Overview
Australian employers budget 15–20% above base salary for the 12% Superannuation Guarantee, payroll tax, and workers’ comp, before Modern Award penalties. Unfair dismissal claims open after 6 months (12 at small employers). Misclassified Awards trigger back-pay audits back 6 years. For 1–3 hires, an EOR absorbs STP reporting and state-by-state payroll tax allocation.
Setting up your own Pty Ltd through ASIC is fast, 1–2 days for the registration itself. The ongoing compliance burden is the real cost: quarterly BAS lodgment, Single Touch Payroll (STP) reporting every pay run, workers’ compensation registration in each state where you have employees, and payroll tax registration once your wage bill crosses state thresholds. For a single hire, that overhead rarely makes financial sense. An EOR absorbs all of it for a flat monthly fee, typically $499–$699 per employee.
Australia is one of the strongest EOR markets in APAC. Sydney and Melbourne have deep tech talent pools, salaries are high but predictable (senior engineers typically command AUD $150,000–$180,000 base), and the timezone overlap with Singapore, Tokyo, and Hong Kong makes it a natural hub for APAC-distributed teams. English-speaking, strong rule of law, no currency controls. The three complexity areas that trip up foreign employers: the Modern Award system (120+ awards, each with different pay scales and conditions), state-by-state variation in workers’ comp premiums and payroll tax thresholds, and the STP reporting requirement that makes every pay run a real-time submission to the ATO.
Key Employment Facts
| Item | Detail |
|---|---|
| Minimum wage | AUD $26.44/hr or $1,004.90/week (national minimum wage from 1 July 2026); Modern Awards often set higher minimums by classification |
| Working hours | 38 hrs/week for full-time employees; overtime as per applicable Modern Award or enterprise agreement |
| Probation period | 6 months (small businesses: 12 months) for unfair dismissal eligibility |
| Notice period | 1–4 weeks statutory depending on tenure; 5 weeks if employee is over 45 with 2+ years of service |
| Severance | Statutory redundancy: 4–16 weeks’ pay based on tenure (1–10+ years); small businesses (fewer than 15 employees) may be exempt |
| Paid leave | 20 days/year annual leave + 10 days personal/carer’s leave + 8 public holidays (varies by state) |
| Employer costs % | 12% Superannuation Guarantee + 2.5–5.5% payroll tax (varies by state) + workers’ compensation (~1–3% depending on industry) |
Employer Cost
Superannuation is the dominant employer cost: 12% of ordinary time earnings (from 1 July 2025). On top of that, budget for payroll tax (2.5–5.45% depending on state, NSW charges 5.45% above a $1.2M threshold, Victoria 4.85% above $900K), workers’ compensation insurance (~1–3% by industry), and the annual leave loading of 17.5% that applies to leave payouts under many Modern Awards. Long service leave accrues at roughly 8.67 weeks per 10 years, a contingent liability of about 0.87% per year.
For a senior developer in Sydney at AUD 150,000 base: superannuation = AUD 17,250, payroll tax allocation = AUD 3,750–8,175 depending on how your EOR apportions it, workers’ comp = AUD 600–1,500. Total direct employer cost before EOR fees: approximately AUD 171,000–177,000 (14–18% above base). Fully loaded including leave accruals and EOR fees, budget AUD 185,000–200,000 per year.
The Modern Award classification affects your actual cost as much as the contribution rates. Awards can require premium overtime rates, weekend penalty rates, and industry-specific allowances that push effective cost well above the headline superannuation overhead. Before making an offer in any heavily award-covered industry, confirm exact award obligations with your EOR.
Statutory Benefits
Superannuation: Employer contributes 12% of ordinary time earnings into the employee’s nominated super fund. This is the largest mandatory employer cost. No employee contribution required (though most Australians contribute voluntarily).
Leave entitlements: 20 days annual leave (accrues, is paid out on termination), 10 days personal/carer’s leave, 2 days compassionate leave, 18 weeks government-funded parental leave (Paid Parental Leave scheme), and community service leave for jury duty or emergency volunteering.
Long service leave: 8.67 weeks after 10 years of continuous service in most states. Some states allow pro-rata access after 7 years. This is unusual by global standards and often catches foreign employers off guard. Some states and industries also have portable long service leave schemes, construction workers in most states and community services workers in some states carry their entitlements between employers. If you’re hiring into one of these industries, your EOR needs to register with the relevant state portable LSL authority and make quarterly contributions.
Payroll tax: This is a state-level tax on your total wage bill, and the thresholds differ significantly. NSW charges 5.45% above a $1.2M annual threshold. Victoria charges 4.85% above $900K. Queensland is 4.75% above $1.3M. If you only have one or two employees, you’ll likely sit below the threshold, but your EOR’s total payroll across all clients will exceed it, so the tax gets passed through to you. Ask your EOR exactly how they allocate payroll tax across clients; some absorb it into the per-employee fee, others line-item it separately.
Employment categories matter. Australia distinguishes between full-time, part-time, and casual employees, and the classification changes your obligations. Full-time and part-time employees get leave entitlements, notice periods, and redundancy pay. Casual employees get none of that but receive a 25% casual loading on top of their base rate instead. Most EOR hires should be permanent (full-time or part-time) because the leave entitlements and job security protections are what your employee expects. Misclassifying a permanent role as casual creates legal exposure under the Fair Work Act.
