Around one-in-four workers across Australia currently miss out on about $5 billion in super a year –averaging $1,800 for each worker not paid super in 2021-22. For those affected, this can mean more than $30,000 less in super savings by retirement, forcing more reliance on the age pension.
A key cause of this challenge are laws made in the 1990s that only require employers to pay super contributions quarterly, out of alignment with the payment of wages. Most workers assume their super is paid with wages because that’s what appears on their payslip.
While many employers pay their employees’ super entitlements on payday, some hold off paying for up to 4 months, building up significant liabilities that some then find difficult to pay on time or at all.
How do I know if I’m a victim?
The best way to detect underpayment is to compare what you are entitled to receive against your super account contributions.
Go to the ATO employee SG entitlement calculator page to see what you are entitled to receive.
However, research shows up to 40% of workers don’t check to see if they’ve been paid their super. The majority of unpaid super is also underpayment not non-payment, which is even harder to detect.
The proposed payday super solution will be effective
In the 2023 Federal Budget, the Australian Government announced that from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages.
Payday super will make it easier to identify that super hasn’t been paid. Paying super more frequently also generates higher super balances through additional investment returns and compound interest on super paid fortnightly instead of quarterly. That will benefit a quarter of workers who are currently paid super quarterly. A worker on median wages could have an extra $7,700 at retirement .
What needs to happen now
The Government’s 2023 commitment now needs to be backed by legislation, and quickly, to lock in payday super. And it needs to be passed this term of Parliament.
With a proposed start date of 1 July 2026, workers and businesses need certainty that the commitment is backed by the right model, policy detail and timings.
SMC stands ready to work with the Government and key stakeholders to ensure the legislation is brought forward quickly and delivers on its intention.
In addition to payday super legislation, the Government should also establish a stronger Australian Tax Office (ATO) compliance regime. That includes setting the originally promised targets and committing to support workers to reclaim their legal super entitlements in the case of insolvencies.
Effective legislation backed by a robust compliance regime is the only way to ensure millions more Australians get their full super entitlements.
Payday super benefits employers too
Payday super puts all employers on a level playing field, eliminating the unfair advantage some get by holding back super contributions or not paying them at all.
Most businesses pay their workers super entitlements on time and in full, but there are still millions of cases every year where super goes unpaid due to poor business practices. Most of these are unintentional – a result of poor administration including payroll mistakes and poor cashflow management.
ATO data also shows more than half of employees are already being paid super monthly, so more regular payments is becoming the norm.
For businesses, payday super smooths out payroll management. Many are already using electronic payroll systems that enable payday super, removing the burden of time-consuming quarterly reconciliations.