what happens if an employer doesn't pay super contributions?

Employers in Australia don’t only pay their employees their salaries. They also set them up for the future by contributing to their superannuation funds.

It’s legally required that employers contribute to the super of employees.

If an employer neglects to contribute to the super of eligible workers, the company could face legal consequences in the form of a fine.

Not only that, but failing to pay staff what is legally part of their compensation could cause an organisation significant reputational harm.

Employers should want to see their staff succeed, both inside and outside of their jobs. It’s a company’s responsibility to give its workers the tools necessary to do so, which is another reason why contributing to employee super should be a top priority for a business.

So while at first glance, it may seem as though not contributing to employee super is a strategic way to save money, it would actually do more harm than good to a company.

Financial consequences

Neglecting to pay employee super is not likely to save a company money in the long run.

If staff members have reason to believe that their employers are not paying their super, they can report the company to the Australian Taxation Office (ATO) using a simple online tool.

There are many resources available for employees to determine how much of a super contribution they should be getting from their employers. For example, they can use the ‘Estimate my super’ tool from the ATO. Therefore, it’s not difficult for an employee to discover that their employer is not contributing enough to their super.

The ATO might even investigate this matter without inquiry from an employee.

Once the ATO discovers that an organisation is not paying its employees’ super, it will be required to pay a super guarantee charge (SGC). This charge is composed of the full amount of the super contributions that were neglected, plus 10% interest and $20 per employee, per quarter.

Clearly, by not paying employee super, an employer runs the high risk of having to pay even more.

Plus, once the ATO finds out that a company is not paying its employees’ super, they can disclose this information to the employees who have been underpaid.

This could have detrimental effects on a business.

Reputational consequences

If an organisation’s workers find out that their employer has been neglecting to pay their super, it’s likely that there will be backlash from the staff.

If a company deliberately neglects to pay super, employees may question the business’ ethics. If an employer accidentally pays late or into the wrong fund, the staff might accuse the organisation of carelessness. Super directly affects people’s futures, so there is very little room for error or neglect.

Even if a business only fails to pay the super of one or a few employees within a large company, news travels fast. It’s possible that the majority of staff will find out about their employer’s actions and demand answers. Employees generally do not want to work for a company with a history of underpaying their staff. Therefore, a company might get resignations as a result of this decision or mistake.

Not only can the news of unpaid super impact current staff, but it can affect a company’s ability to recruit new employees as well. Former or current workers could inform the press of an employer’s neglect to pay super, and the story that emerges from this information could discourage people from applying to open positions within the company.

Additionally, other companies often do not want to partner with organisations who have received bad press or have a history of treating their employees unfairly. For this reason, employers who have failed to pay their staff’s super could have a hard time finding partners or investors when they need them.

Lastly, news of a company neglecting to pay super could affect the decisions of consumers. Many Australians have been doing their best to shop ethically within the past few years.

In fact, “Australian consumers [are] demanding brands be much more accountable in the areas of their response to climate change, environmentally responsible practices [and] ethical treatment of workers, and I think this will continue to grow,” said Louise Grimmer, a retail and marketing expert during an interview with The New Daily.

Neglecting to pay employee super is the kind of unfair worker treatment that is unattractive to consumers.

A good reputation is integral to business success, and failing to pay workers part of their compensation is a way an organisation can hurt their image.

Ethical consequences

Most people are employed so they can afford to live a comfortable life and save up for their futures.

Employers are legally obligated to contribute to their staff super for a reason. The super guarantee is important for workers to be able to save enough money for retirement.

If a company fails to pay its staff’s super contributions, it directly impacts their futures. Employees have goals and desires outside of work, and it’s important that employers keep the financial, emotional and mental well-being of their staff at the forefront of their priorities.

Employers should pay their staff’s super not only because it’s the law, but also because it’s the right thing to do.

At Active Super, we understand that employers have a lot on their plates. Paying super should be easy to understand and should not hurt a business financially.

Learn more about employer super contributions