Total cost of ownership: offshore vs local hire in Australia

Nick O'Connell

August 25, 2026

An Australian admin hire costs $81,242 a year once superannuation, payroll tax, workers' compensation, a desk and equipment are counted, against $22,800 for the same role offshore through Pear Tree. Over three years that is $255,727 against $68,400. Per productive hour, and after handicapping the offshore side to 90% productivity, it is $48.81 versus $15.22.

In short

On a full line-by-line model, an Australian admin hire costs $81,242 a year in steady state once superannuation, payroll tax, workers' compensation, a desk and equipment are counted, against $22,800 for the same role offshore through Pear Tree. Over three years that is $255,727 against $68,400, and offshore lands at 22 to 27% of the local total across admin, operations and developer roles. Per productive hour, after handicapping offshore output to 90% of onshore, it is $48.81 against $15.22. Paid leave is not an additive on-cost: it reduces the hours you get, which is why the per-hour figure matters more than the annual one.

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What is the total cost of ownership of a hire?

Total cost of ownership is every dollar the hire causes you to spend, not the salary line in the offer letter. For a local Australian employee that means salary plus superannuation, payroll tax, workers' compensation, recruitment, workspace and tooling. For an offshore hire it means the rate, the management fee, the software seats and a one-time placement fee.

One correction before the numbers, because a lot of published on-cost figures get this wrong. Annual leave, personal leave and public holidays are not additive on-costs. You already pay for them inside the salary, so adding them again as a percentage double counts. What they actually do is reduce the hours you get, which is a productivity question, not a cash question, and it belongs in the per-hour calculation further down.

The model below uses a NSW business above the payroll tax threshold, an office-based role, and a desk that has to be paid for. If any of those does not apply to you, the local number falls, and there is a variant for that below.

Which cost lines does a local hire actually carry?

Seven, and only one of them is the salary. On a $60,000 admin salary in New South Wales: superannuation at 12% adds $7,200, payroll tax at 5.45% on wages including super adds $3,662, workers' compensation at roughly 1% for an office role adds $600, a desk at the national median flexible-office rate of $715 a month adds $8,580, and equipment and software add about $1,200 a year in steady state.

That is $81,242 a year before you have recruited anyone. Add a recruitment fee at 18% of first-year salary, the midpoint of the standard 15 to 25% range (AU-16), plus an extra $1,200 in year one for a laptop and setup, and year one comes to $93,242.

Every cost line for one admin role: local versus offshore
Cost line	Local hire (NSW, $60,000 salary)	Offshore through Pear Tree
Salary or rate	$60,000	$16,800 (AUD$1,400 per month)
Superannuation at 12%	$7,200	Nil
Payroll tax at 5.45% on wages including super	$3,662	Nil
Workers' compensation at about 1%	$600	Nil
Workspace, at the national median desk rate	$8,580	Nil
Equipment and software, steady state	$1,200 ($2,400 in year one, including a laptop)	$1,200
Management fee	Not applicable	$4,800 (flat AUD$400 per month)
Annual cost, steady state	$81,242	$22,800
Recruitment or placement, year one only	$10,800 (18% of salary)	One-time placement fee
Year one total	$93,242	$22,800 plus the placement fee

Assumes a NSW business above the $1.2 million payroll tax threshold, an office-based role, and a desk that must be paid for. Superannuation guarantee 12% (ATO, from 1 July 2025); NSW payroll tax 5.45% (Revenue NSW 2025-26 and 2026-27); workers' compensation about 1% of wages for a low-risk office role; desk at the Australian median flexible-office rate of $715 per month (Rubberdesk Q1 2026); recruitment at 18%, the midpoint of the standard 15 to 25% range. The local column carries an extra $1,200 in year one for a company laptop, where an offshore professional normally supplies their own machine. Below the payroll tax threshold and with no desk to buy, the local steady-state figure falls to $69,000.

Two of those lines are genuinely optional. Payroll tax only applies above the state threshold, $1.2 million in total Australian wages in NSW, so most small businesses pay none. And the desk is free if you already have spare capacity. Strip both out and the local admin role costs $69,000 a year rather than $81,242, which is still three times the offshore figure.

What does the offshore side actually cost?

