How To Pay An Employee Super: A Guide

Superannuation, commonly referred to as super, is a key component of retirement savings in Australia. It's a system where employers are legally required to contribute a percentage of their employees' earnings into a super fund. This contribution ensures financial security for employees in their retirement years. 

In this guide, we'll delve into the details of paying super to employees, covering topics such as calculating super on different types of pay, eligibility criteria for employees, compliance with legal requirements, and the process of making super contributions. By understanding these essentials, employers can fulfill their obligations while empowering employees to secure their financial future.

Understanding Superannuation for Employers

Employers play a key role in ensuring their employees’ financial security post-retirement by contributing a percentage of their earnings into a super fund. This contribution, known as the superannuation guarantee (SG), is a legal obligation. As of 2024, the minimum SG rate employers must pay is 11% of their  employees’ ordinary time earnings (OTE). However, this is subject to change, making it essential for employers to stay updated with the latest rates. For the most recent SG rate, visit the Australian Taxation Office.

Understanding how to pay employee super is vital for employers to meet their legal obligations and support their employees' retirement goals. At foundU, we provide resources and guidance on managing superannuation contributions, ensuring compliance and security for employers and employees across all Australian industries. 

Who is Eligible for Superannuation?

Criteria for Superannuation Eligibility

Employers in Australia are required to make superannuation contributions for eligible employees, who are those aged 18 or over (regardless of earnings) and individuals under 18 who work more than 30 hours per week. All employees are eligible for super guarantee, regardless of their type of employment (full-time, part-time, or casual), position, or residency status. However, additional eligibility rules apply to employees under 18, domestic or private workers, contractors, international workers, self-employed people, and high income earners who opt out of super.

Updated information on eligibility requirements are available through the Australian Taxation Office.

Clarify Employment Types

All eligible employees in Australia, regardless of employment type or earnings, are entitled to super contributions. This includes full-time, part-time, and casual employees, as well as contractors who meet specific criteria. Self-employed individuals like sole traders or those in partnerships are not required to pay super guarantee, but can make voluntary super contributions. 

Special Cases

There are some exceptions to the general eligibility requirements, such as employees who are under 18 years of age and work more than 30 hours per week. These individuals are eligible for super guarantee.

Conversely, employers do not have to pay super for members of the army, naval, or air force reserve for work carried out in that role. Some high income earners, international workers, and self-employed people may also opt out of super.

How Much Super Do I Need to Pay?

Understanding the Super Guarantee Rate

The current superannuation guarantee rate in Australia is 11% of an employee's ordinary earnings. This rate is set to gradually increase over time, reaching 12% by July 2025. The increases are scheduled incrementally, with the rate rising by 0.5% each financial year starting from July 2021.

Calculating Super on Different Types of Pay

When determining how much super an employer pays, it's essential to understand calculations for different types of pay. For regular wages, apply the current super guarantee rate to the employee's ordinary earnings. Similarly, allowances such as travel or meal allowances are usually part of ordinary earnings and subject to the super guarantee rate. However, bonuses may require a separate calculation; typically, a specific rate is determined based on relevant agreements, contracts, or company policies. 

How to Pay Employee Superannuation

Choosing the Right Super Fund for Your Employees

When selecting a default super fund for employees, employers should consider factors like fund performance, fees, and insurance options. Default funds must meet specific criteria set by the government, providing a simple option for employees who don't make a choice. Alternatively, employees can nominate their preferred fund, offering them more control over their retirement savings. 

The Process of Making Super Contributions

Making super contributions involves several steps:

1. First, calculate the amount owed based on employees' earnings and the current super guarantee rate. 
2. Next, ensure payroll systems are configured to accurately calculate super contributions to employees’ wages. 
3. Then, compile the total contribution amount for all eligible employees.
4. Submit these contributions as a SuperStream report to a third party intermediary (known as a “clearing house”), who distribute the super into all the various funds for all employees. For small businesses, a free government-run clearing house is available.
5. Maintain records of contributions and ensure compliance with legislative requirements.

foundU's payroll software streamlines super payments by automating calculations, seamlessly integrating with payroll processes, and providing intuitive tools for accurate record-keeping, ensuring employers can efficiently manage their super contributions with ease. Additionally, foundU offers an integration with a free clearing house, allowing users to pay their superannuation through the platform, further simplifying the process.

Ensuring Compliance and Supporting Your Employees

Ensuring compliance with superannuation payments is important not only for meeting legal obligations, but also for supporting employees' long-term financial security. By fulfilling super obligations, employers contribute to their employees' retirement savings, fostering loyalty and trust within the workforce. Thus, it’s vital for employers to stay informed about their superannuation obligations and adopt efficient payroll and superannuation management tools, like those offered by foundU. 

Streamline your super payments with foundU!

Discover streamlined solutions for your payroll and superannuation management needs. From simplifying compliance to supporting employee welfare, foundU offers intuitive tools to enhance workforce management. Take the first step towards optimising your processes today.