US vs Australia on-costs: FICA next to super, payroll tax and workers’ comp

A US employer pays 6.2% Social Security, 1.45% Medicare and federal unemployment tax; an Australian employer pays 12% superannuation, state payroll tax and workers’ compensation. Those are the compulsory employer layers in each system for 2026.

On the US side, IRS Topic 751 gives Social Security at 6.2% for the employer on wages up to USD 184,500 in 2026 and Medicare at 1.45% with no wage limit. IRS Topic 759 puts FUTA at 6.0%, charged only on the first USD 7,000 paid to a worker in the year. Employers who have paid into state unemployment funds can usually offset up to 5.4% of it, so the effective federal rate is often 0.6%. State unemployment rates and workers’ compensation premiums vary by state and employer, so they are left out of the federal figures below.

On the Australian side, the ATO’s super guarantee for 2026-27 is 12%, calculated on qualifying earnings and capped once a person’s earnings for the year pass AUD 270,830. Payroll tax belongs to the states; New South Wales levies 5.45% on wages including super once the employer’s annual payroll passes AUD 1,200,000. Workers’ compensation in New South Wales is insured through icare at a rate tied to industry classification.

Neither list includes the employee’s own tax. This comparison looks only at money an employer spends beyond the salary written in the contract.

On a salary of 110,000 in local currency, the federal US employer taxes total about USD 8,457 and the Australian on-costs total about AUD 20,284. The amounts are not converted; the useful comparison is each as a share of base pay.

US assumptions: a single employee on USD 110,000 in 2026, full FUTA credit available, and no state unemployment, workers’ compensation or benefits counted. Employer Social Security comes to USD 6,820. Medicare is 1.45%, or USD 1,595. Net FUTA is 0.6% of USD 7,000, or USD 42. The total is USD 8,457, about 7.7% of salary.

Australian assumptions: a full-time employee in Sydney on AUD 110,000 for 2026-27, super at 12% on top, no leave loading, payroll tax at the NSW 5.45% rate on every dollar because the employer’s group already exceeds the threshold, and workers’ compensation at an illustrative 0.30% of wages including super. Super is AUD 13,200. Payroll tax on AUD 123,200 is AUD 6,714.40. Workers’ compensation is AUD 369.60. The total is AUD 20,284, about 18.4% of salary, for an employer cost of AUD 130,284.

Most of the Australian figure is super, which ends up in the employee’s own retirement account, so a candidate will see it as part of their reward even though it never appears in take-home pay. Payroll tax is the second layer, and it disappears for a standalone employer whose total wages sit under the state threshold, which would cut AUD 6,714.40 from the example. The full Sydney workings are in the cost of a Sydney employee in 2026-27.

At higher salaries the US percentage falls because Social Security stops at USD 184,500, while the Australian percentage holds steady until super reaches its annual cap. That difference matters most for senior engineering and sales roles, where US employer taxes flatten out long before Australian ones do.

Take a salary of 250,000 on the same assumptions. In the US, Social Security is capped at USD 11,439 (6.2% of 184,500), Medicare is USD 3,625 and net FUTA stays at USD 42, giving USD 15,106, about 6.0% of salary. In Australia, super at 12% is AUD 30,000, still under the AUD 270,830 base; NSW payroll tax on AUD 280,000 is AUD 15,260; illustrative workers’ compensation is AUD 840. The total is AUD 46,100, still about 18.4%.

Above AUD 270,830 of qualifying earnings, the super guarantee stops for the rest of the financial year, so the maximum compulsory super for 2026-27 is AUD 32,499.60. Payroll tax has no such ceiling; it continues on every dollar of taxable wages.

The US figures also hide a separate cost: the Additional Medicare Tax of 0.9% on wages above USD 200,000 is withheld from the employee, not paid by the employer, so it changes the employee’s net pay but not the employer’s budget.

A US employee pays 7.65% FICA plus income taxes, while an Australian employee pays no compulsory super and no payroll tax, only income tax and the Medicare levy. That difference is why Australian candidates often compare offers on total package, super included.

Australian resident income tax for 2026-27 is nil up to AUD 18,200, then 15%, 30% to AUD 135,000, 37% to AUD 190,000 and 45% above that, plus a 2% Medicare levy. The Sydney employee on AUD 110,000 pays AUD 23,520 of income tax and AUD 2,200 of Medicare levy, keeping AUD 84,280 for the year, assuming private hospital cover and no study debt.