Three lines, and it is worth being straight about all three rather than quoting the headline rate alone. An admin hire is AUD$1,400 a month in salary, $16,800 a year. The flat management fee is $400 a month, $4,800 a year. Software seats are real and you still pay them, so budget roughly $1,200 a year for the same tooling a local hire would use.

That totals $22,800 a year, plus a one-time placement fee for the search and vetting which sits outside the annual model. There is no superannuation, no payroll tax, no workers' compensation and no desk, because none of those obligations attach to a non-resident performing all their work outside Australia.

What you do not save on is management. Your time supervising the person is identical either way, so it nets out of the comparison entirely rather than favouring one side.

What is the three-year total cost for each?

Between $187,000 and $362,000 in difference, depending on the role. Three years is the right window because recruitment is a year-one cost and retention determines whether you pay it again, and Pear Tree holds a 90% retention rate against a roughly 60% industry average (PT-01).

Three-year total cost of ownership across three roles
Role	AU salary	Local, 3 years	Offshore, 3 years	Difference	Offshore as % of local
Admin or virtual assistant	$60,000	$255,727	$68,400	$187,327	27%
Operations manager	$95,000	$387,086	$86,400	$300,686	22%
Full-stack developer	$120,000	$480,914	$118,800	$362,114	25%

Three years equals year one plus two steady-state years, on the same NSW assumptions as the table above. Offshore rates are AUD$1,400, $1,900 and $2,800 per month respectively, plus the flat $400 per month management fee and $1,200 a year in software. Offshore totals exclude the one-time placement fee. Assumes no replacement hire in either column; replacing a local hire once inside three years adds another recruitment fee plus the $50,000 to $150,000 cost of a bad hire (SEEK and Hays 2024).

The pattern holds across seniority. Offshore lands at 22 to 27% of the local three-year total, and the absolute gap widens as the role gets more senior, because superannuation, payroll tax and recruitment all scale with salary while the management fee stays flat at $400 a month.

Retention is what makes the three-year view honest rather than flattering. If you replace a local hire once inside three years you add another recruitment fee plus the $50,000 to $150,000 cost of a bad hire (SEEK and Hays 2024, AU-10). Pear Tree includes a six-month replacement guarantee (PT-04).

What does it cost per productive hour?

$48.81 an hour locally against $15.22 offshore for an admin role, and this is the number worth carrying into a board paper. It is also where the offshore side gets handicapped rather than flattered.

Start with productive hours. A full-time Australian employee is paid for 52 weeks but works about 43.8 of them, once four weeks of annual leave, ten days of personal leave and eleven public holidays come out under the National Employment Standards. That is roughly 1,664 productive hours a year, and it is the correct divisor for both sides.

Then apply a discount to the offshore side. Well-managed offshore teams reach 90 to 95% of onshore productivity (McKinsey and Deloitte 2024, RET-05), so the table below uses the conservative end, 90%, giving 1,498 effective hours against the local 1,664. Even carrying that penalty, offshore lands 69 to 74% lower per productive hour.

Cost per productive hour, with offshore handicapped to 90% of onshore output
Role	Local, per productive hour	Offshore, per effective hour	Difference
Admin or virtual assistant	$48.81	$15.22	69% lower
Operations manager	$73.86	$19.23	74% lower
Full-stack developer	$91.75	$26.44	71% lower

Productive hours calculated from 52 paid weeks less four weeks annual leave, ten days personal leave and eleven public holidays under the National Employment Standards, giving 43.8 weeks or about 1,664 hours at 38 hours a week. The offshore column divides by 1,498 hours, applying a 10% productivity discount because well-managed offshore teams reach 90 to 95% of onshore productivity (McKinsey and Deloitte 2024); the conservative end of that range is used. Steady-state annual costs are used, so recruitment and placement fees are excluded from both columns.

Which costs are the same either way?

Four, and they are the ones that quietly decide whether the hire works. Your management time, your onboarding effort, your software licences and the cost of a poor role definition do not change with location.

That matters for how you read the tables. The saving is real, but it is a saving on employment overhead, not on the work of managing a person well. A badly briefed offshore hire and a badly briefed local hire fail in the same way, and the offshore one is only cheaper to have failed.

