How much does an employee actually cost beyond their salary?

Budget on top of gross salary: superannuation guarantee at 11.5% of ordinary time earnings, WorkCover premium (industry-rated, typically 1-3% of remuneration in Victoria), payroll software costs, leave loading if the Award applies, and the cost of onboarding time. A realistic all-up cost is commonly 20-30% above the advertised salary.

What revenue do I need before hiring my first employee?

There's no fixed threshold, but a common rule of thumb is that the new hire's fully-loaded annual cost should be coverable by at least 3 months of consistent, not one-off, revenue at current levels — so if a new employee costs $70,000 all-up, you'd want to see that you can comfortably absorb roughly $17,500 in additional quarterly costs without straining cash flow, ideally backed by a pipeline of work that justifies the extra capacity.

Should I hire a casual, part-time, or full-time employee first?

Casual employment offers more flexibility (casual loading in exchange for no guaranteed hours and generally no paid leave) and is often the lowest-risk way to trial demand before committing to a permanent role. Part-time or full-time makes sense once demand is proven and consistent enough that you need reliable, ongoing capacity.

What compliance steps come before the first pay run?

Register for PAYG withholding (if not already), collect a Tax File Number declaration, register with WorkSafe Victoria for WorkCover before their first day, confirm the correct Modern Award and classification, set up Single Touch Payroll (STP Phase 2) in Xero, and select a default super fund with SuperStream connected.

Is it cheaper to use a contractor instead of hiring an employee?

Sometimes, but it depends on genuine substance, not just labelling. If the work is ongoing, exclusive, and personally performed with no ability to delegate, the arrangement may still trigger superannuation obligations and risk being reclassified as employment. Contractors can make sense for project-based or specialist work, but shouldn't be used purely to avoid employment costs on an ongoing role.

When to Hire Your First Employee — A Melbourne Service Business Guide

Published July 2026By True Tally Bookkeeping8 min read

For most Melbourne service business owners, hiring the first employee is less about wanting to grow and more about running out of hours in the day. Turning down work, working weekends to keep up, or delaying client responses because you're stretched — these are the real signals that hiring conversations belong on the agenda. The trap is deciding based on how busy you feel, rather than what the numbers actually show.

The real cost of an employee, not just the salary

The advertised salary is only the starting point. On top of gross wages, a Melbourne employer needs to budget for:

Superannuation Guarantee — currently 11.5% of ordinary time earnings
WorkCover premium — industry-rated in Victoria, commonly 1-3% of remuneration depending on classification
Leave loading — if the applicable Award requires it, typically 17.5% on annual leave taken
Payroll software and STP compliance costs
Onboarding time — the hours you or your team spend training rather than billing

A realistic all-up cost is commonly 20-30% above the advertised salary. A $70,000 role can cost the business $85,000-$91,000 in the first year once these are added.

The revenue test: can the business absorb it without straining cash flow?

Rather than hiring on a hopeful projection, check whether your current, consistent revenue — not a single good month — comfortably covers the fully-loaded cost. A practical test: could the business absorb three months of the new employee's fully-loaded cost from cash reserves or predictable revenue, without needing the new hire to generate income from day one? If the answer is yes, the financial risk of the hire is manageable.

        Worth checking first: look at your last six months of revenue, not just the most recent quarter. A single strong month driven by one large client doesn't tell you whether ongoing capacity is needed — a sustained trend across multiple months does.
      

Casual, part-time, or full-time: choosing the right entry point

Casual employment is often the lowest-risk way to test demand. Casual loading (typically 25% under most Awards) compensates for the lack of guaranteed hours and paid leave, giving you flexibility to scale up or down as work fluctuates. Once demand proves consistent over several months, converting to part-time or full-time — with paid leave entitlements and more predictable rostering — becomes the better long-term move, both for retention and for the employee's security.

True Tally — payroll setup before your first pay run

We set up Xero Payroll correctly the first time — Award classification, STP Phase 2, super, and WorkSafe Victoria registration — so nothing gets missed. Book a free 20-minute call.

Book a Free 20-Minute Call

Compliance to sort before the first pay run

Once you've decided to hire, several obligations need to be in place before the employee's first day, not after:

PAYG withholding registration (most businesses already have this through their ABN)
Tax File Number declaration collected before the first pay
WorkSafe Victoria registration — required before the employee starts, not retrospectively
Correct Modern Award and classification identified for the role
Single Touch Payroll (STP Phase 2) configured in Xero
Default super fund selected with SuperStream connected

What actually changes once you have staff

Hiring your first employee changes more than payroll. It typically means:

Your bookkeeping needs to move from ad hoc to monthly, since payroll obligations are now recurring and time-sensitive
You need documented processes so the new hire can do the work consistently, not just how you happen to do it in your head
Your pricing needs to reflect that some of the work is now delivered by paid labour, not just your own time

Businesses that skip this step — hiring without updating their financial processes — are the ones who find themselves surprised by a cash flow squeeze two or three months later, once the new employee's costs are running but the extra revenue hasn't caught up yet.

Signs you've waited too long already

If you're regularly turning down work, working past 7pm most nights just to keep the business ticking over, or clients are starting to notice slower response times, the cost of not hiring is already showing up — it's just showing up as burnout and lost revenue instead of a line item on a payslip.

It's worth naming the flip side too: hiring before demand supports it creates its own risk, tying up cash in a fixed cost the business can't yet cover from consistent revenue. The goal isn't to hire at the first sign of busyness — it's to hire once the numbers show the workload is a sustained pattern rather than a temporary peak, and once the fully-loaded cost has been modelled against real, not hoped-for, cash flow.

Thinking about hiring? Get the numbers right first.

True Tally helps Melbourne service businesses model the real cost of a first hire and set up payroll properly from day one. Book a free 20-minute call.