Without appropriate private hospital cover, a single person earning above AUD 105,000 also pays the Medicare levy surcharge, starting at 1%. In the example that adds AUD 1,100 to the employee’s tax bill but nothing to the employer’s cost.

Tax is withheld each pay under the ATO’s pay as you go (PAYG) formulas. For the example, monthly withholding is AUD 2,145, giving take-home pay of AUD 7,021.67 a month. Withholding slightly overshoots the annual liability, by AUD 20 in this case, and the difference comes back when the employee lodges a return.

Super contributions are taxed at 15% inside the fund rather than on the payslip, so the AUD 13,200 of super in the example never reaches the employee’s bank account and is not part of the PAYG withholding calculation, although it does count as taxable wages for NSW payroll tax. For a US manager used to 401(k) deferrals coming out of the employee’s pay, that is the key mental switch: in Australia the retirement money is added by the employer on top.

Leave, long service leave and some award terms add cost that never appears as a tax rate, so a budget built only from percentages will run short.

• Annual leave loading, where an award or contract provides it, commonly 17.5% of four weeks’ pay. On AUD 110,000 it adds AUD 1,480.77 of pay and AUD 1,753.82 of employer cost once super, payroll tax and workers’ compensation are applied.
• Long service leave under state law, such as 8.67 weeks after 10 years in New South Wales, accrues as a provision on the balance sheet.
• Workers’ compensation rates vary by industry: the icare 2024-25 table listed 0.213% for computer consultancy and 0.520% for legal services, before the dust diseases levy. Each 0.1 percentage point changes the example by AUD 123.20.
• Fringe benefits tax applies to non-cash benefits such as cars, with its own year ending 31 March.

By contrast, the government funds Paid Parental Leave, now 26 weeks, so employers pass it through payroll rather than pay it themselves. Employer-funded health cover, a large line in many US budgets, is not among the compulsory Australian on-costs described here.

Yes. Payroll tax, workers’ compensation, long service leave and public holidays are all set by the state or territory where the employee works, so the same salary costs slightly different amounts in Sydney, Melbourne, Brisbane or Perth.

The worked example uses New South Wales because its 2026-27 figures are confirmed: 5.45% payroll tax above AUD 1,200,000 of annual wages, with monthly thresholds of AUD 92,055, AUD 98,630 or AUD 101,918 depending on the length of the month. Every other state and territory sets its own rate and threshold, so check the current figures with the relevant state revenue office before relying on a number for Victoria, Queensland or Western Australia.

Grouping rules also matter. Businesses under common ownership or control, or that share employees, are grouped for payroll tax, and only one member claims the threshold. Where the employer is a larger group already over the line, as the worked example assumes, payroll tax applies from the first dollar of the new hire’s wages.

Superannuation, income tax and the Medicare levy are federal and identical across states. That makes super the stable part of the Australian on-cost, while payroll tax and workers’ compensation are the parts to recheck whenever an employee relocates between states.

Employment type changes the picture too. A casual employee receives a 25% loading instead of paid annual and personal leave, so the hourly cost rises while leave provisions fall. Super, payroll tax and workers’ compensation then apply to the loaded pay.

Show Australian base salary, super, payroll tax and workers’ compensation as four separate AUD lines, and convert only the total. Converting each line invites rounding noise and hides which cost is moving.

Plan cash timing as well as totals. Under Payday Super, super has to be in the employee’s fund inside 7 business days of each pay date, so super is paid alongside wages, not quarterly. The timing change is covered in Payday Super from July 2026.

If the role is employed through Employer of Record Australia, add a line for our service charge, from USD 560 a head monthly, or USD 6,720 a year, around AUD 797 a month on the ECB’s 24 September 2026 figure, plus our set-up fee, normally a single charge at the start. The employer of record that employs the person pays the super, payroll tax and premiums, and those costs pass through to you. See pricing for what the fee covers.

A final budgeting habit helps: refresh the Australian figures every 1 July, when the national minimum wage, award rates, the super maximum contribution base and the unfair dismissal threshold usually move, rather than on a US calendar-year cycle. For the broader picture of why US firms hire in Australia at all, read American companies hiring Australians.