Compliance is the one line that behaves differently rather than identically. An Employer of Record or Contractor of Record engages the person compliantly in their home country from $400 per month per person (COM-04), which replaces the payroll and classification machinery you would otherwise run in-house.

What changes the answer?

Four variables, and it is worth testing your own case against each. Payroll tax status is the biggest single swing, worth $3,662 a year on an admin role and $7,325 on a developer. Whether you need to buy a desk is the second, at $8,580 a year at the national median, or $11,220 in Sydney.

The third is retention, because a role you refill every eighteen months carries recruitment twice in three years. The fourth is how much of the role genuinely can be done remotely, and being honest about that is worth more than any figure in this article. If the work needs a physical presence, the TCO comparison does not apply.

State matters less than people expect. Payroll tax rates run from 4.0% in Tasmania to 6.85% in the ACT with thresholds from $1.0 million to $2.0 million, which moves the local number by a few thousand dollars, not by an order of magnitude.

The bottom line

On a full line-by-line model, an offshore hire costs 22 to 27% of the local three-year total, and 26 to 31% per productive hour after handicapping offshore output to 90% of onshore. The lines that create the gap are superannuation, payroll tax, workspace and recruitment, none of which attach to a non-resident working outside Australia. Substitute your own payroll tax status, desk cost and retention assumption before you act on it, because those three move the answer more than the salary does.

Frequently asked questions

What is the total cost of ownership of an Australian employee?

For a $60,000 admin role in New South Wales, $81,242 a year in steady state. That is the salary plus 12% superannuation at $7,200, payroll tax at 5.45% on wages including super at $3,662, workers' compensation at about 1% at $600, a desk at the national median rate of $8,580, and $1,200 in equipment and software. Year one adds a recruitment fee of about $10,800, taking it to $93,242. Below the payroll tax threshold and with no desk to buy, the figure falls to $69,000.

How much cheaper is an offshore hire on a total cost of ownership basis?

Offshore lands at 22 to 27% of the local three-year total, depending on the role. An admin role is $68,400 over three years against $255,727 locally, an operations manager is $86,400 against $387,086, and a full-stack developer is $118,800 against $480,914. The gap widens with seniority because superannuation, payroll tax and recruitment all scale with salary while the management fee stays flat at $400 a month.

Should annual leave be counted as an employer on-cost?

No, and adding it as a percentage double counts. You already pay for annual leave, personal leave and public holidays inside the salary, so they are not additional cash. What they do is reduce the hours you get: a full-time Australian employee is paid for 52 weeks but works about 43.8 of them once four weeks of annual leave, ten days of personal leave and eleven public holidays come out. That belongs in a cost-per-productive-hour calculation, not in an on-cost percentage.

What does an offshore hire cost per hour compared with a local hire?

$15.22 against $48.81 for an admin role, $19.23 against $73.86 for an operations manager, and $26.44 against $91.75 for a full-stack developer. Those offshore figures already carry a 10% productivity discount, because well-managed offshore teams reach 90 to 95% of onshore productivity and the conservative end of that range is applied. Local hours are 1,664 a year and offshore effective hours 1,498.

Which costs are the same whether you hire locally or offshore?

Your management time, your onboarding effort, your software licences and the cost of a poorly defined role. None of those change with location, so they net out of the comparison rather than favouring either side. The saving is on employment overhead, not on the work of managing a person well: a badly briefed offshore hire fails the same way a badly briefed local hire does, it is just cheaper to have failed.

What would change the answer for my business?

Four things. Payroll tax status is the biggest swing, worth $3,662 a year on an admin role and $7,325 on a developer, and most small businesses sit below the threshold. Whether you must buy a desk is next, at $8,580 a year nationally or $11,220 in Sydney. Retention is third, because refilling a role twice in three years adds recruitment twice. The fourth is whether the work genuinely can be done remotely at all; if it needs physical presence, the comparison does not apply.

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AUTHOR BIO: Nick is Co-Founder of Pear Tree, a direct offshore talent placement company helping Australian and New Zealand businesses hire world-class Filipino and South African professionals without the agency markup. With offices in Sydney, Auckland, Cebu, Manila, Cape Town and Hawke's Bay, Pear Tree has placed talent with 750+ companies and maintains a 90% retention rate.

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