Super30 January 2019

The high cost of unpaid super

Wayne Davy
Wayne Davy

By opening a recent ALP conference with an election pitch to add superannuation to the National Employment Standards (NES), Bill Shorten showed how critical an issue unpaid super in Australia has become.

A report by Industry Super Australia (ISA) has shown up to one third of eligible Australian workers are underpaid their super entitlements at some point each year, with a total cost of as much as $6 billion dollars each year.

Unpaid super is also a growing problem in Tasmania, with ISA’s recent analysis of Australian Taxation Office (ATO) data showing 57,400 Tasmanians weren’t paid $102 million in super entitlements in 2015-16 – 5,250 more workers affected than in 2013-14.

Industry-based super funds such as Tasplan are here to help address this problem, offering simple tools and advice to businesses in order to see them meet their super payment requirements.

In the south of the state, 30,280 people, or 32.2% of the eligible workforce, were underpaid an average of $1,880 in 2015-16.

In the north and northwest, 27,120 people, or 31.6% of the eligible workforce, were underpaid an average of $1,661 in 2015-16.

Three main risk factors exist for Tasmanian workers in regard to missing out on super; being aged under 35; having a wage under $30,000, and; having a blue-collar occupation.

Having one or more of these characteristics is likely to increase the chances of a worker being underpaid to 38.4% compared to the general risk of 33.3%.

Worryingly, if a worker is young, earning less than $30,000 and in a blue-collar job, the chances of missing out on super skyrockets to 54%.

Any measure we can take to look after this cohort, who often come from the most vulnerable groups in our society, should be an obvious priority for our nation and our state.

In addition to the long-term financial detriment to workers, super non-compliance has further negative effects, including a competitive disadvantage to compliant businesses as well as putting further stress on government resources through additional reliance on the age pension.

So how do we make sure everyone receives the super they deserve?

Paying super can be an onerous task for employers, especially for smaller businesses with thinly stretched resources when it comes to making multiple transactions into the different individual funds of each employee.

As the state’s largest and only locally-based super provider, with 138,000 members which make up about 50% of the Tasmanian workforce, Tasplan is committed to making super payments as simple as possible for employers.

We have the tools and expertise to help employers, such as our ‘clearing house’ system, where businesses can pay the super of all their employees in one transaction, regardless of which super fund they belong to.

The system is designed to comply with all legal requirements and provides more security and fewer errors by alerting employers to potential issues before a payment is completed.

Recovering unpaid super can be an even more onerous task for employees. As the laws stand, unpaid super is treated as a debt to the ATO, making the claims process difficult.

Adding super to the NES will see unpaid super placed in the same category as unpaid wages, meaning short-changed workers, unions and the Fair Work Ombudsman will be able to take action through the Fair Work Commission or the Federal Court.

In addition to Labor’s election pitch, ISA has proposed a four-point action plan in order to increase employer super compliance and deliver Australian workers their rightful entitlements.

ISA’s number one priority is that super payment is made mandatory at the time an employee is paid their normal wages.

This is standard practice for many employers, however businesses are currently allowed to make super payments quarterly, making compliance more difficult to track by employees as well as the ATO.

By regulating and streamlining payment times, employers will have no excuses for failing to pay super – and if they do miss a payment, a flag will be raised.

Second, the ISA is calling for the ATO to take a more proactive stance in monitoring, reporting and enforcing super compliance.

Despite the wealth of data they possess, the bulk of unpaid super cases actioned by the ATO are the result of employee complaints or employers self-reporting non-compliance.

The third item on the ISA’s agenda is to toughen the penalties for non-compliance, which are currently applied on a discretionary basis, significantly reducing their power of deterrence.

Finally, the ISA is calling for the safety net for unpaid entitlements to be extended. Employees of companies with insufficient assets to pay their wages, leave and redundancy entitlements are protected by a Government safety net, the Fair Entitlements Guarantee (FEG).

As it stands, the FEG doesn’t cover any form of super contribution, leaving underpaid workers high and dry.

While the measures proposed by Labor and ISA will go a long way to helping Tasmanians receive their super entitlements, it must be remembered the onus ultimately lies with employers to ensure compliance.

This will in turn ensure the state’s workforce is given the opportunity to live, work and retire without having to face the hardship of not being paid what they are owed.

Wayne Davy is CEO at Tasplan Super. We're a Tasmanian based profit-for-members super fund which has grown to be the state’s largest and only locally based super provider, with some $8 billion under management.

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