Cost of Labor in Australia 2025: Trends, Wages & Business Impact

Australia’s cost of labor is a hot topic as 2025 brings new economic pressures, policy reforms, and evolving workplace expectations. Whether you’re running a business, managing a team, or planning your career, understanding the true cost of labor is crucial for making informed decisions. Let’s unpack what’s driving these changes, who’s affected most, and how you can adapt to stay competitive.

2025 Wage Updates and the Policy Landscape

This year, the Fair Work Commission delivered a 3.8% increase to the national minimum wage, pushing it to $24.50 per hour as of July 2025. The move reflects ongoing cost-of-living pressures and a government focus on closing wage gaps. In parallel, the new National Skills Agreement is subsidising training for priority sectors, particularly healthcare and renewable energy, to address chronic skills shortages without driving unsustainable wage inflation.

• Minimum wage: $24.50/hour (from July 2025)

• Modern awards: Most awards also received a 3.5-4% increase

• Superannuation: Compulsory employer contribution now at 12%, up from 11% in 2024

These changes mean the real cost of employing staff is rising faster than headline wage figures. Payroll tax thresholds have also been updated in several states—NSW raised its threshold to $1.5 million, aiming to ease the burden on small and medium businesses.

Breaking Down Labor Costs: Beyond the Payslip

When calculating the cost of labor, wages are just the tip of the iceberg. Businesses must also factor in:

• Superannuation: Now 12% of ordinary time earnings

• Leave entitlements: Annual, personal, long service, and (in some sectors) paid family and domestic violence leave

• Payroll tax: Varies by state and payroll size

• Workers’ compensation premiums

• Recruitment, training, and onboarding costs

• Compliance and HR administration

For example, a hospitality business in Victoria paying a casual worker $28/hour (including casual loading) will face an effective hourly cost closer to $34 once superannuation, payroll tax, and leave accruals are included. In sectors with high turnover, recruitment and onboarding can add another 5-10% to annual labor costs.

Trends Reshaping Australia’s Labor Market

Three major trends are shaping the Australian labor landscape in 2025:

• Workforce shortages and migration policy: Despite modest increases in skilled migration, sectors like aged care, construction, and IT still face acute shortages—pushing up wages and benefits as employers compete for talent.

• Flexible and remote work: Hybrid models are here to stay, but they come with hidden labor costs: home office stipends, increased compliance (for work health and safety), and new payroll tax risks for cross-border employees.

• Automation and technology: Businesses are investing in automation and AI to control rising labor costs. For example, a mid-sized logistics firm in Brisbane recently reduced its warehouse wage bill by 15% after implementing AI-driven scheduling, even as headline wage rates climbed.

What Does This Mean for You?

For business owners, accurately forecasting labor costs is essential to protect margins and remain compliant. For employees, understanding your total compensation—including superannuation, leave, and non-cash benefits—can help you negotiate smarter and plan for the future.

• Review your payroll regularly to ensure compliance with the latest award changes and superannuation rates

• Explore government incentives for upskilling or hiring in priority sectors

• Factor in the full cost of labor when budgeting for new hires or expansion