only above the state threshold) | varies by state |
| Software, phone, laptop, uniform, tools | $2,000 to $5,000 in year one |
| Recruitment and training | $1,000 to $6,000 |
Before payroll tax and insurance, that is already over $85,000 in the first year, and a first-year figure of $90,000 or more is common once set-up is counted. The lesson isn’t the exact figure. It is that the pay rate understates the cost by a wide margin.
Check the award rate too. The Fair Work Commission increased modern award rates by 4.75 per cent from 1 July 2026, and the national minimum wage moved to $26.44 an hour. If you worked out a role’s cost last financial year, redo it.
Why has the timing of super changed?
Until 1 July 2026, many small employers paid super quarterly, which meant roughly three months of float. Under Payday Super, which began on 1 July 2026, contributions generally need to reach the employee’s fund within seven business days of payday. The first contribution for a brand-new employee has a longer window.
For a business running tight, it matters. A new hire’s super is now a weekly or fortnightly cash outflow, not a lump sum three months away. It also means the cost of an unfunded gap shows up faster, and late contributions are a problem the ATO takes seriously. Our guide to super guarantee obligations and cash flow covers the mechanics.
How long is the gap before a hire pays back?
Every hire has a ramp: weeks of recruitment, weeks of training, then a stretch where they’re productive but not yet at full speed. For client-facing roles the ramp is longer, because a caseload or a customer list has to be built.
Work out the gap with three numbers:
- Monthly cost of the role, including on-costs.
- Monthly extra gross profit they will bring when productive (not revenue, since materials and other costs still apply).
- Months to get there.
Say a role costs $7,500 a month all in and brings in $11,000 of extra gross profit once productive. It takes three months to ramp: $2,500, then $5,500, then $8,500 of contribution. The gap is $5,000 + $2,000 + the training and set-up. Roughly $12,000 to $15,000 has to come from somewhere before the hire breaks even, and it takes a few more months to earn that back. Put the pessimistic version next to it, with the ramp taking twice as long.
The cash runway calculator is a handy check on whether the business can carry that gap without outside money.
Which finance suits wages?
Wages are a repeating cost, which affects the choice. A long fixed-term loan to pay wages is usually a poor fit, because the wage bill will still be running long after the loan’s purpose has passed.
| Situation | Often-suitable finance |
|---|---|
| Ramp-up gap of a few months, then self-funding | Line of credit drawn as needed, or a working capital loan |
| Several hires to deliver a signed contract | Short facility matched to the payment date, or progress payment finance |
| Hire needs equipment or a vehicle | Equipment finance on the asset, with wages from cash flow |
| Customers pay slowly, squeezing wages | Invoice finance against unpaid invoices |
| Hire is part of a larger expansion | Term loan covering fit-out, equipment and an initial wage buffer |
A bank can be a very good first stop, especially if you already bank there and your accounts are in order. If it says the request is too small, too fast or too unusual, there are other lenders who look at bank statements and trading history more closely than at balance sheets. Our hiring staff funding page and the paying staff wages page go through how lenders treat each.
Planning a hire and want to see what could fund the gap? Tell us the role and the timing and we’ll talk through what suits.
What can reduce the amount you need to borrow?
A few levers shrink the gap before you borrow anything.
- Start part-time or with a trial period. A staged start cuts the wage bill during the least productive weeks.
- Time the start date. Starting someone the week before a busy season is cheaper than three months before.
- Check available incentives. The Australian Government and some states run wage subsidies or apprenticeship incentives that change often. Check with your state small business body or the Fair Work Ombudsman, and don’t assume.
- Redistribute your own time. If the hire frees you to bill more hours or win more work, count that as revenue and plan for it.
- Check the structure. If you are adding a second entity or site, payroll tax grouping may combine wages for one threshold. Revenue NSW, for example, explains that only one group member can claim the tax-free threshold. See our guide to payroll tax by state.
What do lenders want to see before funding a hire?
Lenders don’t want to be paid out of hope. They are looking for four things:
- A profitable base. The current business can cover the repayments with room to spare.
- A reason. The role exists to meet demand you can describe, such as a waiting list, a contract or a booked-out calendar.
- A costed plan. The monthly cost of the hire, the ramp-up and when they expect it to break even.
- A fallback. What you’d do if the work arrived late.
That is much the same as what any good decision on a hire involves. Our guide on what lenders look for in a business loan application goes deeper on the paperwork.
A worked example: the electrical contractor
This is an illustrative example. An electrical contractor with two employees has a three-month backlog and is turning away smaller jobs. The owner wants to hire a licensed electrician at $90,000 plus on-costs and add a second van.
- Monthly cost of the hire: about $10,500 including super, insurance, tools and a phone.
- Extra gross profit when productive: about $14,000 a month, based on the jobs now being declined.
- Ramp-up: the electrician needs a month to learn the systems and a month before jobs are fully scheduled. Estimated gap: about $18,000.
- Van: $62,000, funded separately through equipment finance on the vehicle.
The owner arranges a $25,000 line of credit for the ramp-up, draws about $18,000 across the first two months and repays it from month four. The van sits on its own facility. Even with a four-month ramp-up instead of two, the existing business can carry the repayments, and the backlog suggests the work is real.
Mistakes to avoid when funding new staff
- Costing the role at the pay rate and forgetting on-costs.
- Funding a recurring wage with a loan that ends before the hire has paid back.
- Hiring ahead of work that is only a maybe.
- Misclassifying an employee as a contractor to save on-costs.
- Letting super fall behind in the first quarter under Payday Super.
- Borrowing for a full team when a staged start would do.
Ready to find finance for your next hire?
If the hire is the right move, getting the funding structure right early is worth a short conversation. It is far easier to talk through the ramp-up before the first pay run than after the second.
Our enquiry takes around a minute and doesn’t involve a credit check, so asking won’t touch your credit file. Your details go to us, not to a crowd of lenders, which keeps your phone quiet. A real person looks at the specifics of your business and calls you. The more precisely you describe the role, the timing and the amount, the sooner we can point to what is likely to fit.
Frequently asked questions
How much does it really cost to hire an employee in Australia?
The wage is the starting point. On top come superannuation at 12 per cent of ordinary time earnings, paid leave, workers compensation insurance, payroll software, equipment, training and, above the state threshold, payroll tax. For a typical full-time role, the true cost is commonly well above the pay rate, so work it out role by role.
Can I get a business loan to pay wages?
Yes, lenders do fund working capital that covers wages, particularly when the hire supports clear growth such as new contracts or a second location. They will want to see that the existing business is profitable and that you have a plan for when the new income arrives.
Is it better to hire casual, part-time or contractors?
It depends on the work. Casuals cost a loading but bring flexibility. Part-time and full-time give security and loyalty. Genuine contractors run their own business, and misclassifying an employee as a contractor can create back-pay and super liabilities. Check the Fair Work Ombudsman's guidance before deciding.
What is Payday Super and how does it affect hiring?
From 1 July 2026, employers must make super contributions so they reach employees' funds within seven business days of payday, replacing the old quarterly rhythm. The cost of a hire arrives sooner as a result, and there's less float in your account between paying wages and paying super.
How long before a new hire pays for themselves?
Allow three to six months for many roles, longer for skilled or client-facing roles that need to build a caseload. Work it out from your own numbers: the extra gross profit the role should produce each month, divided into the cost of wages and on-costs plus set-up.
Will a lender fund a hire if I have no signed work yet?
Some will, if the current business is strong enough to carry the repayments without the new income. Signed contracts or a waiting list make the case much stronger, but few lenders lend on the promise of work alone.