Putting the Super into Pay Day

Why is the project underway?

The targeted benefits of Pay Day Super are severalfold: 1. Employee retirement benefits should be higher by the earlier investment of contributions. 2. The SG Gap (unpaid SG) caused by employers going broke and deliberate non-payment should be lessened. There are downsides of course, employers’ cash flow will need to be brought forward and this could be an issue particularly for those employers that do not experience regular cash flow such as seasonal earners and those with sporadic invoicing. There will also be the additional administrative cost in both labour and software.

The Pay Day Super challenges:

The task is huge especially when you consider the subchallenges that are inherent in it, including:

Facilitating Real-time Payments:

A few years back the notion of paying SG and having it arrive in the employee’s superannuation account in real time would not have been possible, technology could not have made it happen. In more recent times, it is conceivable with banking changes such as New Payments Platform or a crypto platform. In addition to the speedier payment, the selected platform also needs to be able to transmit sufficient data with the payment to properly identify the recipient and the character of the superannuation contribution.

Historic handling of SG contributions:

The typical passage of SG from employer to employee’s super account goes like this: the employer sends funds to their bank, who pass it to a Clearing House who pass it to the employee’s Superannuation fund who then allocate it to a members account. This process typically takes somewhere between 4 or 5 days and up to 2 weeks. This sort of lag does not accord with the notion of Pay Day Super.

Legislation:

New legislation will need to be drafted to govern each of the stakeholders; employers, superannuation funds, Clearing Houses, the ATO etc. This will be a significant body of work and will need government and possibly bi-partisan support to pass it into law.

Superannuation Guarantee Charge (SGC):

The current rules around SGC are draconian and full of inequitable outcomes to both employers and employees. Well intentioned employers can end up with significant SGC liabilities resulting from circumstances outside their control. Employees reliant on the SGC to recover shortfall SG payments from errant employers are often left unpaid. The current penalty regime and system of assurance that SG will be paid must be improved for Pay Day Super to boast success.