Australian small business owners face a critical decision when scaling their operations: should you hire a full-time employee or outsource the role? While the headline salary comparison might seem straightforward, the true cost difference involves dozens of additional factors that many business owners underestimate.
This guide breaks down the complete financial comparison between hiring full-time employees and outsourcing for Australian businesses, with detailed cost calculations, worked examples across different business sizes, and a clear framework for making the right decision for your situation.
When Australian business owners think about hiring, they typically focus on the advertised salary. A bookkeeper in Sydney might command $65,000 per year, or a finance analyst $75,000. However, the actual cost to your business is significantly higher once you account for all mandatory and indirect costs.
Superannuation Guarantee: Currently 11.5% of ordinary time earnings, increasing to 12% from July 2025. For a $70,000 salary, that's $8,400 annually.
Payroll Tax: Applicable in most states once your Australia-wide wages exceed the threshold. In NSW, this threshold is $1,200,000 with a rate of 5.45%. For Victorian businesses, it's $700,000 at 4.85%. A business paying $500,000 in total wages across all states would incur approximately $15,000-$25,000 in payroll tax annually depending on state.
WorkCover Insurance: Varies by industry and state. For office-based roles in NSW, expect 0.5-1.5% of wages. For a $70,000 role, that's $350-$1,050 annually.
Leave Entitlements: Full-time employees are entitled to 4 weeks annual leave plus 10 days personal/sick leave. This represents approximately 10.7% of their working time that you're paying for but not receiving productivity. On a $70,000 salary, that's $7,490 in paid non-working time.
Public Holidays: Approximately 10-13 days depending on state, representing another 4% of working time or $2,800 annually.
Long Service Leave: After 10 years, employees accrue approximately 8.67 weeks of long service leave (varies by state). While this doesn't hit immediately, it's a future liability. For long-term planning, budget approximately 0.87% annually, or $609 for a $70,000 role.
Recruitment: Advertising costs, recruitment agency fees (typically 15-20% of annual salary), or internal time spent screening candidates. For a $70,000 role, budget $10,500-$14,000 for agency-assisted recruitment, or approximately $3,000-$5,000 for DIY recruitment plus 30-40 hours of your time.
Onboarding and Training: New employees take 3-6 months to reach full productivity. Factor in training materials, supervisor time, and reduced output during the learning period. Estimate 20-30% reduced productivity for the first quarter, equivalent to $3,500-$5,250 in lost value.
Equipment and Software: Laptop ($1,500-$2,500), monitor ($300-$600), desk and chair ($800-$1,500), phone ($800-$1,200 annually), software licenses (Microsoft 365, accounting software, communication tools) approximately $1,200-$2,000 annually. Total first-year setup: $4,600-$8,000, then $2,000-$3,200 annually for ongoing costs.
Office Space: If you provide office space, calculate the per-desk cost. In Sydney CBD, this averages $12,000-$18,000 per year per employee when you factor in rent, utilities, cleaning, and facilities. In suburban locations, expect $6,000-$10,000 annually.
Management Overhead: Every employee requires supervision, performance reviews, and administrative support from HR/payroll functions. Estimate 2-4 hours per month of management time, equivalent to $2,400-$4,800 annually in opportunity cost.
Termination Costs: If the hire doesn't work out, factor in notice period costs (typically 2-4 weeks), potential redundancy pay, and the cost of recruiting a replacement. For a $70,000 role, an unsuccessful hire that lasts 12 months can cost $15,000-$25,000 in separation and replacement expenses.
Let's calculate the true annual cost of hiring a finance analyst in Sydney on a $75,000 base salary:
Direct Costs:
Indirect Costs (First Year):
Total First-Year Cost: $142,784Ongoing Annual Cost (Years 2+): $118,784
This means a $75,000 salary actually costs your business $118,784 per year in steady state, or 58% more than the headline salary. In the first year, the true cost is 90% higher at $142,784.
Outsourcing shifts the cost structure entirely. Instead of employment overheads, you pay a monthly fee to a service provider who handles all employment obligations, equipment, and management for their offshore team.
Most reputable outsourcing providers charge an all-inclusive monthly fee that covers:
Direct Labour: The overseas employee's salary (typically $800-$2,500 per month for Philippines-based finance or admin roles)
Employer Obligations: Local employment taxes, insurance, and compliance in the offshore location
Equipment and Infrastructure: Computer, internet, software licenses, office space, and utilities
Management and Training: Onboarding, ongoing supervision, and quality control
Replacement Risk: If the person doesn't work out, the provider sources a replacement at no additional cost
For example, a Philippines-based bookkeeper might cost $1,500-$2,500 per month all-inclusive, or $18,000-$30,000 annually. A finance analyst with 5+ years experience might be $2,000-$3,500 per month ($24,000-$42,000 annually).
