Proposed seven-day superannuation payment deadline creates 75% reduction in current timeframe, with severe penalties for non-compliance including 60% administrative uplift.
Australia’s small and medium businesses are facing a significant financial hurdle as the government’s proposed Payday Super requirements approach implementation.
New research from Employment Hero reveals that businesses will need an average of $124,000 in additional working capital to meet the new compliance demands, creating what the company calls a “seismic shift in payroll and compliance requirements.”
Employment Hero, which processes payroll for over 300,000 businesses and handles 2 million verified payslips monthly, has released comprehensive modelling showing the impact of the upcoming changes. The platform, which sees AU $120 billion flow through it annually, provides a unique window into how these requirements will affect real businesses.
The research reveals concerning preparedness levels among SMBs. According to Employment Hero’s survey, 65% of small and medium businesses expect Payday Super to have a moderate to huge impact on their daily operations. Perhaps more alarming, 15% of SMBs were completely unaware of the upcoming changes.
“Almost 20% of Employment Hero customers stated they do not feel very or at all prepared to meet the seven-day deadline, with an additional 50% stating they only feel ‘somewhat prepared,'” the research shows.
The seven-day deadline crunch
Under the proposed reforms, employers will have just seven calendar days from wage payment to pay the Superannuation Guarantee (SG) – a 75% reduction in the current timeframe. This compressed deadline comes with severe penalties for non-compliance, including the shortfall amount, daily interest, and an administrative penalty of 60% of the shortfall.
The concern extends beyond just meeting deadlines. As Employment Hero CEO Ben Thompson explains: “Payday Super could be the biggest positive change to super since its introduction, but it must be done in a way that doesn’t break small businesses or cost Australians their jobs. Without changes to SuperStream, payments infrastructure and proposed penalties, we risk a system where small businesses are punished for delays outside their control, and that’s simply unfair.”
A significant worry for businesses is the current state of payment infrastructure and where liability falls when systems fail. Shaun Sullivan, Director at Elite Bookkeeping Enterprises, highlights a critical issue: “The industry needs certainty and clarity on who is responsible and accountable when delays and/or errors happen. We’re very concerned that currently, only the business is responsible for the payment landing within the new seven day deadline but there are so many edge cases – such as public holidays or other events outside of our control – which could see this deadline miss.”
The research indicates that businesses are particularly concerned about clearing houses or super funds causing delays that could put them at risk of penalties, with many not fully understanding that liability would fall entirely on them.
The financial burden extends beyond penalties. Employment Hero’s modelling shows that 32.5% of businesses will need to build larger cash reserves to prepare for the change. The $124,000 average figure represents the additional working capital needed to manage the increased frequency of superannuation payments under the new system.
This cash flow pressure could force operational changes, with 20% of businesses indicating they might need to change their pay cycle frequency. However, this creates a secondary problem – 84% of employees would be somewhat or very concerned if their pay cycle had to change.
Employment Hero is working to address these challenges through multiple channels. The company is developing new solutions within its Employment Operating System, including automated superannuation payments, seamless digital employee onboarding, and enhanced ATO compliance features.
Thompson emphasizes the broader mission: “Most business owners didn’t go into business because they wanted to manage employment; they want to use their time to do what they love and what they’re passionate about. Employment Hero exists to make employment easier and more valuable, which is why we are passionately working to help make Payday Super a positive change for all.”
Recommended changes
To address the identified risks, Employment Hero is advocating for several key changes:
- Legislated modernization of super system infrastructure
- Staggered implementation to give SMBs more preparation time
- Extension of the payment window to 10 business days until real-time infrastructure is in place
- Fairer penalties for SMBs with more transitional support
With less than 12 months until implementation, Thompson warns that preparation time is critical: “12 months may seem like a long time, but the impact on SMBs and required infrastructure upgrade imposed should not be underestimated. We’re encouraging all businesses to turn their attention to Payday Super and making sure you have the right systems and processes in place to manage the admin and cashflow impacts.”
The research underscores a fundamental tension between the positive intent of Payday Super – improving retirement outcomes for Australians – and the practical realities of implementation for small businesses that form the backbone of the Australian economy.
As the implementation deadline approaches, the focus remains on ensuring that this significant reform achieves its objectives without creating unintended consequences that could harm the very businesses it aims to help regulate.
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