Quick answer
A new employee pays for themselves when the extra gross profit they generate or unlock each month exceeds their full monthly cost — wages, super, workers compensation, leave and equipment. Break-even usually arrives months after they start, because productivity builds gradually. Add up the shortfall in those early months: that's the cash the business needs to carry, and the amount a growth facility can cover.
Key points
- Full cost of a hire is well above the wage — super alone is 12% of ordinary time earnings.
- Revenue roles break even on billable output; support roles on the time and capacity they free.
- Productivity ramps up: model months at 25%, 50% and 75% before full speed.
- The cumulative shortfall before break-even is the funding need.
- Monthly break-even
- Gross profit unlocked ≥ full monthly cost
- Cumulative break-even
- When early shortfalls are fully recovered
- Super guarantee
- 12% for 2025–26 and 2026–27
“Can we afford another person?” is really two questions. Can the business afford their cost every month from now on? And can it afford the months before they’re fully productive? The first is about break-even. The second is about cash. Both have clear answers once you put numbers on them.
What does a hire really cost each month?
Start with the award or agreed wage, then add everything that comes with it:
| Item | How to estimate |
|---|---|
| Base wage | Award rate or agreed salary, including any penalty rates the role will attract |
| Superannuation | 12% of ordinary time earnings (the ATO confirms 12% for 2025–26 and 2026–27) |
| Workers compensation | Your state scheme premium for the role’s industry classification |
| Leave and public holidays | Paid time off still costs the business |
| Payroll tax | If total wages exceed your state’s threshold |
| Equipment and tools | Vehicle, tools, uniform, phone, laptop, licences |
| Recruitment and training | Advertising, agency fees, onboarding time |
Spread one-off costs over the first year and add them to the monthly figure. That’s your full monthly cost — the number the hire has to beat.
What does the hire earn or unlock?
Revenue roles (tradespeople, technicians, clinicians, salespeople, chefs):
Monthly gross profit = billable hours or sales × gross profit per hour or sale
Leverage roles (office managers, estimators, supervisors, coordinators):
Monthly value = gross profit from the extra work others can now do + overtime, contractor or error costs avoided
Be honest about leverage roles. Freed-up time is only worth money if it’s reinvested in work that earns. Name where the hours will go.
How do you find the break-even month?
There are two break-evens worth knowing:
- Monthly break-even — the first month the hire’s gross profit covers their full monthly cost.
- Cumulative break-even — the month when their total contribution has recovered all the early shortfalls.
Model the ramp-up. For many roles, a simple pattern works: 25% productive in month one, 50% in month two, 75% in month three, full speed from month four. Specialist or sales roles may take six months or more. See planning for the slow start for typical patterns.
A worked example (illustrative)
A physiotherapy clinic hires a new graduate physio. Full monthly cost: about $8,200, covering salary, super, insurance, registration, continuing education and a share of clinic consumables.
At full speed the physio will see about 90 consultations a month. After the clinic’s share of the fee and room costs, each consult contributes about $120 of gross profit — $10,800 a month. The monthly boost at full speed is $2,600.
The ramp-up, as the new physio builds a caseload:
| Month | Productivity | Gross profit | Cost | Net | Cumulative |
|---|---|---|---|---|---|
| 1 | 25% | $2,700 | $8,200 | −$5,500 | −$5,500 |
| 2 | 50% | $5,400 | $8,200 | −$2,800 | −$8,300 |
| 3 | 75% | $8,100 | $8,200 | −$100 | −$8,400 |
| 4 | 100% | $10,800 | $8,200 | +$2,600 | −$5,800 |
| 5 | 100% | $10,800 | $8,200 | +$2,600 | −$3,200 |
| 6 | 100% | $10,800 | $8,200 | +$2,600 | −$600 |
| 7 | 100% | $10,800 | $8,200 | +$2,600 | +$2,000 |
Monthly break-even arrives in month four. Cumulative break-even arrives in month seven. The deepest point is about $8,400 in month three — that’s the cash the clinic needs to carry. A small line of credit or working-capital facility sized to that gap covers it neatly. Model your own hire in the Growth ROI calculator by entering the role’s full cost as a running cost, and when the numbers work, see what funding could carry the ramp-up.
What changes the break-even?
- Existing demand. A backlog of work cuts the ramp-up dramatically. Hiring into an empty diary stretches it.
- Experience. An experienced hire costs more but ramps faster; a junior costs less but needs supervision.
- Supervision cost. Time senior staff spend training reduces their own output — count it.
- Employment type. Casual or part-time hours can reduce risk while demand is proven. The Fair Work Ombudsman explains the entitlements for each employment type.
- Payday Super. From 1 July 2026, super must reach the employee’s fund within seven business days of each payday. It doesn’t change the cost, but it changes when the cash leaves.
When is break-even the wrong test?
Some hires are strategic: a manager who lets you open a second site, a compliance role that lets you tender for government work, a senior person who reduces key-person risk. Their payback shows up in moves they make possible, not their own output. Value them by those moves — our hiring staff playbook and the guide to signs you’re ready to hire cover the bigger picture.
Ready to grow the team?
If you know what the new person will do, what they’ll cost and how long they’ll take to hit their stride, we can help fund the gap. One short form starts it, with no credit enquiry made at that point. Your details aren’t sent down a line of lenders; a specialist reviews the hire and rings you back. Precise answers on the form help us line up the right option quickly.
Frequently asked questions
How long does it take for a new employee to pay for themselves?
It varies by role and industry. A qualified tradesperson joining a business with a backlog may cover their cost within a couple of months; a new salesperson building a pipeline may take six months or more. Model the ramp-up month by month to find both the month they first cover their cost and the month the early shortfall is fully recovered.
What's included in the full cost of an employee?
Wages at or above the award, 12% super, workers compensation insurance, paid leave and public holidays, payroll tax if your state threshold is exceeded, plus tools, vehicle, uniform, software licences, training and recruitment. Add them all to get a monthly figure.
How do I value a role that doesn't generate revenue directly?
Count what it frees up. If an office manager saves the owner 15 hours a week and those hours go into quoting and selling, value the role by the extra gross profit those hours produce, or by the overtime and contractor costs it replaces.
Should I borrow to cover a new hire's wages?
It can make sense when there's clear demand for the work the hire will do and the ramp-up shortfall is temporary. Size the funding to the shortfall, not the whole salary, and match the term to the break-even so the hire's own output repays it.