Reviewed and republished against current official sources: 23 July 2026 Estimated Reading Time: 8 minutes
Agency staffing versus permanent employment in early childhood is rarely a simple contest between an invoice rate and a base wage. Agency cover can provide valuable flexibility for an unexpected or finite gap. Permanent employment may offer better value when the same workforce requirement continues across multiple roster cycles. The decisive question is whether the service is buying useful flexibility or repeatedly paying a premium for a need it already knows will remain.
The practical answer: a staffing gap has become structural when the same capability is repeatedly required, the need is visible in the forward roster, and there is no credible, funded plan to remove the dependency. |
That distinction matters more in 2026. The Australian Government’s worker retention payment supports a 15 per cent above-award wage increase for eligible workers and has been extended to 30 June 2028. Separately, the Children’s Services Award introduced a new classification structure and staged pay changes from March 2026, followed by the 2026 Annual Wage Review increase. These changes affect services differently depending on award coverage, workplace instruments, eligibility, funding and employment arrangements.
A higher wage environment does not prove that one staffing model is always cheaper. It makes poor comparisons more consequential. Leadership teams need to compare the same staffing requirement, over the same period, using their actual costs—and then decide whether the underlying need is genuinely temporary.
The five-signal structural staffing test
Leadership teams use five signals to distinguish legitimate temporary cover from structural dependency. One signal alone may reflect an ordinary operational fluctuation. When three or more appear together across consecutive roster cycles, the service should conduct a formal workforce review. This is a management trigger, not a legal or financial threshold.
Roster and workforce-planning signals
1 The pattern signal. The same room, qualification, leadership function or shift repeatedly requires external cover. The names may change, but the capability gap remains.
2. The forecast signal. The need is already visible in the forward roster, enrolment plan, approved leave calendar or operating model. Agency cover is no longer responding to surprise; it is filling a known requirement.
3. The ownership signal. Temporary educators are effectively occupying a continuing role, yet nobody owns a permanent recruitment plan, role redesign or retention response.
Leadership and continuity signals
4. The leadership-load signal. Directors and operations leaders repeatedly spend time booking, inducting, reallocating and supervising short-term cover. The hidden cost is not the existence of this work; it is its recurrence.
5. The continuity signal. Rotation is beginning to affect room consistency, team workload, family confidence, documentation handover or the service’s ability to sustain its preferred practice.
The most useful question is therefore not, ‘Are we using an agency?’ It is, ‘Are we still purchasing uncertainty, or are we financing an unresolved permanent need?’
Agency staffing versus permanent employment in early childhood: is the demand temporary or structural?
Decision factor | Genuinely temporary demand | Structural staffing demand |
Cause | Unexpected absence, finite leave, short transition or temporary enrolment movement | Continuing vacancy, recurring capability gap or operating model that depends on external cover |
Visibility | Difficult to predict or limited in duration | Visible in forward rosters, recruitment history or service planning |
Role ownership | Existing substantive role and return point are clear | No substantive employee or credible closure plan |
Cost behaviour | Premium buys flexibility for a defined period | Premium repeats without resolving the underlying requirement |
Best response | Use controlled temporary cover and define an exit point | Open a permanent recruitment, retention or role-design response |
Agency staffing remains a rational tool when it protects ratios, relieves immediate pressure or buys time while leadership makes a sound decision. The mistake is not using agency staff. The mistake is allowing an emergency response to become the operating model without formally choosing it.
Compare like with like—not an invoice rate with a base wage
The agency invoice and the permanent employee’s base hourly rate are not comparable figures. A defensible comparison uses the full cost of meeting the same staffing requirement over the same period.
- Temporary agency cost: Hours required × comparison period × agency invoice rate, using a consistent Goods and Services Tax basis.
- Permanent employment cost: Hours required × comparison period × loaded permanent hourly cost, plus the one-off recruitment cost.
- Loaded permanent hourly cost: Base hourly rate plus the service’s applicable employment on-costs, which may include superannuation, leave, payroll tax, workers’ compensation, insurance and other relevant costs.
The calculation should use the service’s current award, agreement or workplace-instrument position. It should not rely on a generic sector percentage where payroll can provide a more accurate figure. The worker retention payment also should not be treated as universal or permanent income: participation, worker coverage, funding and conditions must be checked against current official guidance.
What employment on-cost percentage should you enter?
