Paying super to employees: Things to know

What is superannuation, and why do employers need to pay super to their employees

Superannuation is an essential part of the retirement savings system in Australia, allowing employees to receive payments from their employer that are then put into a fund to form part of the employee’s retirement savings.

Employers in Australia must pay out superannuation for their employees, and the super guarantee rate is currently set at 10.5% of an employee’s ordinary time earnings. This is expected to increase by 0.5% each financial year until 2025. Employers need to pay super as it helps ensure that employees have financial security during retirement and are more financially sustained when they move away from full-time employment.

With superannuation contributions from employers, many employees would be able to build up sufficient funds for when they do retire. However, employers must comply with laws around paying their employees’ superannuation.

How are employer super contribution rates calculated?

Employer super contributions are calculated based on the employee’s ordinary time earnings (OTE). To calculate the amount a business must contribute to its employee’s superannuation funds, the total OTE for each employee must be multiplied by the required contribution rate.

The contribution rate will vary based on how much an employee earns and when they commenced employment. However, employers must make these contributions at least four times yearly or more frequently if required.

It is important to note that failure to pay super according to wage contributions can incur fines from the Australian Taxation Office. Hence, it is in the best interest of employers to be well-informed about their obligations for superannuation fund compliance.

When are employers required to make super contributions?

Employers in Australia must make super contributions on behalf of employees at least four times a year. These contributions are due by the 28th of each quarter, ensuring employees build up their retirement savings over time.

Employers must ensure these payments are accurate, as incorrect or late payments may be subject to penalties from the Australian Taxation Office. These obligations apply to businesses with salaries over $450 a month, contractors and casuals who work more than 30 hours per week and other people for whom employers provide services into the super fund.

Appropriate financial advice should always be taken when establishing rights and obligations related to employer contributions to ensure all parties comply with Australian tax laws.

What happens if an employer fails to make the necessary super contributions

In Australia, employers are legally obligated to make necessary super contributions on behalf of their employees. Failing to do so delays the employee’s retirement plan and can result in serious repercussions.

The Australian Taxation Office may take action against an employer that neglects to pay the necessary amount, including issuing fines and recovery notices — resulting in extra costs for employers making the correct payments.

To ensure compliance, employers should understand their obligations, keep up to date regarding superannuation payments, and make all necessary payments by the due date.

How can you check that your employees are receiving the correct amount of superannuation?

To ensure your employees receive the correct amount of superannuation, it’s vital to understand the laws and obligations set out by the Australian Taxation Office.

You’ll need to ensure that your employees are eligible to receive Superannuation Guarantee contributions from their employers and be aware of the relevant rate and due dates for those payments.

It’s also a good idea to double-check payroll tax calculations with an accountant or advisor to guarantee compliance with tax regulations and ensure that all Super Guarantee entitlements have been correctly paid.

What should you do if you have not made the required super contributions?

If you discover that you have not been making the required super contributions, taking immediate action is vital.

First, calculate the total amount of unpaid superannuation plus interest and other applicable fees. It will help you determine your financial liabilities.

After this has been worked out, contact your chosen Super fund and arrange to pay the outstanding amounts. Remember to update all future payroll processes to ensure compliance with legislative requirements.

It is important that employers comply with their obligations under the law, as failure to do so can lead to substantial fines and penalties for non-compliance.