Your Management Time: You still need to provide direction, review work, and integrate the outsourced person into your workflows. Estimate 2-4 hours per week initially, dropping to 1-2 hours once established.
Australian Compliance Expertise: For roles requiring deep Australian regulatory knowledge (like BAS agents, tax agents, or legal advice), you may need Australian oversight or supervision. This is why many businesses use a hybrid model where offshore staff handle data entry and processing, while Australian-qualified professionals handle compliance and client-facing work.
Integration Tools: Depending on your setup, you may need collaboration tools, or time-tracking software. Budget $10-$30 per month per person for these tools.
Scenario: Sydney-based professional services firm needs bookkeeping support for accounts payable, receivable, and BAS preparation.
Full-Time Hire Option:
First Year Total: $102,728Ongoing Annual: $94,228
Outsourcing Option:
First Year Total: $26,360Ongoing Annual: $24,360
Savings: $76,368 in Year 1, then $69,868 per year ongoing
Additional Benefits: No leave coverage issues, provider handles replacement if person leaves, scales up or down easily.
Trade-offs: Requires Australian BAS agent oversight for lodgements (you or your accountant), needs clear processes and documentation, 2-3 hour time difference requires some scheduling coordination.
Scenario: Melbourne-based tech company needs financial analysis, reporting, and budgeting support.
Full-Time Hire Option:
First Year Total: $145,017Ongoing Annual: $120,017
Outsourcing Option:
First Year Total: $39,360Ongoing Annual: $36,360
Savings: $105,657 in Year 1, then $83,657 per year ongoing
Additional Benefits: Access to CPA-qualified talent at lower cost, flexible scaling for busy periods, reduced HR administration.
Trade-offs: May need Australian CFO or senior finance person for strategic decisions and board reporting, requires investment in clear financial processes and systems.
Scenario: Brisbane-based manufacturing business needs senior finance capability for monthly close, cash flow management, and financial reporting.
Full-Time Hire Option:
First Year Total: $198,746Ongoing Annual: $163,746
Embedded Finance Team Option (Hybrid Model):Instead of pure outsourcing or pure hiring, many $10M+ businesses use an embedded model with mixed onshore/offshore:
First Year Total: $81,000 (including $3,000 setup)Ongoing Annual: $78,000
Savings: $117,746 in Year 1, then $85,746 per year ongoing
Additional Benefits: Senior Australian expertise available when needed, day-to-day execution handled offshore, flexibility to scale team without hiring, access to multiple skillsets within one service.
Trade-offs: Requires strong systems and processes, not a single "finance manager" to tap on the shoulder, needs commitment to structured communication (daily check-ins, weekly calls).
1. Role Requires Constant Physical PresenceCustomer-facing positions, warehouse management, or roles requiring daily in-person collaboration are difficult to outsource effectively.
2. Deep Australian Regulatory Expertise Is CriticalTax agent services, legal advice, or roles requiring professional registration in Australia typically need local full-time staff. However, these roles can often supervise outsourced support staff for data entry and processing.
3. You're Building Long-Term Institutional KnowledgeFor roles that require 5-10+ years to master your specific business, and where that knowledge is core to your competitive advantage, full-time hires create more stability.
4. You Have Strong HR InfrastructureIf you already have 15+ employees, HR systems in place, and efficient onboarding processes, the marginal cost of one more employee is lower than the fully-loaded calculations above.
5. Workload Is Consistently HighIf the role requires 40+ productive hours per week year-round with minimal downtime, and you can keep them busy, a full-time hire delivers better value per hour worked.
1. Process-Based or Repetitive WorkAccounts payable processing, data entry, reconciliations, payroll administration, and other structured tasks outsource extremely well once documented.
2. Fluctuating WorkloadIf you need 60 hours some weeks and 20 hours others, outsourcing offers flexibility that full-time employees don't. Most providers allow you to scale hours or add temporary support during busy periods.
3. Skill Gaps You Can't Afford Full-TimeNeed a CPA-qualified analyst but can't justify $110,000+ for a full-time senior hire? Outsourcing gives you access to that expertise for $36,000-$48,000 annually.
