Last Updated: December 2025
Recruitment agencies operate a high-volume, low-margin hybrid model: permanent placements generate lumpy, high-value fees while contract staffing functions as a payroll bureau with ongoing revenue but razor-thin true margins after on-costs. Accurate bookkeeping is essential for recognising permanent revenue correctly (with guarantee provisions), calculating true contract margins (including 12% super, state payroll tax, workers comp, and leave loadings), managing multi-state payroll compliance, and forecasting working capital to fund the perpetual gap between weekly/fortnightly contractor payments and 30-60 day client terms.
Many agencies appear profitable on gross billing alone yet operate at break-even or loss once full on-costs are applied. Margin compression, late super payments triggering non-deductible SGC, and interstate payroll tax oversights remain leading causes of financial distress and ATO penalties.
This comprehensive guide explains how to manage bookkeeping for recruitment agencies in Australia, covering specialised chart of accounts, detailed revenue recognition with extended examples, true margin calculation methodologies, contractor payroll obligations (updated for 2025 super and state thresholds), GST treatment, in-depth financial statement analysis, common mistakes with risk levels, and expanded FAQs addressing real-world challenges.
A robust chart of accounts separates permanent and contract streams, tracks per-consultant and per-client profitability, and isolates on-costs for accurate margin reporting.
Operating expenses include internal consultant salaries/bonuses, office rent, recruitment software (Bullhorn, JobAdder), marketing, and professional indemnity insurance.
Revenue recognises when the candidate commences employment and the agency has an enforceable right to payment (not at offer, invoice, or settlement).
Extended Example: Executive placement at 22% of $220,000 salary = $48,400 fee (plus GST $4,840). Candidate starts 3 June.
Standard guarantees range 3-12 months. Maintain provisions based on historical claim rates (typically 4-8%).
Extended Example: Annual permanent fees $3,200,000 with 5.7% historical rebate rate = $182,400 annual provision. Quarterly calculation on $800,000 fees creates $45,600 provision liability, reducing net recognised revenue accordingly. Release provision as guarantee periods expire claim-free.
Expense when revenue recognises; structures often tiered (e.g., 25% up to target, 35% above).
Example: $48,400 fee with consultant on 32% commission = $15,488 expense in June.
Agencies act as principal and present gross client billing as revenue with contractor costs as cost of sales (AASB 15 requirement for labour hire).
Base-pay spreads alone are misleading; true margin requires fully loaded contractor costs.
Detailed Example (client rate $118/hour, contractor base $85/hour, 40-hour week):
Total loaded cost: ≈$113.43/hourTrue margin: $4.57/hour (3.9% vs apparent 27.9% on base pay alone).
Healthy contract books target 15-25% true margin through disciplined charge-rate governance. Weekly billing at 40 hours = $4,720 revenue, $4,537 cost, $183 gross profit.
Recognition occurs as timesheet-approved work is performed (accrual basis), not when client pays.
Agencies bear full employer obligations across potentially hundreds of contractors.
Withhold per TFN declaration; 47% top marginal rate applies without TFN. Report/remit via monthly or quarterly BAS; provide payment summaries annually.
Pay on ordinary time earnings for labour hire contractors (deemed employees for super purposes). Quarterly deadlines: 28 October, January, April, July. Late payments trigger non-deductible Superannuation Guarantee Charge (super owing + interest + $20/employee/week admin fee).
Example: Contractor $120,000 OTE quarterly = $14,400 super due by deadline.
Applies to total Australian wages including contractors above state thresholds:
Register in every state where contractors perform work; interstate wages pro-rated against thresholds. Grouping provisions apply to related entities.
Mandatory state-based coverage; premiums 1-5% of wages depending on industry classification (lower for office/IT, higher for industrial/trades) and claims history.
Recruitment services are fully taxable supplies at 10% GST with full input credit entitlement (unlike financial services).
Example: Weekly contract billing $4,720 + GST $472 = $5,192 invoice.
Separate streams for transparency.
Extended Example (annual):
Contract operations create significant working capital intensity.
Extended Example:
Extended Example:
Typical requirement equals 1.5-2.0 months of contract billing to bridge payroll before client receipts.
Example: $16.8m annual contract billing = $1.4m monthly → $2.1m-$2.8m working capital needed. Invoice finance, overdrafts, or equity are common solutions.
Ignoring on-costs in margin calculations (Risk: Critical)
Agencies accept contracts believing 25% spread while true margin is <8%, leading to sustained losses.
Late superannuation payments (Risk: High)T
riggers non-deductible SGC + interest + admin fees; common when cash flow is tight.
Multi-state payroll tax non-registration (Risk: High)
Backdated liabilities, penalties, and interest across jurisdictions.
Inadequate/inaccurate guarantee provisions (Risk: Medium)
Profit volatility when claims exceed provisions.
Poor working capital forecasting (Risk: Critical)
Growth without funding leads to inability to meet payroll despite record billing.
When should permanent placement fee revenue be recognised?
On the candidate’s start date when the agency has performed and has an enforceable right to payment. Establish guarantee provisions immediately based on historical claim rates (4-8%); release as periods expire claim-free. Recognition at invoice or offer acceptance overstates current-period profit.
How to calculate true contract margins accurately?
Use fully loaded hourly rates: base pay + super 12% + payroll tax (state-specific above threshold) + workers compensation + annual/personal leave + public holidays + minor admin loadings. Review charge rates quarterly by client, role type, and state to maintain 15-25% target margins.
What are superannuation obligations for labour hire contractors?
12% on ordinary time earnings because contractors are deemed employees for super purposes in virtually all labour hire arrangements. Pay quarterly by 28th of following month (Oct/Jan/Apr/Jul) or incur non-deductible SGC including super owing, interest at ~10%, and $20/employee/week admin fee.
How does payroll tax apply across multiple states?R
egister and remit in every state where contractors perform work. Thresholds are pro-rated for interstate wages; grouping applies to related entities. Use multi-state payroll software with automated apportionment to avoid manual errors and penalties.
What working capital do contract-focused agencies require?
Approximately 1.5-2 months of contract billing to fund weekly/fortnightly payroll before 30-60 day client receipts. Forecast debtor days rigorously; secure invoice finance or overdraft facilities early during growth phases.
What software integrates best for recruitment bookkeeping?
Bullhorn, JobAdder, Vincere, or similar front-office platforms integrated with Xero or MYOB for automated timesheet import, payroll processing, margin reporting, and multi-state tax compliance.
Disclaimer: This guide provides general information only and does not constitute financial, legal, tax, or employment advice. Always verify current requirements with the ATO and relevant state authorities, and consult qualified professionals for advice specific to your circumstances.
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