Payday super to reduce underpayments

One of the superannuation industry’s peak bodies, Industry Super Australia (ISA), has made renewed calls to align superannuation payments with wages to end underpayments and the unpaid super “scourge”.

New modelling and analysis from the ISA has determined that increasing the frequency of super payments and aligning them with wages is the most effective method to reverse Australia’s $33 billion underpaid or unpaid super problem that has mounted in the last seven years.

The analysis showed that updating the law to reflect societal changes would both decrease unpaid super rates and increase the retirement savings of 4.2 million workers who are paid super quarterly. The modelling found that a 30-year-old earning the age-based median wage may have $8,000 more at retirement if paid super fortnightly instead of quarterly, as the super contributions would compound for longer if paid more often.

It also showed that one million women in the 2019 to 2020 financial year did not receive $1.3 billion in super, with $10.8 billion in total lost over seven years, with those that are a younger and earning less than average more likely to be affected. Some women also retire with 10 per cent less super due to it not being paid alongside wages.

ISA said changing and mandating the frequency of super payments instead of including it in wage theft laws or setting unpaid super recovery targets for the main regulator, the Australian Taxation Office (ATO), would be more effective.

“Forcing the ATO to do a better job of recovering unpaid super is welcome, but it’s unlikely to prevent workers being underpaid in the first place– it’s a bit like having an ambulance at the bottom of a cliff rather than fencing it off,” Industry Super Australia chief executive, Bernie Dean, said.

“Only by aligning payment of super and wages will the government protect millions of Australians missing out on what they’re owed and falling off the unpaid super cliff.

“At this federal budget our politicians have an opportunity to end the huge super rip-off undermining the future economic security of many young women and others on lower incomes.

“With more resources and performance targets the ATO has no excuse but to do better than recover a woeful one in five dollars in underpaid super, and should start actually enforcing the law by penalising employers that deliberately dud their employees.”

ISA also recommended for super to be added to the National Employment Standards to help third parties recover unpaid super and to the Fair Entitlements Guarantee so workers can recover their super losses when companies go insolvent.