How much super do I need to pay my employees?
27 February 2020
5
min read
Superannuation is earned by eligible employees and, as an employer, paying your staff's superannuation is a legal obligation. As such, it is an expense that should be built into any business model. The following provides some helpful tips around your super responsibilities as an employer. It's your turn to impress them.
What is the Superannuation Guarantee?
At the heart of the superannuation system sits the Superannuation Guarantee (SG for short). Under the SG, legislation requires employers to:
Generally, you have to pay super for any employee who is 18 years or older and for who you pay $450 or more (before tax) in salary or wages in a month. You also have to pay super for an employee who is under 18 if you pay them $450 or more (before tax) in salary or wages in a month, and if they work for more than 30 hours in a week. This applies whether the employee works full time, part time or as a casual. If you’re unsure whether an employee is eligible for the SG, you can use the ATO eligibility decision tool.1
If you have an employee who wants to make personal super contributions as a payroll deduction, check you have given the ATO their Tax File Number (TFN) as it is not allowed to hold personal after-tax (non-concessional) contributions for more than 30 days without it.
This is the big one and it can seem daunting, but there are plenty of guides available. The Australian Tax Office website is a particularly helpful resource, including the Super Guarantee Contributions Calculator.
You’re required to make SG contributions on (at least) a quarterly basis. If you don’t, you may incur a penalty. If super isn't paid on time, employees are within their rights to raise this issue. Quarterly payments must be made by the following dates (in bold):
Quarter |
Due date |
1 July - 30 September |
28 October |
1 October - 31 December |
28 January |
1 January - 31 March |
28 April |
1 April - 30 June |
28 July |
How to calculate Superannuation Guarantee payments
The SG is currently 9.5% of an employee's ordinary time earnings (OTE). OTE is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift loadings and allowances, but not overtime payments.
To work out what you must pay, multiply your employee's OTE for the quarter by the SG rate (or the percentage you use if you're paying super at a higher rate).2
An employer doesn't have to pay the SG for their employee's earnings above a certain limit, called the maximum contribution base. This base is indexed annually and is generally available before the start of each financial year. While the base limits the amount that you have to pay for SG purposes, funds can accept contributions above it.
I have to pay super to contractors?
A contractor employee must be paid the minimum SG amount on the labour component of their contract. Paying an additional 9.5% wages on top of your contractor's usual pay does not count as a super contribution.
Superannuation payments set to increase in the future
There is much debate over how superannuation will look in the future. There are calls for super not to be compulsory for certain workers, such as younger people saving for a house deposit, and arguments from some that scheduled increases to the SG should be dropped or at least frozen.
The SG is due to increase from 9.5% per annum to 10% on 1 July, 2021, and 12% by 1 July, 2025. Opponents of the increase believe that such a move could lead to slower wage growth for employees, but others, including the Association of Superannuation Funds of Australia, believes the increase will have a significant positive impact on the average Australian’s retirement fund.
Either way, as an employer, it is an obligation to monitor any changes and ensure that the percentage you are using to calculate the contributions is the correct one.
Find out more about your super responsibilities.
Partner with a super fund that's right by you
It's easy to make QSuper your default fund. With over a century of experience, tailored financial wellbeing solutions, and dedicated support for your business, it's easy to see why employers from across Australia choose QSuper as their default super fund.
More reasons to choose QSuper
1 https://www.ato.gov.au/Business/Super-for-employers/Working-out-if-you-have-to-pay-super/, accessed 26 February 2020
2 https://www.ato.gov.au/business/super-for-employers/how-much-to-pay/, accessed 26 February 2020