There is no official Australian standard on-cost percentage. The correct figure depends on what the service is measuring, its employment instrument, jurisdiction, payroll-tax position, workers’ compensation premium and whether another employee must replace the permanent employee during leave.
If payroll cannot provide a loaded rate, use 25 per cent as an initial planning estimate and test 30 per cent as a higher-cost scenario. These are transparent calculator assumptions—not statutory rates or accounting advice. Replace them with the service’s actual figure before approving a workforce decision.
The 25 per cent starting point is intended for a comparison based on productive staffing coverage. It reflects the current 12 per cent superannuation guarantee together with a broad allowance for paid leave. The 30 per cent scenario is useful where leave replacement, payroll tax, workers’ compensation, leave loading or other applicable employment costs may lift the loaded rate. A service comparing payroll cost for paid hours, rather than the cost of keeping the required hours covered, may need a different figure.
Cost component | Published basis | How to treat it in the calculator |
Superannuation | The superannuation guarantee is 12 per cent from 1 July 2025. | Include the service’s actual superannuation cost. |
Annual leave | Non-casual employees generally receive four weeks of paid annual leave each year. | Include the cost only once. If the entered hours represent productive room coverage, allow for any replacement cover required during leave. |
Personal and carer’s leave | Full-time employees receive ten days each year, with part-time entitlement calculated proportionally. | Use an evidence-based utilisation or relief allowance where coverage must be maintained; do not assume every accrued day will be used in the comparison period. |
Workers’ compensation | Premiums vary with jurisdiction, industry, employer size and claims experience. | Use the service’s current premium rate or finance estimate. |
Payroll tax | Rates and thresholds vary by state and territory, and liability depends on the employer group’s taxable wages. | Include it only where the service is liable, using the applicable effective rate. |
Recruitment and onboarding | These are primarily one-off appointment costs rather than recurring payroll on-costs. | Enter direct one-off costs in the separate recruitment-cost field; do not also include them in the percentage. |
Cost calculator: agency staffing versus permanent employment in early childhood
Compare the indicative cost of meeting the same staffing requirement through temporary agency cover or permanent employment. Enter your organisation’s actual figures rather than relying on sector-wide assumptions.
Calculation results
Indicative comparison only. Actual employment and agency costs depend on award classifications, agreements, superannuation, leave, payroll tax, workers’ compensation, penalty rates, overtime, agency terms and individual service circumstances. This calculator does not provide financial, legal, payroll or employment advice.
Temporary agency staffing can be appropriate for genuinely short-term or unexpected cover. Permanent employment may become more cost-effective when the staffing requirement is ongoing. Cost should be considered alongside continuity, workforce stability, service quality and operational risk.
The costs that should inform the decision—but should not be invented
Some consequences of recurring instability do not appear on an agency invoice. Australian research has documented the complexity and time pressure within educators’ work (Harrison et al., 2024), while recent research links professional wellbeing, belonging, connection and safety with turnover intentions (Canobi et al., 2024). International centre-level studies also show that persistent turnover can cluster within particular services rather than appearing as an isolated event (Doromal et al., 2022; Bryant et al., 2023).
These findings support a wider operational review, but they do not justify assigning a made-up dollar value to continuity, family confidence or leadership attention. Measure what the service can evidence:
- director and operations hours spent arranging and inducting cover
- number of agency bookings and different workers used for the same continuing requirement
- recruitment attempts, time-to-fill and reasons offers or appointments failed
- overtime, additional relief and room reallocations connected with the gap
- documented handover, practice or workload issues associated with rotation
If the service cannot evidence a cost, it should describe the risk rather than manufacture a saving.
When temporary agency staffing remains the right decision
Temporary cover is often the more responsible choice when the service is dealing with a genuinely finite event or unresolved uncertainty. Examples include a defined period of leave, an unexpected absence, a short-term enrolment fluctuation, an urgent ratio or qualification requirement, or a transition while leadership confirms the permanent shape of a role.
The control is an explicit exit condition. Leadership should record what will end the arrangement: the employee’s return, the enrolment review, the permanent appointment, the completion of a restructure or a specified decision date. ‘Until we find someone’ is not an exit condition unless the recruitment plan has an owner, budget and timetable.
