Managing super payments
How to successfully manage super for your diverse workforce
A diverse workforce can be a great asset to your business, bringing with it unique perspectives, experiences, and talents. However, managing super for such a workforce can present some challenges due to the different types of workers you may employ.
At CareSuper, part of the service we offer is to help you to manage your compliance obligations. In this article, we explore how you can effectively manage super for your diverse workforce.
Before we dive in, it’s important to note that the following information is current as of September 2023 and is subject to change. You can visit the Australian Taxation Office (ATO) for a full breakdown of when you are (and aren’t) required to pay super.
Navigating super contributions for different worker types
If you’ve been running a business for a while now, you’ll know the Superannuation Guarantee (SG) requires you to make mandatory contributions on behalf of your employees, currently set at 11 per cent of their before-tax earnings. In most cases, these contributions must be paid into the super fund your employee chooses. If your employee doesn’t choose a fund and doesn’t have a stapled fund, you can make the contributions to your default super fund.
So, how do the super rules differ for different types of workers? Let's break it down:
- Full-time, part-time, and casual employees: Regardless of how many hours they work or what they earn, all employees over 18 are entitled to SG contributions. What about employees under 18? Super contributions are only compulsory if they work over 30 hours per week. For example, 16-year-old Mai usually works at your bakery every Saturday for 5 hours. During the first week of the school holidays, she covers for a colleague who is overseas and ends up working 32 hours. You’d likely need to pay Mai SG contributions for the 32-hour week, but not for the 5 hours she worked the week after.
- Contractors: If you engage a contractor primarily for their personal labour and skills, and they fulfil the contract themselves, you’re generally obligated to pay them super. This is the case even if they have an Australian Business Number (ABN). You can calculate the contractor’s SG contributions based on their ordinary time earnings (OTE), which is the labour part of the contract. You don’t need to include payments that are for equipment and materials, the goods and services tax (GST), or overtime rates you paid them. For example, you contract Adam the painter to refresh your offices. You pay him a daily rate of $1,500 for his services, $200 of which is to cover the cost of the paint. While you’re pondering whether you really made the right colour choice, you’ll also likely have to pay Adam super based on his OTE, in this case, $1,300. However, if you engaged a painting company for the job, and they sent you an employee or sub-contractor, you probably wouldn’t need to pay super for that person.
- Temporary residents: Temporary residents have most of the same super requirements as full-time, part-time and casual employees. A key difference is that if they’re on a temporary working visa, they’re not eligible to choose their own super fund, so you need to make their SG contributions to your default fund. For example, you hire Lucia, a backpacker on a gap year, as a receptionist (and informal Spanish teacher!). Lucia’s entitled to super regardless of how much they work or earn while working for you.
- Employees working overseas: If one of your employees is temporarily working overseas, and is an Australian resident for tax purposes, you must pay them super. The country your employee is working in may also require you to pay them super (or the equivalent) as well. To prevent this double payment, Australia has arrangements (called bilateral social security agreements) with some countries. Under the agreements, you can apply for a certificate of coverage that excuses you from paying super in the other country. Applications for the certificate need to be submitted to the ATO before your employee leaves the country and will generally be assessed within one month. While the ATO will notify the country, you should keep a record of the certificate and give the original to your employee. For example, Nate from marketing requests to work from the Netherlands for 18 months. While he’s off ‘enjoying’ herring with pickles, you’ll need to pay him super in Australia. And because the Netherlands has the AOW pension (the equivalent of super), you’ll need a certificate of coverage to avoid making double contributions.
Workers you don’t have to pay super for
There are also some workers you don’t have to pay super for. For example, if you hire a high-income earner who also has other employers, they can ask you not to pay them super to avoid exceeding their concessional contributions cap. Other types of workers exempt from mandatory contributions include:
- Yourself, if you’re self-employed
- Non-Australian residents working outside the country
- Some foreign executives with specific visas or entry permits
- Reservists in the army, navy or air force (for work carried out in that role).
Unsure whether you need to pay super to an employee?
The ATO has a handy Super guarantee eligibility decision tool that you can use to help determine whether you’re required to pay super to an employee.
We’re here to support you
As you can see, there are quite a few rules when it comes to paying super to different types of employees. As a CareSuper employer, you’re partnered with one of Australia’s top-performing Industry SuperFunds, with more than 35 years’ experience looking after businesses like yours.
Our dedicated Client Partnership team offers personalised support for you and your employees, tailored to your business, every step of the way.
If you’d like help with your super obligations, reach out to your dedicated relationship manager.
If you’re not yet a CareSuper employer and would like to learn more about partnering with us, complete our form and we’ll be in touch.