Employee Benefits and Compensation in Australia: 2026 Update

What Are Employee Benefits?

Employee benefits are forms of compensation provided to employees in addition to their base salary. In Australia, several of these are guaranteed by legislation. Others are offered at the employer’s discretion to remain competitive in the local labour market.

The distinction matters for international employers. Statutory benefits (superannuation, leave, termination protections) are non-negotiable. Failing to provide them exposes the employer to penalties from the Fair Work Ombudsman and, for superannuation shortfalls, the Australian Taxation Office. Voluntary benefits (additional insurance, wellness programs, above-award pay) are the tools companies use to differentiate their offer when hiring in Australia.

Statutory Minimum vs. Market Practice

Compensation Laws in Australia

Employment law in Australia is governed by the Fair Work Act 2009, which replaced the earlier Workplace Relations Act 1996. The Fair Work Commission sets minimum wages, approves enterprise agreements, and adjudicates unfair dismissal claims. The Fair Work Ombudsman enforces compliance.

The National Employment Standards (NES) set 11 minimum entitlements for all employees in the national system, covering maximum hours, leave, notice, redundancy pay, and more. Modern awards set industry-specific minimum pay rates above the NES. Enterprise agreements can provide terms above the award floor, subject to the “better off overall test” (BOOT).

• The national minimum wage from 1 July 2026 is AUD $26.44 per hour, or $1,004.90 per week for a 38-hour week. Most employees are covered by a modern award with higher rates.
• The standard maximum is 38 ordinary hours per week. Overtime is paid at 150% for the first two to three hours (depending on the award) and 200% after that, with 200% typically applying for work on Sundays and public holidays.

Types of Guaranteed Employee Benefits in Australia

The NES and the Fair Work Act 2009 establish the following mandatory benefits.

Superannuation

Under the Superannuation Guarantee, employers must contribute a percentage of each employee’s ordinary time earnings (OTE) to a complying super fund. The current rate is 12%, effective 1 July 2025.

From 1 July 2026, the Payday Super rules require employers to pay superannuation contributions at the same time as wages, replacing the previous quarterly payment cycle.

Employees can choose their own fund under the Choice of Fund legislation. If no choice is made, contributions go to the employer’s default fund (or a “stapled” fund from a previous employer).

Paid Personal/Carer’s Leave (Sick Leave)

Full-time employees are entitled to 10 days of paid personal/carer’s leave per year. Part-time employees receive a pro-rata amount. Unused leave accumulates year to year. The leave can be used for the employee’s own illness or injury, or to care for an immediate family or household member. Employers may request a medical certificate or statutory declaration as evidence.

Parental Leave

Eligible employees who have completed at least 12 months of continuous service are entitled to 12 months of unpaid parental leave, with the right to request an additional 12 months.

The Australian Government also funds Parental Leave Pay (PLP) for eligible working parents. From 1 July 2026, the scheme provides up to 130 days (26 weeks) of pay at the national minimum wage rate of AUD $1,004.70 per week before tax. Twenty of those days are reserved for each parent on a use-it-or-lose-it basis, and the remainder can be shared flexibly. From the 2025-26 financial year, the ATO also pays a 12% superannuation contribution on PLP, paid directly into the employee’s super fund after the end of the financial year.

Annual Leave

Full-time employees are entitled to four weeks (20 days) of paid annual leave per year of service. Leave accrues from the employee’s first day. Some shift workers under certain awards receive five weeks. Unused leave accumulates.

Long Service Leave

Long service leave is an entitlement unique to Australia, established by state and territory legislation rather than the NES. In most jurisdictions, full-time employees are entitled to a period of paid leave (typically 8.67 weeks) after 10 years of continuous service, with pro-rata access available from around 5 to 7 years depending on the state. The exact rules, including accrual rates and qualifying periods, vary between states and territories.

Public Holidays

The NES provides for eight national public holidays, with additional public holidays declared by individual states and territories. Employees are generally entitled to be absent on a public holiday and, if they do work, receive penalty rates per their applicable award.

Health Insurance and Medicare in Australia

Australia’s public healthcare system, Medicare, is funded through the tax system. Most Australian residents pay a Medicare levy of 2% of taxable income.

