Superannuation and HR: Your legal responsibilities as an employer

Prior to 1st July 2022, employers were not obliged to pay superannuation for employees earning less than $450 per month. This has changed with the scrapping of the super guarantee (SG) threshold and is a major change for many employers who will be making superannuation payments to some of their employees for the first time.

“Employers are now required to make superannuation guarantee contributions for all their employees, including casual and part-time, irrespective of how much they earn per month,” explains Aaron Goonrey, partner Workplace Relations and Safety at Lander & Rogers.

The abolition of this threshold will help three percent of the workforce which is primarily made up of lower income earners in healthcare and teaching roles, many of whom are female.

“It is important to note that an employer also needs to pay superannuation guarantee payments to an employee under 18 if they work more than 30 hours per week, regardless of how much they are paid. It will mean that many employees who were ineligible to receive superannuation will from 1 July be entitled to employer superannuation contributions,” says Goonrey.

By its nature superannuation compliance is inherently complex and needs robust systems and processes in place with ongoing checks and reviews to ensure compliance.  It relies on payroll systems, interpretation of many different instruments such as modern awards, employment contracts and policies; and you also need to factor in individual employee circumstances, changes in superannuation rules over time and ongoing training of individuals involved in the compliance process.   

In order for each employee’s superannuation entitlement to be calculated correctly, company payroll and finance systems must be updated to accommodate the superannuation guarantee changes. Goonrey recommends the ATO website which has published information that is user friendly as well as a Super Guarantee Eligibility Tool.

Rising rates

The superannuation guarantee rate has also risen to 10.5 per cent and will increase incrementally year on year. On 1 July 2023 it will rise to 11 per cent, then from 1 July 2024 to 11.5 per cent and then from 1 July 2025 to 12 per cent.

Some employers may look to ‘package’ employer superannuation contributions in employment contracts to obviate the anticipated superannuation increases in the years to come. 

“This is done by the employment contract providing that superannuation is inclusive of the employee’s total remuneration package. On the condition that the employee’s rate of pay does not go below the minimum wage rate provided by an industrial instrument (modern award of enterprise agreement) this is permitted,” says Goonrey.

As widespread underpayment continues to be an issue in Australia, Goonrey urges employers to publicise the new benefit to staff.

“Making people aware of their entitlements and ensuring transparency around pay is not only the right thing to do, it is a useful means of attracting and retaining top talent,” he says.

Penalties of non-compliance

The consequences for ignoring or failing to comply with these new obligations can also be pretty severe.

Employers are no longer protected from defaulting on superannuation payments. Back in 2020, in response to the Federal Government’s superannuation guarantee amnesty, 24,000 employers came forward and disclosed $588 million of unpaid or underpaid superannuation that they owed in respect of their employees.

“If an employer does not pay superannuation for their employees, they may be liable to pay a superannuation charge which is made up of the shortfall amount, interest on the amount of the shortfall, as well as an administration fee.” 

The ATO can also issue a penalty notice directing the employer to pay the unpaid super. 

“If an employer ignores the penalty notice, they are liable for significant fines. Company directors also become personally liable and non-compliance with a penalty notice can result in imprisonment,” says Goonrey.

KPMG have reported that the ATO and the Fair Work Ombudsman are collaborating on more proactive investigations using Single Touch Payroll analytics and data-sharing.

The increased involvement of the Fair Work Ombudsman means that employers should also ensure that they are meeting their contractual employment obligations. The global pandemic, employee shortages and shift in business priorities will not be sufficient excuses for organisations who take their eyes off the ball when it comes to superannuation guarantee compliance.