One in four Victorian are underpaid super and it is costing them $1 billion in a year, and unless politicians fix the mess by mandating that super is paid on payday, workers will continue to miss out.
Industry Super Australia (ISA) analysis of the latest tax data shows 642,000 Victorian workers were not paid an average of $1,617 in 2019-20 of money they are owed. (See table 1)
Over seven years Victorians have missed out on an eyewatering $7.7 billion.
Industry Super Australia Chief Executive Bernie Dean:
“Missing out on more than $1 billion in super that they’ve earned a year, is a crushing financial blow for Victoria’s workers. Adding super to employment standards is welcome but it won’t stop the bleeding, only payday super will curb underpayments.”
New ISA research reveals blue-collar workers are more likely to be unpaid their superannuation – making up about 40% of unpaid super losses, despite being only 28% of the national workforce.
Over seven years Victorian tradies, labourers, and machine operators missed out on almost $3 billion in super they were owed.
A key factor driving Victoria’s unpaid super scourge, impacting its blue-collar workforce, is an outdated law from the 1990s that allows employers to pay super quarterly leading to misalignment between the super published on a payslip and when the amount can be deposited into a worker’s account.
While most bosses do the right thing, some exploit the outdated laws and lack of engagement to hide underpayments, dudding workers and getting an unfair advantage against competitors in the process.
Modernising the law so that super is paid on payday will make it easier for workers to keep track of payments, drastically reducing the prevalence of unpaid super.
Paying super more frequently means liabilities won’t build up to the point where businesses can’t pay. Regulators will also be able to use real-time payments monitoring to uncover unpaid super.
It also boosts the retirement savings of all the 4.2 million Australian workers who are paid super quarterly.
Mr Dean adds:
“Aligning payment of super and wages is the right thing to do by workers, boosts government revenue, lifts investment returns and puts all employers on a level playing field. At this federal budget our politicians have an opportunity to end the huge super rip off undermining the future economic security of blue-collar workers, young women, and others on lower incomes.”
ISA modelling shows that a 30-year-old earning the age-based median wage could be $8,000 better off at retirement if paid super fortnightly instead of quarterly, because more frequent contributions compound for longer.
Payday super is:
- The most effective solution
- Better for business: by eliminating red tape and allowing smoother payroll management
- Workers would be better off now and into the future
- Affordable and a long-term revenue positive to the Budget.
The ATO only recovers a dismal 15% of unpaid super, and while the government including super in the National Employment Standards is welcome only payday super stems unpaid super from occurring.
Super should also be included in the Fair Entitlements Guarantee – a government safety net that pays workers’ entitlements when businesses go bust.