Parental leave: The government-funded Paid Parental Leave scheme provides 18 weeks at the national minimum wage (currently AUD $26.44/hr from 1 July 2026). This is paid by the government, not the employer, but many companies offer a top-up to full salary for 12–18 weeks to stay competitive for senior hires. Your EOR can administer both the government scheme and any employer top-up through the same payroll.
Workers’ compensation: State-based mandatory insurance covering workplace injuries and illness. Premiums vary by state and industry risk classification. A desk-based tech worker in NSW might pay 0.3–0.5% of wages; a construction worker in Victoria could pay 3–5%. Your EOR handles the policy, but the premium cost flows through to you.
Work Visas and Immigration
Australia is a major immigration destination, and foreign worker sponsorship through EOR is common, particularly in tech, healthcare, and engineering where domestic skills shortages persist. The visa system is well-defined but expensive, and processing times have blown out post-COVID. Plan for longer timelines than the Department of Home Affairs officially quotes.
| Visa/Permit Type | Who It’s For | Duration | Processing Time |
|---|---|---|---|
| Subclass 482 (TSS, Temporary Skill Shortage) | Sponsored workers in occupations on the skilled occupation list | 2–4 years depending on stream | 2–6 months |
| Subclass 494 (Skilled Employer Sponsored Regional) | Sponsored workers in designated regional areas | 5 years | 3–8 months |
| Subclass 186 (Employer Nomination Scheme) | Permanent residency through employer sponsorship | Permanent | 6–12 months |
| Subclass 189 (Skilled Independent) | Skilled workers without employer sponsorship (points-tested) | Permanent | 6–18 months |
An EOR entity can become a Standard Business Sponsor and lodge Subclass 482 (TSS) visa nominations on behalf of the foreign employee. The EOR must demonstrate a genuine need for the role, and the position must be on the relevant skilled occupation list, either the Short-Term, Medium-Term, or Regional lists. Labour market testing is required for most nominations: the role must be advertised domestically for at least 4 weeks before sponsoring a foreign worker. The EOR handles the sponsorship application and nomination, but the employee lodges their own visa application.
The Skilling Australians Fund (SAF) levy is the hidden cost: AUD 1,200/year for small businesses or AUD 1,800/year for larger ones, per sponsored worker. This is paid by the sponsor (the EOR, passed through to you). The TSS visa also requires the sponsored worker to be paid at or above the Temporary Skilled Migration Income Threshold (TSMIT), currently AUD 73,150/year. Occupations not on any skilled list simply cannot be sponsored, no amount of salary fixes that. Confirm your role’s occupation code is on the list before investing time in the process.
Choosing an EOR for Australia
Provider fees, entity models, and onboarding SLAs change frequently. See our ranked shortlist: Best EOR for Australia.
Termination Rules
The Fair Work Act distinguishes between personal dismissal (performance or conduct) and genuine redundancy. Personal dismissal requires a valid reason, procedural fairness, and a genuine opportunity for the employee to respond. Genuine redundancy requires that the role no longer exists, that applicable Modern Award or enterprise agreement consultation obligations are followed, and that reasonable alternative positions are offered if available.
Redundancy pay is statutory and scales with tenure: 4 weeks for 1 year of service, climbing incrementally to 16 weeks for 10+ years. Notice periods run 1–4 weeks depending on tenure, plus an extra week for employees over 45 with 2+ years of service. Accrued annual leave pays out on termination including leave loading.
For a senior developer with 5 years’ service at AUD 150,000: redundancy pay = 10 weeks = AUD 28,850, notice period = 3 weeks = AUD 8,655, accrued unused annual leave = variable. Total minimum termination cost: AUD 37,000–50,000 before EOR fees.
Unfair dismissal claims can be filed by any employee who has completed 6 months’ service (12 months at small businesses). The Fair Work Commission conciliates most claims before hearing. Compensation is capped at 26 weeks’ pay or AUD 87,500, but even meritless claims cost legal fees and management time. Your EOR must run the procedural steps: written notice, documented reason, opportunity to respond. Skipping any step is the primary cause of successful unfair dismissal claims against foreign employers.
Frequently Asked Questions
What are the unfair dismissal risks in Australia?
Employees at non-small businesses who have completed 6 months of service (12 months at small businesses with fewer than 15 employees) can file an unfair dismissal claim with the Fair Work Commission. To be valid, the dismissal must lack a “valid reason related to capacity or conduct” or have been “harsh, unjust, or unreasonable” in the circumstances. Compensation is capped at 26 weeks’ pay or half the high income threshold (AUD $175,000), whichever is lower. Reinstatement is also a possible remedy. The EOR manages the termination process to minimize this risk, but poor documentation or rushed terminations in Australia frequently result in claims, even meritless ones cost time and legal fees.
Which Modern Award applies to a software developer?
Most white-collar tech hires map to the Professional Employees Award 2020 or an industry-specific award depending on the employer’s primary activity. The wrong classification changes minimum pay, overtime, and penalty rates. Your EOR should confirm the award mapping in writing before the offer letter goes out, not after the first pay run.
Sources
Related Decision Pages
- Deel Review : How Deel handles Modern Award compliance and super contributions
- Remote Review : Owned Australian entity and how Remote manages payroll tax by state
- Rippling Review : Native Australian payroll with integrated HR platform
- Hiring in Singapore : Most common APAC pairing with Australia for regional teams
- Hiring in Japan : Another high-cost APAC market with strong employee protections
- Compare EOR providers
- Hiring in Australia
- Hiring your first international employee
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