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The Hidden Cost of Employing HR

Take a moment and consider the cost implications of hiring an HR employee. Obviously there is the base salary, but have you worked out the associated costs of that employee? Hypothetically speaking, if you employee an HR Manager for $90,000 p/a base salary, that employee could end up costing you up to 1.4 times more than $90,000.

Firstly there is superannuation, which is paid on top of their base salary for any employee earning over $450 in a calendar month, which is a minimum of 9%. So this is another $8,100 that you need to pay out.

Then there is annual leave. Although this is built into their wage, you are effectively paying $90,000 for 48 weeks of work in the year, which means the proper annualised wage for the employee is roughly another $6,920.

In addition you have sick leave, which is generally 10 sick days per annum, another $3,460.

Next you have public holidays, again there are usually 10 public holidays in Australia each year, meaning another $3,460.

Compulsory workers compensation varies depending on the industry you’re in, but can be in excess of 15% of the total annual wages. For our example, we will use 5%, another $4,500.

Payroll tax is payable in each state when you pay over a certain threshold in wages, the threshold and percentages vary from state to state, but NSW for example has a threshold of $600,000 and a rate of 6%. Even though you may not have passed the threshold yet, if you are planning on expanding your business, you may pass it in the future, and thus should account for it. This would mean another $5,400.

Another cost you must consider is the cost of actually recruiting the staff, on average this will cost around $5,000, which includes the recruitment costs, down time and training. If your staff member was to stay with you for 2 years, this would be an annualised cost of $2,500.

After taking these things into consideration, your staff member who you employed on $90,000 p/a, is actually costing you roughly $129,340. Keeping in mind that these aren’t all the costs associated with employing someone, you would also need to consider office space, stationary, computers, office furniture, staff amenities etc. to get the full cost of employing someone.