At a glance
Key takeaways
- Begin with base salary and compulsory superannuation.
- Model leave and productive hours without double counting.
- Include recruitment, systems, management and continuity where relevant.
- Compare like-for-like capability and service scope.
Start with the visible employment cost
The base salary is the starting point. Eligible employees also attract superannuation guarantee contributions. The rate is 12%, although the calculation base and individual circumstances still need to be checked.
Depending on the employer and jurisdiction, payroll tax, workers compensation premiums and other employment related costs may also apply. These should be based on the business’s actual position, not a generic percentage copied from a sales proposal.
Separate paid cost from productive capacity
Employees are paid during annual leave and may have personal leave, public holidays and training. Those entitlements are legitimate employment costs, but a model must avoid adding leave cost twice when it is already included in annual salary.
A useful analysis calculates total annual employment cost, then separately estimates productive capacity after planned leave, public holidays, training and normal non-processing time. This produces a more honest cost per productive hour.
Annual salary already pays for ordinary paid leave. Adjust capacity or cost carefully and do not count the same entitlement twice.
Add the less-visible costs that genuinely apply
Recruitment fees, onboarding, equipment, software, office space, management time and turnover disruption may be relevant. They are not automatically avoidable, and some remain even when work is outsourced.
The business case should distinguish avoidable costs, shared overheads and sunk costs. Only costs that actually change belong in the savings calculation.
- Recruitment and background checks
- Laptop, licences and secure access
- Training and process documentation
- Supervision and technical review
- Leave coverage and turnover disruption
- Office and support costs that are genuinely incremental
Compare capability, not job titles
An accounts officer, qualified accountant, payroll specialist, controller and CFO are not interchangeable. A lower-cost model that excludes review, management reporting or technical judgement does not provide the same service.
Define the work by activity and accountability. Then compare the employee model, outsourced model and blended model against the same volumes, controls and outcomes.
A defensible cost model
Build the comparison transparently so management can challenge the assumptions. Use ranges for uncertain items and test the result if volume, salary or transition effort changes.
- Annual salary plus applicable superannuation
- Applicable payroll tax and workers compensation
- Incremental recruitment, technology and workspace
- Estimated productive capacity
- Required review and management layer
- Transition cost and expected time to stabilise
- Service coverage, continuity and scalability
Sources & further reading
Primary guidance
This publication provides general information only. It does not replace accounting, tax, legal, workplace-relations or other professional advice tailored to your circumstances.