As part of the last Federal Budget announcements, employers will need to change the way they pay their employees super from 1 July 2026. While this may seem years away, the logistical change will take planning.
Known as ‘pay day super’, employers will be required to pay their employees superannuation contributions at the same time as their salary and wages — instead of quarterly. While for employees, the change will see them benefit from the compounding returns on their investment and help them to keep track of their overall super savings.
Employers can make the change to ‘pay day super’ anytime before 1 July 2026. Making the move sooner may see your business as an employer of choice.
In addition to compounding interest on investment returns, the change will assist close to 3 million Australians who lose an average of $1,700 of super annually. While most employers do the right thing and pay super contributions, there are cases of employers not paying on time, the correct amount or, in some cases, not at all.
Payday super will particularly help casual workers and women.
Industry Super Australia has commissioned modelling that demonstrates that a 30-year-old earning the age-based median wage could be $8,000 better off at retirement if paid super fortnightly instead of quarterly. This is because contributions would compound for longer if paid more frequently.
Payday super will also mean casual workers are at less risk of not receiving super contributions altogether. Unfortunately, this can happen when a casual worker moves on from the position before their quarterly super payment is due or when a business folds or goes bankrupt. It’s important to note that casual workers are entitled to super, even if they are only with the business for a short period.
Female workers are particularly set to benefit. An Industry Super Australia analysis of the 2019-20 tax file showed that one in five women are underpaid super. Almost 40% of women in their 20s who earned less than $25,000 missed out on an average of $570 a year. The impact of unpaid super for the individual can be substantial.
As a business owner, while the administration of the above will be more time consuming, it may provide better cash flow alternatives. This can be achieved by smaller fortnightly payments rather than one large lump sum every quarter.