Locum vs Permanent Cost Comparator

What a locum actually costs

Start with the pay itself: days, hours per day and the hourly rate the locum invoices. On top of that sit the two on-costs a practice usually assumes it avoids.

Superannuation applies because a locum working the shifts personally is working under a contract principally for their labour, which is employment for superannuation purposes regardless of the ABN. Payroll tax applies because the relevant contract provisions deem payments for services to a business to be wages, unless one of the harmonised exemptions is met.

That second one is the point most practices miss, and it is the same provision that catches contractor GPs. A locum engaged directly is not outside the payroll tax system; they are inside it by a different route.

Direct engagement or agency changes where the costs sit

Engaged directly, the practice pays the locum and carries the super and payroll tax itself. Through an agency, the practice pays the agency and the agency carries them, recovering the cost inside its fee.

So the same locum can cost the same total and appear very differently depending on how the arrangement is structured. The calculator models both: turn direct engagement off and the on-costs move into the agency fee, where they already are.

The practical consequence is that a low agency fee is not automatically the cheaper route, and a direct engagement is not automatically cheaper either. What matters is whether the on-costs are inside the quoted figure or outside it.

The 47% no-ABN trap

If a locum does not quote an ABN, the practice must withhold 47% of the payment and remit it to the ATO. That is the top marginal rate of 45% plus the 2% Medicare levy, applied as a flat rate to the whole payment with no regard to the locum's expenses or circumstances.

This one is genuinely not a cost to the practice: the money is the locum's tax, remitted on their behalf, and they recover it by lodging a return. But it is cash out the door before the locum is paid, which is why a locum without an ABN often asks for a higher rate, and why getting the ABN on file before the first payment is worth doing.

The permanent side of the ledger

A permanent employee carries costs that do not appear on the payslip: superannuation guarantee, payroll tax, workers compensation, recruitment, and training. Together these commonly add a quarter to a third to the headline salary.

Recruitment is the easiest to forget because it is paid once and then ignored. Amortised over the expected tenure it can add several thousand dollars a year, and a short tenure makes it much more expensive per year than a long one.

When a locum is the right answer

Locums are the right tool for a genuine gap: parental leave, an unexpected departure, seasonal demand, or a service line whose volume is not yet proven. Cover that lasts weeks is a locum problem; cover that lasts years is a hiring problem.

For ongoing need, the fully-loaded cost of a locum usually exceeds the fully-loaded cost of a permanent hire once both are counted the same way. The calculator shows where that crossover falls for your own numbers rather than for an average practice.

What this calculator does not model

Payroll tax is applied at a flat rate to both sides, with no threshold. A practice under the threshold pays no payroll tax at all, so on both sides the figure here is the rate applied to wages rather than a liability the practice necessarily has.

It also assumes the relevant contract provisions reach the arrangement. In Western Australia they do not apply to medical practices, and the five harmonised exemptions can take a contract back out. If either applies to you, the payroll tax line belongs on neither side, and the locum is genuinely cheaper by that amount.