4. Cash Flow ConstraintsEarly-stage businesses with uneven revenue benefit from the lower fixed cost and easier exit if circumstances change.
5. You Need to Scale QuicklyHiring and onboarding full-time staff takes 2-4 months. Outsourcing providers can have someone working within 2-4 weeks, making it ideal for rapid growth periods.
6. Administrative Burden Is a ConcernIf you're a small team without dedicated HR, every additional employee creates payroll, performance review, and compliance work. Outsourcing shifts this burden to the provider.
Productivity Loss During Holidays: When your employee takes leave, work stops or piles up. For critical roles, you might need to hire temporary coverage, doubling your cost for that period.
Notice Period Risk: When someone resigns, you're paying full salary during their 2-4 week notice period while they're mentally checked out and potentially taking accumulated leave. Meanwhile, you're urgently recruiting a replacement.
Wage Inflation: Australian wages typically increase 3-5% annually through either market pressure, award increases, or Fair Work decisions. Your $75,000 hire becomes $78,750 next year and $82,700 in year three.
Skill Obsolescence: If your employee's skills don't keep pace with industry changes, you're paying for training or accepting declining performance. With outsourcing providers, they handle ongoing training as part of the service.
Management Overhead: While your direct costs drop significantly, you'll spend 2-4 hours weekly (at least initially) providing direction, answering questions, and reviewing work. For senior executives, this opportunity cost can be substantial.
Process Documentation: Outsourcing forces you to document processes clearly. This is ultimately beneficial but requires upfront investment. Budget 10-20 hours to document procedures properly.
Communication Friction: With 2-3 hour time differences (Philippines) or larger gaps (India), you can't always get instant answers. Asynchronous communication requires planning ahead and clear briefs.
Tool and Integration Costs: You may need to invest in project management tools, time tracking software, or cloud-based systems to enable remote work effectively. Budget $500-$2,000 for initial setup, then $30-$100 monthly per person.
Supervision for Compliance: For finance and HR roles, you'll likely need Australian qualified oversight for lodgements, advice, and client-facing work. This is less "hidden" and more about understanding the hybrid model most businesses use.
Many Australian SMEs in the $3M-$15M revenue range find the optimal solution is neither pure outsourcing nor pure full-time hiring, but rather a hybrid model:
Structure: Offshore team handles high-volume, process-based work (data entry, processing, reconciliation) under supervision of part-time or fractional Australian specialists who handle compliance, strategy, and client relationships.
Example: A $6M professional services firm might structure their finance function as:
Compare this to hiring:
The hybrid model delivers more total capacity (equivalent of 2.5 FTE) at 70% of the cost of one full-time finance manager, while maintaining Australian expertise for compliance and strategy.
Use this framework to evaluate each role:
Step 1: Define the Role Requirements
Step 2: Calculate True Costs
Step 3: Assess Risk Tolerance
Step 4: Evaluate Available Capacity
Step 5: Consider Growth Trajectory
What's the typical cost difference between outsourcing and hiring full-time in Australia?
Outsourcing typically costs 60-70% less than full-time employment when you account for all costs. A role with a $70,000 base salary actually costs $110,000-$120,000 annually including superannuation, leave, equipment, and office space. The same capability outsourced to the Philippines costs $24,000-$42,000 annually all-inclusive. However, full-time employees may deliver higher value for roles requiring deep Australian market knowledge or constant physical presence.
Does outsourcing include superannuation and leave entitlements?
No, because outsourced workers are not your employees under Australian law. The outsourcing provider is their employer in their local country (typically Philippines, India, or Vietnam) and handles all employment obligations under local law. Your monthly fee is all-inclusive with no additional Australian employment costs. This is one of the primary cost savings.
Can I outsource roles that require Australian qualifications like BAS agents or tax agents?
Not entirely. BAS agents and tax agents must be registered with the Tax Practitioners Board and meet Australian qualification requirements. However, you can use a hybrid model where Australian-qualified professionals supervise offshore team members who handle data entry, processing, and preparation work. The Australian professional then reviews and lodges the work. This is the model used by many accounting firms and bookkeeping services.
What happens if the outsourced person doesn't work out?
Reputable outsourcing providers offer replacement guarantees at no additional cost. If the person isn't performing or isn't the right fit, they'll source a replacement within 2-4 weeks. This eliminates the termination and recruitment costs you'd face with a full-time employee. However, if you go through multiple replacements, this signals either unclear expectations or process documentation issues that you need to address.
