How much does payroll cost in Australia?
Reviewed by Mellow Editorial Team, HR & payroll content team
Running payroll in Australia costs between roughly $4 and $12 per employee per month if you use payroll software, or $50–$150 per employee per month if you outsource to a payroll bureau or accounting firm. On top of software or service fees, the real cost of payroll is the sum of employer obligations layered on top of gross wages.
The employer costs beyond gross wages
When you hire someone in Australia, the sticker price of their salary understates what you actually spend. The main statutory add-ons are:
Superannuation Guarantee (SG). From 2026, you must contribute 12% of an employee's ordinary time earnings to a complying superannuation fund. This is paid on top of salary unless the employment contract explicitly structures super within a total remuneration package. For a $70,000 base salary, that is $8,400 in super contributions per year.
Payroll tax. Each state and territory charges payroll tax once your total Australian wages exceed a jurisdiction-specific threshold. Rates and thresholds vary significantly — New South Wales, Victoria, Queensland and others each set their own rules. If your wage bill is modest or concentrated in one state, you may fall below the threshold entirely. Once you cross it, the liability applies to your whole relevant payroll, not just the excess.
Workers compensation insurance. Premiums are set by state-based schemes and vary by industry risk classification. A desk-based business pays far less than a construction or manufacturing employer.
Medicare levy. The Medicare levy of 2% is paid by employees, not employers — it is withheld from wages through PAYG. It is not an employer cost, but understanding it helps you answer employee questions about their take-home pay.
Software and administration costs
DIY payroll software in Australia typically costs $5–$10 per employee per month for small businesses, often with a base platform fee on top. Mid-market platforms with more automation, award interpretation and leave management sit higher. At the high end, enterprise HRIS and payroll systems are priced on contract.
If you outsource, a bookkeeper or accounting firm running your payroll will usually charge per pay run or per employee per month. For a business with 10 employees processing fortnightly, expect to pay $150–$400 per month depending on complexity and location.
The hidden cost is internal time. Someone in your business needs to collect timesheets, update payroll records, manage leave balances, handle STP submissions, and respond to employee queries. For most small businesses, this is 2–5 hours per pay cycle. At a senior admin or manager's hourly rate, that adds up.
Compliance obligations that carry a cost if you get them wrong
Single Touch Payroll (STP). Every pay event must be reported to the ATO digitally through STP-enabled software. The annual payroll finalisation declaration is due by 14 July each financial year. Non-compliance attracts penalties — STP is not optional.
PAYG withholding. Income tax is progressive and withheld from each payment under PAYG. You are responsible for calculating the correct withholding, which depends on the employee's tax file number declaration, residency status, and whether they have a HECS/HELP debt. HECS/HELP repayments are deducted from payroll on a banded income scale set by the ATO each year.
Award and agreement compliance. Most Australian employees are covered by a Modern Award or enterprise agreement. Awards set minimum pay rates, penalty rates, overtime and allowances. Getting classification wrong means underpayment liability, which can be costly and reputationally damaging. Wage theft has been criminalised federally, so this is not a minor administrative risk.
National Employment Standards (NES). The NES requires, among other things, 4 weeks of paid annual leave per year and a redundancy pay scale based on years of service. These are minimum entitlements — they cannot be contracted away. Leave liabilities accumulate on your balance sheet; redundancy obligations grow with tenure.
What drives costs up or down
Your payroll cost per employee rises when:
- You have complex award or agreement structures with penalty rates and allowances
- You operate across multiple states (adding multi-jurisdiction payroll tax complexity)
- You employ casuals with variable hours, which increases processing time
- You use a manual or fragmented system that requires double-handling
Costs fall when you have salaried employees on simple arrangements, process payroll infrequently (monthly rather than weekly), and use software that automates STP lodgement and leave calculations.
A simple way to estimate total employment cost
A practical rule of thumb: budget approximately 1.2x to 1.3x an employee's gross salary to cover super, workers compensation and a share of payroll administration overhead. In a payroll-tax-liable state, add that liability on top. For a $90,000 salary, true employment cost is likely to land between $108,000 and $120,000 before any payroll service fees.
This estimate will differ based on your state, industry and headcount, but it gives you a working number for budgeting and offer modelling.
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