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Can Your Business Afford to Hire? How to Test the Numbers Before Adding Staff
A practical financial test to run before you approve the role.
There’s a moment a lot of founders hit. The bookkeeping is under control, the tax is lodged on time, and the business is still growing, but you’ve stopped being able to answer basic questions about your own numbers.
What’s our actual cash position next quarter? Which part of the business is making money? What happens if we hire two more people?
That’s usually the point business owners start asking about a virtual CFO. This guide explains what the service actually involves, how it’s different from a bookkeeper or accountant, and how to tell if now is the right time.
KEY TAKEAWAYS
- Test the complete Year 1 employment cost, not the salary alone.
- Run expected and downside cash-flow scenarios before approving the role.
- Set a break-even target and 30, 60 and 90-day measures before the employee starts.
- Check the relevant award, superannuation, workers compensation and payroll-tax requirements for the role and location.
The role makes sense. Do the numbers?
The team is stretched, work is being delayed and the right person could give the business room to grow. The difficult question is not whether the role would help. It is whether the business can carry the full cost through a slower month or a delayed customer payment.
A salary is only the starting point. A sound hiring decision considers the full employment cost, when cash will leave the business and what the role needs to contribute. This article provides a practical financial test before you approve the hire.
A salary is not the full cost of hiring
Build the cost component by component rather than adding a generic percentage to the salary. The amount will depend on the role, award or agreement, employment type, state, total payroll and equipment required.
| Cost area | What to check |
|---|---|
| Salary or wages | Pay rate, ordinary hours, applicable award or agreement, allowances, penalties and overtime. |
| Superannuation | The 12% super guarantee and the earnings base that applies. From 1 July 2026, Payday Super changes the timing of employer payments. |
| Leave and capacity | Paid leave, possible leave loading, public holidays, coverage and the effect on productive hours. |
| Insurance and payroll tax | Workers compensation premiums and payroll tax where the relevant state or territory threshold and grouping rules apply. |
| Setup and support | Recruitment, equipment, software, workspace, training, onboarding and management time. |
Paid leave is not automatically an extra percentage added to every annual salary, but it affects capacity and cash planning. Likewise, payroll tax and workers compensation cannot be estimated reliably from one national rate. Check the rules and rates that apply to the business and role.
A simple employee-cost example
The following example is illustrative only. It shows why the advertised salary and the Year 1 cash commitment can be different.
| Component | Amount | Planning note |
|---|---|---|
| Annual salary | $80,000 | Starting point only |
| Superannuation at 12% | $9,600 | Confirm the applicable earnings base |
| Recruitment and onboarding | $5,000 | One-off estimate |
| Equipment and software | $3,000 | Year 1 estimate |
| Workers compensation | $1,500 | Illustrative only; use the actual premium |
| Visible Year 1 total | $99,100 | Excludes any applicable payroll tax and other role-specific costs |
This is not a benchmark or a universal loading. The actual result will change with employment conditions, insurance, payroll-tax position and the systems the employee needs.
Put the new cost into a cash-flow forecast
The current bank balance is a snapshot. A cash-flow forecast shows whether the business can meet the commitment as wages, superannuation, tax obligations, supplier payments and customer receipts move over time.
Model at least three scenarios:
Downside
Revenue is lower, customer payments arrive later or onboarding takes longer.
Stronger result
Revenue or collections improve without assuming every favourable outcome occurs at once.
Look at the lowest projected cash balance, not only the closing balance. A business can finish the forecast period in a healthy position and still face pressure in an earlier month.
Test the role's break-even point
The break-even test asks how much additional gross profit the role must create or protect to cover its cost. Gross profit matters because additional revenue can carry direct labour, materials, commissions or production costs.
KEY TAKEAWAYS
Questions to answer before approving the hire
- What is the full Year 1 cost and the ongoing monthly cost?
- Does the downside forecast remain cash-positive at its lowest point?
- What happens if revenue or a major customer payment arrives late?
- When should the role begin contributing, and how will that contribution be measured?
- Who will manage and train the employee, and has that time been allowed for?
- Would a lawful part-time, casual or fixed-term arrangement better match the workload?
If you are considering a contractor, classify the relationship correctly. An ABN, invoice or short engagement does not automatically make someone an independent contractor.
Make the decision with a clear financial view
A good hire can increase capacity, improve delivery and give a founder more room to lead. The decision is stronger when the business understands the complete cost, the timing of cash payments and the contribution required from the role.
Frequently Asked Questions
How much does an employee cost beyond salary?
There is no single percentage that suits every role. Consider superannuation, applicable award conditions, leave and capacity, workers compensation, payroll tax where relevant, recruitment, equipment, software, onboarding and management time.
How far ahead should the cash-flow forecast run before hiring?
Use a period long enough to capture recruitment, onboarding and the expected ramp-up of the role. Test expected and downside scenarios and review the lowest projected cash balance, not only the closing balance.
How do you calculate a new employee's break-even point?
Estimate the additional gross profit the role must create or protect to cover its complete cost. For a support role, include capacity created, contractor costs replaced, revenue protected and senior time released.
Should we hire an employee or engage a contractor?
Choose the arrangement based on the real working relationship and business need. An ABN, invoice or short engagement does not automatically make a worker an independent contractor. Check Fair Work and ATO guidance and obtain advice where the classification is unclear.
What should we monitor after the employee starts?
Review the measures agreed before hiring at 30, 60 and 90 days. These may cover capacity, delivery time, gross profit, revenue protected, customer service, workload transferred or another role-specific result.
Need help testing the numbers?
The Pen can model the hiring decision against your forecast, cash position and business plan before you commit.
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Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by The Pen Accounting as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and/or other advice as may be appropriate having regard to their particular circumstances.