How do I calculate payroll tax accurately for my state?
Payroll tax varies significantly by state. NSW has a $1,200,000 threshold at 5.45%, Victoria is $700,000 at 4.85%, Queensland is $1,300,000 at 4.75%, and other states have different thresholds and rates. Crucially, the threshold is based on your Australia-wide wages, not state-by-state. Once you exceed the threshold in any state, you may owe payroll tax in multiple states. Consult with your accountant or use the revenue office calculators for your specific situation as rates and thresholds change annually.
Should I factor in potential wage increases when comparing costs?
Yes. Australian wages typically increase 3-5% annually through market pressure, award increases, or Fair Work decisions. A $75,000 salary becomes $78,750 in year two and $82,688 by year three. Outsourcing rates are typically more stable and adjust 0-2% annually. Over a 3-5 year period, this wage inflation significantly increases the cost gap between full-time employment and outsourcing.
What's the real cost of office space per employee?
This varies dramatically by location. Sydney CBD office space costs approximately $12,000-$18,000 per employee per year when you factor in rent, utilities, cleaning, and facilities. Suburban locations are $6,000-$10,000. Regional areas might be $4,000-$6,000. If you're working from a shared office space or coworking facility, calculate the per-desk monthly rate. For home-based businesses with no separate office, this cost is zero for both options.
Can I start with outsourcing and hire full-time later?
Absolutely. Many businesses start with outsourcing for flexibility and lower risk, then convert to full-time employees once workload is consistently high and the business can afford the additional cost. The outsourced period also gives you time to document processes and understand exactly what the role requires before hiring. Some outsourcing providers even offer pathways to sponsor and relocate their offshore staff to Australia if you want to bring them in-house long-term.
How do I compare costs for part-time or casual employees?
Part-time permanent employees are typically paid pro-rata salary plus superannuation and leave entitlements based on their hours. A 0.6 FTE (3 days per week) bookkeeper on $65,000 full-time equivalent would cost approximately $50,000 annually all-inclusive (salary + super + leave). Casual employees receive a loading (typically 25%) instead of leave entitlements, so the hourly rate is higher but you pay only for hours worked. Compare this to outsourcing rates that can be scaled by hours or days as needed with no minimum commitment.
What management time should I expect with outsourcing?
Plan for 4-6 hours weekly in the first month while you're establishing workflows, documentation, and communication rhythms. This drops to 2-3 hours weekly for the next 2-3 months as the person becomes familiar with your systems. In steady state, expect 1-2 hours weekly for check-ins, questions, and work review. This is comparable to managing a full-time employee but requires more intentional communication since you can't just walk over to their desk.
Do outsourcing costs include software licenses I already pay for?
Usually not. Most outsourcing fees include basic software (Microsoft Office, communication tools, etc.) but not specialised software like Xero, MYOB, or industry-specific systems. You'll need to provide licenses for any software requiring access to your company data. However, this is the same cost you'd incur for a full-time employee. Check with your provider about what's included in their standard package.
How do I ensure quality when outsourcing?
Quality management starts with clear process documentation, measurable KPIs, and regular check-ins. Use the first 1-2 months to establish quality standards and review 100% of output. As accuracy improves, move to sample-based reviews (checking 20-30% of transactions). Most quality issues stem from unclear processes or expectations rather than capability issues. If you're hiring a finance or HR role, look for providers who employ locally-qualified professionals (CPAs, CA, CPA Australia members) in their offshore locations.
Scale Suite provides embedded finance and HR teams that combine offshore capacity with Australian oversight, creating a hybrid model designed specifically for Australian businesses. Our service includes daily integration, supervised by Australia-based Chartered Accountants for compliance and strategy.
This structure delivers the cost benefits of outsourcing while maintaining Australian expertise for BAS lodgements, tax compliance, and strategic advisory. We're TPB-registered BAS agents and work as an extension of your business, not an external service provider checking in monthly.
If you're evaluating whether to hire full-time or outsource your finance or HR functions, we can provide specific cost comparisons based on your business size and requirements.
We review and check articles periodically. At the time of writing this information was up to date based on our assessment. Employment costs, thresholds, and rates change annually. Consult with your accountant or financial advisor for your specific situation.
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses.Our Sydney-based team integrates with your daily operations through a shared platform, working like part of your internal staff but with senior-level expertise. From complete bookkeeping to strategic CFO insights, we deliver better outcomes than a single hire - without the recruitment risk, training time, or full-time salary commitment.
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