Hiring your first employee: the cash costs nobody puts in the job ad

The first hire is one of the biggest steps a small business takes. Until now, if work was slow, you simply took less home. Once someone else depends on a pay packet, the business has a fixed cost that arrives every week or fortnight — whether customers pay on time or not. Getting the numbers right before you hire means the step forward doesn’t become a cash squeeze.

Before the first pay run: the setup obligations

Business.gov.au’s guide to hiring employees sets out the core obligations. Before or as your first employee starts, you’ll need to:

• Register for PAYG withholding — before you pay employees for the first time
• Set up Single Touch Payroll — report pay information to the ATO through STP-enabled software or a provider
• Arrange workers compensation insurance — required when you employ staff
• Give the Fair Work Information Statement — before, or as soon as possible after, they start
• Collect a TFN declaration so you withhold the right amount of tax
• Provide a super standard choice form within 28 days of them starting
• Keep records — business.gov.au notes employment records generally need to be kept for seven years

The Fair Work Ombudsman’s hiring guidance adds: know whether the role is full-time, part-time or casual, use its pay tools to find minimum rates, penalties and allowances under the relevant award, and provide pay slips within one working day of paying wages.

The full cost of an employee

The wage is the headline. The true cost is wider.

Cost	When it hits your bank account
Wages	Every pay cycle
PAYG withholding	Held from wages, paid to the ATO with your BAS or on your withholding schedule
Superannuation (12% from 1 July 2025)	From 1 July 2026, with each pay run
Workers compensation insurance	Premium, usually upfront or by instalment
Leave entitlements	Accrue for permanent staff; paid when taken
Equipment, uniforms, tools, devices	Upfront
Recruitment	Ads, time, sometimes agency fees
Training	Your time and theirs, often unbillable at first
Payroll software	Monthly subscription
Payroll tax	Only above state thresholds — check your state revenue office

Penalty rates for weekends, evenings and public holidays can lift the cost significantly in hospitality and retail. Use the award rates for the hours you’ll actually roster, not a flat rate.

Payday Super: the cash flow change from 1 July 2026

Many small employers used to pay super quarterly, holding the money for up to three months. From 1 July 2026, Payday Super changes that. The ATO says a super guarantee contribution is on time if it’s received by the employee’s fund within seven business days after payday.

For your cash flow, that means super leaves the account every pay cycle, alongside wages. If you’re forecasting the cost of a first hire, treat super as part of every payday, not a quarterly bill. Businesses used to the quarterly rhythm may notice the change most in their first few months.

The ramp-up gap

Most new staff don’t pay for themselves on day one. They need training, they work slower while they learn, and the extra work they enable takes time to book, deliver, invoice and get paid for. Meanwhile, every cost in the table above is running.

A simple way to size the gap:

1. List the new hire’s full weekly cost.
2. Estimate the extra revenue they’ll enable each week, rising over time as they get up to speed.
3. Shift that revenue to when it’s actually paid — after your customers’ payment terms.
4. Add up the difference week by week until revenue catches up.

The total is roughly how much cash the hire ties up before it pays its way. Our cash flow forecasting page shows how to lay this out across months.

Want help sizing the gap and finding a way to bridge it? Start a 60-second enquiry — no credit check to ask.

How to fund the first hire

The cost of an employee is ongoing, but the gap you need to bridge is temporary. That’s why short-term, flexible finance usually fits best:

• A business line of credit — draw for wages during the ramp-up, repay as the new work is paid.
• A short-term working capital loan — a defined amount for a defined period.
• Invoice finance — if the hire lets you take on more B2B work, the invoices can fund the wages.

Avoid funding a three-month gap with a five-year loan; you’ll be paying for it long after the employee is covering their own costs. If the hire comes with bigger purchases — a second van, more equipment — fund those separately with vehicle or equipment finance. Our page on funding new hires goes into more detail.

Is the business ready to hire?

A few signs you’re ready:

• You’re regularly turning work away
• Your own hours are the bottleneck on growth
• There’s booked work, contracts or a waiting list
• Equipment sits idle because there’s no one to run it
• The numbers show the hire paying for itself within a reasonable period

And a few signs to wait:

• Revenue is lumpy and unpredictable
• BAS or super is already falling behind
• You’d be hiring in hope rather than against demand

Illustrative example: A mobile dog-grooming business run by one owner is booked out three weeks ahead. She hires a part-time groomer under the relevant award, buys a second set of equipment through equipment finance, and opens a small line of credit to cover wages and super for the first two months while the extra bookings build. By month three, the second groomer’s bookings cover their own wages, super and the equipment repayments.

Employee, casual or contractor?

How you engage someone changes the cost. Permanent staff accrue leave. Casual employees receive a loading in place of some entitlements and must be given the Casual Employment Information Statement. Genuine contractors generally invoice you and handle their own tax and super — but whether someone is an employee or contractor is determined by the law and the real working relationship, not the label. Getting it wrong can mean back-paying wages and super. Check the Fair Work Ombudsman’s guidance before deciding.

A first-hire checklist

1. Confirm the award and classification for the role.
2. Cost the role fully — wages, super, workers comp, leave, equipment, software.
3. Forecast the ramp-up gap.
4. Register for PAYG withholding and set up STP-enabled payroll.
5. Arrange workers compensation insurance.
6. Prepare the Fair Work Information Statement, TFN declaration and super choice form.
7. Arrange funding for the ramp-up before the start date.
8. Plan the first month’s work so the new hire is productive quickly.

Setting up payroll properly from the start

Payroll mistakes are expensive to unwind, so set it up carefully:

• Choose STP-enabled payroll software that handles award rates, penalty rates, super and leave accruals.
• Set up the award classification correctly, with any allowances that apply.
• Record the employee’s super fund details from their choice form, or your default fund if they don’t choose one.
• Schedule super with each pay run so the Payday Super deadline is met automatically.
• Set aside PAYG withholding in a separate account so it’s ready when it’s due.

Spending an hour with your bookkeeper or accountant on setup is usually far cheaper than correcting underpayments later.

Take the next step with confidence

Hiring your first employee is a milestone worth celebrating — and worth funding properly. Tell us about the role, the start date and the work it will unlock. A real person will help you choose a facility that covers the ramp-up without locking you into more than you need. Asking won’t touch your credit file, your details won’t be scattered among a crowd of lenders, and realistic figures help us find the right fit the first time. See how to fund your first hire.