When permanent employment deserves a formal business case
A permanent response deserves formal consideration when the service has an ongoing funded requirement, the same gap is recurring, temporary cover is occupying a continuing function or leadership is repeatedly coordinating around the absence of role ownership.
Permanent recruitment is not merely a conversion of agency hours into salary. The business case should also test whether the role is realistically recruitable and retainable. Classification, remuneration, roster, non-contact time, leadership expectations, decision authority, employment conditions and the service’s reputation all influence whether recruitment will resolve the gap or simply restart the vacancy cycle.
Real-world signal: Goodstart’s reported reduction in agency use
In June 2026, an Australian Government announcement about the extension of the worker retention payment reported that Goodstart Early Learning’s use of agency staff had decreased by 69 per cent during the first year of the program, while its use of casual staff fell by 5 per cent.
This is a useful contemporary signal, not a universal proof. The announcement did not publish a service-level cost breakdown or establish that wage funding alone caused the change. Goodstart’s scale, workforce systems and operating context also differ from those of smaller providers. The careful conclusion is narrower: improved wage support and retention conditions can materially change an organisation’s staffing mix, and agency reliance is not necessarily fixed
Common decision errors
- Comparing an agency invoice rate with a permanent employee’s base wage and calling the difference a saving.
- Assuming every agency educator creates inconsistency or every permanent appointment creates stability.
- Recruiting permanently into a role whose workload, roster, classification or leadership expectations caused the vacancy.
- Using a national wage announcement without checking the service’s award, agreement, workplace instrument and funding eligibility.
- Treating leadership time, quality or family confidence as precise financial amounts without evidence.
Questions for the next workforce review
- Which agency-covered requirements are already visible beyond the current roster period?
- Has the same requirement appeared across multiple roster cycles, even when the room or worker has changed?
- What event or decision will bring each temporary arrangement to an end?
- At what point does the loaded permanent cost cross the temporary agency cost?
- Before permanent recruitment begins, what must change in the role or employment proposition?
- Who owns the closure plan, and when will leadership review progress?
Leadership takeaway
Comparing agency staffing versus permanent employment in early childhood does not require a service to choose one model exclusively. The discipline is matching each model to the problem it is designed to solve. Where the need is unexpected and finite, flexibility has value. Where it is recurring, predictable and central to service delivery, leadership should test a permanent response using real costs and a credible recruitment and retention plan.
If the structural staffing test identifies an ongoing vacancy or capability gap, review the role design before commencing permanent recruitment. Learn about Early Years Talent’s permanent recruitment approach.
Related resources
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Current salary benchmarks for educators, teachers, Educational Leaders and Centre Directors across Australia.
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Frequently Asked Questions (FAQ)
These questions address the practical issues leadership teams should test when comparing temporary agency staffing with permanent employment.
Is temporary agency staffing always more expensive than permanent employment?
No. For short, uncertain or genuinely finite cover, the agency premium may cost less than a permanent recruitment fee and the employment costs incurred over the same period. The crossover depends on the service’s actual figures.
How can a service tell whether an agency staffing need has become structural?
Look for repeated demand, forward visibility, absent role ownership, recurring leadership coordination and continuity effects. When several signals appear together across consecutive roster cycles, conduct a formal workforce review.
Does the worker retention payment make permanent employment cheaper?
Not automatically. The payment supports higher wages for eligible workers through participating services and includes conditions and workplace-instrument requirements. Its effect on a service’s comparison depends on eligibility, funding, worker coverage and the costs entered.
Should leadership include quality and continuity in the calculation?
They should inform the decision, but they should not be assigned invented dollar amounts. Track observable indicators such as leadership hours, booking frequency, worker rotation, handover issues and repeated recruitment activity.
What should happen once the gap is identified as structural?
Choose an owned response: permanent recruitment, retention intervention, role redesign, roster redesign or a deliberate decision to retain agency capacity. The important change is moving from unexamined repetition to an explicit workforce decision.
What on-cost percentage should I use if payroll cannot provide one?
Use 25 per cent as an initial planning estimate for a productive-coverage comparison, then test 30 per cent as a higher-cost scenario. Do not present either figure as the service’s actual cost. The decision should be updated when payroll or finance supplies a loaded rate.
Why is the 12 per cent superannuation guarantee not enough?
Because superannuation is only one employment cost. Paid leave, workers’ compensation, payroll tax where applicable, leave loading and the cost of maintaining coverage can also affect the permanent-employment side of the comparison.
