Businesses will need an extra $124,000 in working capital on average to meet the new Payday Super rules, according to modelling prepared by employment solutions provider Employment Hero.
The research aims to shed light on the financial challenges facing Australia’s small and medium enterprises (SMEs) as a result of the government’s new Payday Super rules that are set to take effect in less than 12 months.
Corroborating this, its survey of business customers found that 65 per cent of SMEs said Payday Super will have a moderate to huge impact on the day-to-day running of their businesses, and 32.5 per cent said they would have to build larger cash reserves to prepare for the change. Fifteen per cent of SMEs were not aware of Payday Super at all.
Employment Hero stated that while it supports the intent of Payday Super to improve and protect retirement outcomes for Australians, it is also pushing for legislation to account for how businesses actually operate today and not overload SMEs with unfair risk or cost that could work against the policy objective.
“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,” said Employment Hero CEO Ben Thompson.
“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.”
One of the proposed Payday Super rules which is a source of contention is the seven-calendar-day deadline from the payment of wages to pay the Superannuation Guarantee (SG), with failure to meet such deadline would result in the employer being liable for penalties. Almost 20 per cent shared that they do not feel very or at all prepared to meet the seven-day deadline, with an additional 50 per cent said they only feel ‘somewhat prepared’.
Respondents also shared their concerns on clearing houses or super funds causing delays and putting businesses at risk of penalties. Some open-ended commentary showed many businesses are not aware that liability would fall to them.
Shaun Sullivan, director at Elite Bookkeeping Enterprises, commented: “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 missed. We need concessions for delays and more information on how any corrections or adjustments can be made in what is currently an unreasonable time frame.”
Employment Hero has sought for the legislation of required modernisation of the super system infrastructure to address this, along with a staggered implementation to give SMEs more time to prepare, to extend the payment window to 10 business days until faster, real-time payments and messaging infrastructure is in place and to make penalties fairer for SMEs and providing more transitional support.
This is in addition to the close coordination it is conducting with the government, as well as clearing houses, the ATO and super funds to develop a dedicated new suite of Payday Super solutions, as well as advocating for changes that will remove the disproportionate risk for SMEs and reduce significant unintended consequences.
“We’re doing everything we can to support SMEs through this change, including advocating for changes that will reduce the risk of insolvency and building solutions that are going to make it easier for employers to be compliant, regardless of where the legislation or infrastructure change lands,” said Thompson.
In the meantime, Employment Hero is encouraging SMEs to make the necessary preparations before the new Payday Super rules take effect.
“Twelve months may seem like a long time, but the impact on SMEs and the 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,” concluded Thompson.