Private health insurance is not mandatory. However, high-income earners without adequate private hospital cover are liable for an additional Medicare Levy Surcharge (MLS). For the 2026-27 financial year, the MLS thresholds and rates are:

Source: ATO, Medicare Levy Surcharge income thresholds and rates, 2026-27.

Employers who directly pay for an employee’s private health insurance trigger fringe benefits tax (FBT) at a rate of 47%. Because of this, many employers instead offer a health insurance allowance or arrange a group discount plan, which avoids the FBT liability while still supporting employee health coverage.

Multiplier’s Localized Benefits can help administer a health insurance allowance for your Australia-based team, avoiding FBT exposure.

Payroll Tax by State and Territory in Australia

Payroll tax is a state and territory tax levied on employers whose total Australian taxable wages exceed a threshold. Each jurisdiction sets its own rate and threshold. For 2026-27:

Sources: Revenue NSW, State Revenue Office Victoria, the NT Territory Revenue Office, and individual state revenue offices (2026-27 rates). Victoria applies an additional surcharge on national wages above $10 million. Queensland charges 4.95% on national wages above $6.5 million. From 1 July 2026, the ACT replaced its flat rate with bands rising to 8.75% for the largest groups, and the Northern Territory introduced a 6.5% rate for groups with national wages of $100 million or more.

For employers operating across multiple states, the threshold is apportioned based on the proportion of total Australian wages paid in each jurisdiction. This means multi-state employers may owe payroll tax in several states simultaneously.

Termination, Unfair Dismissal, and Redundancy Pay in Australia

Notice Periods

Under the NES (Fair Work Act 2009, s117), the minimum notice period an employer must provide depends on the employee’s length of continuous service:

Employees aged 45 or over with at least two years of continuous service are entitled to one additional week on top of the above. The employer may choose to pay in lieu of notice.

Unfair Dismissal

Employees earning below the high-income threshold (AUD $190,100 from 1 July 2026), or those covered by a modern award or enterprise agreement regardless of income, can lodge an unfair dismissal claim with the Fair Work Commission. The maximum compensation that may be awarded is AUD $95,050, or 26 weeks’ pay, whichever is lower.

Redundancy Pay

Employees made genuinely redundant after at least 12 months of continuous service are entitled to redundancy pay under the NES, scaled by tenure:

Redundancy pay generally does not apply to small businesses (fewer than 15 employees), casual workers, employees with under 12 months’ service, or where an employee unreasonably refuses suitable redeployment within the business.

How to Design an Employee Benefits Program in Australia

Step 1: Determine budget and set goals. Assess what your company can afford and decide which benefits support your hiring and retention objectives while complying with Australian law.

Step 2: Research industry standards. Benchmark against competing employers in your sector and survey employees on which benefits they value most.

Step 3: Design a flexible package. Offer a mix of statutory and voluntary benefits employees can tailor to their needs, reducing spend on underused offerings.

Step 4: Communicate the plan. Present the package clearly to existing and prospective employees. Open feedback channels to build trust.

Step 5: Evaluate and adjust. Review the plan regularly against legislative changes and employee feedback. Australian employment law evolves frequently (see the 2026 Payday Super and parental leave changes above), so ongoing monitoring is essential.

How Multiplier Helps You Manage Employee Benefits in Australia

Hiring in Australia without a local entity typically means setting up a subsidiary, which involves registration, compliance setup, and ongoing administrative overhead. Multiplier’s Employer of Record removes that requirement.

Multiplier owns its own legal entity in Australia. It becomes the legal employer of your team members, handling superannuation contributions, tax filings, leave administration, termination processing, and supplemental benefits enrolment. Your company retains full operational control over the employee’s day-to-day work while Multiplier handles statutory compliance.

Use the Employee Cost Calculator to estimate the total cost of employing someone in Australia, including superannuation, payroll tax, and other statutory obligations.

Hire and manage benefits in Australia with Multiplier

Multiplier’s EOR handles superannuation contributions, tax filings, and statutory benefits compliance in Australia, with no local entity required.

Talk to our team or explore Australia EOR.

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