Should paid leave and leave replacement both be included?
Only when they represent separate costs. If the comparison is based on productive hours that must remain covered, include the permanent employee’s paid leave and any genuine replacement cost. If the payroll figure already captures the relevant paid hours or relief allowance, do not add them again.
Do payroll tax and workers’ compensation apply at the same rate to every service?
No. Payroll-tax rates and thresholds differ across states and territories, while workers’ compensation premiums vary by jurisdiction, industry, employer size and claims experience. Use the service’s actual position rather than a national average.
Should recruitment and onboarding costs be included in the on-cost percentage?
No. Put direct, one-off appointment costs in the calculator’s separate recruitment-cost field so they are counted once. Recurring employment administration should be included only where the service can identify and support it.
Authoritative sources
The information presented in this article is informed by current research, government guidance and recognised sector literature. The references below are provided for readers who wish to explore the topic in greater depth.
Australian Taxation Office (2026), Supporting your small business: superannuation guarantee rate
Australian Government Department of Education (2026), Worker retention payment
Fair Work Ombudsman (2026), Annual leave fact sheet
Fair Work Ombudsman (2026), Sick and carer’s leave and compassionate leave fact sheet
Fair Work Ombudsman (2026), Changes to the Children’s Services Award
Fair Work Commission (2026), Children’s Services Award 2010 [MA000120]
Jobs and Skills Australia (2024), The future of the early childhood education profession
Australian Government Ministers’ Media Centre (2026), Albanese Government locks in pay rise for early educators while limiting fees for families
Payroll Tax Australia (2026), Payroll tax rates and thresholds
Safe Work Australia (2026), Workers’ compensation premiums
Peer-reviewed references
Bryant, D., Yazejian, N., Jang, W., Kuhn, L., Hirschstein, M., Soliday Hong, S.L., Stein, A. et al. (2023) ‘Retention and turnover of teaching staff in a high-quality early childhood network’, Early Childhood Research Quarterly, 65, pp. 159–169. https://doi.org/10.1016/j.ecresq.2023.06.002
Canobi, K.H., Eadie, P., Murray, L., Levickis, P., Page, J. and McFarland, L. (2024) ‘Profiles of professional wellbeing and turnover intentions among Australian early childhood educators’, Early Education and Development, 35(5), pp. 1063–1079. https://doi.org/10.1080/10409289.2024.2336434
Doromal, J.B., Bassok, D., Bellows, L. and Markowitz, A.J. (2022) ‘Hard-to-staff centers: Exploring center-level variation in the persistence of child care teacher turnover’, Early Childhood Research Quarterly, 61, pp. 170–178. https://doi.org/10.1016/j.ecresq.2022.07.007
Harper, E., McGrath-Champ, S. and Wilson, R. (2025) ‘Perspectives on teachers’ work in Australian early childhood education and care settings: Evidence and ecology’, Early Childhood Education Journal, 53, pp. 2359–2372. https://doi.org/10.1007/s10643-024-01745-2
Harrison, L.J., Wong, S., Brown, J.E., Gibson, M., Cumming, T., Bittman, M. and Press, F. (2024) ‘Taking a detailed look at early childhood educators’ worktime’, Australasian Journal of Early Childhood, 49(2), pp. 95–113. https://doi.org/10.1177/18369391231219820
Irvine, S., Lunn, J., Sumsion, J., Jansen, E., Sullivan, V. and Thorpe, K. (2024) ‘Professionalization and professionalism: Quality improvement in early childhood education and care’, Early Childhood Education Journal, 52, pp. 1911–1922. https://doi.org/10.1007/s10643-023-01531-6
Schaack, D.D., Donovan, C.V., Adejumo, T. and Ortega, M. (2022) ‘To stay or to leave: Factors shaping early childhood teachers’ turnover and retention decisions’, Journal of Research in Childhood Education, 36(2), pp. 327–345. https://doi.org/10.1080/02568543.2021.1955779
Thorpe, K., Panthi, N., Houen, S., Horwood, M. and Staton, S. (2024) ‘Support to stay and thrive: Mapping challenges faced by Australia’s early years educators to the National Workforce Strategy 2022–2031’, The Australian Educational Researcher, 51(1), pp. 321–345. https://doi.org/10.1007/s13384-022-00607-3
Last reviewed: July 2026