Payday Super – challenges and opportunities

As Payday Super progresses through parliament, we ask Mat Gilroy, General Manager, Commercial Platforms at Australian Retirement Trust (ART) for his views on Payday Super and how ART and our employers are preparing for the changes coming. 

What are the main concerns or questions you’re hearing from employers about Payday Super?

Firstly, many of our employers, especially the ones with more complex payroll processes, are looking at the types of errors and warnings they’re getting currently when making super payments. 

“With smaller time frames for payment, reducing data errors will be crucial,” Mat said, “and employers are starting by understanding the quality of their current contributions.”

Payroll teams are also looking at how the introduction of 'Qualifying Earnings' (QE) for an employer's Superannuation Guarantee (SG) obligations will change how they make contributions.

“Many questions we’re getting from employers are about the change in their super calculation formulas required to move from Ordinary Time Earnings to the new Qualifying Earnings definition,” Mat said. 

“A lot of the focus of Payday Super has been around when super is paid, but employers may also need to change how their super payments are calculated.” 

Another concern is around the 7-calendar days for payments, and in particular employers are seeking reassurance that payments have successfully made it to super funds. 

“Payroll teams want clarity around payment confirmation, regardless of which method they use to pay, so they know they won’t be penalised,” Mat added.

What do employers expect of ART?

“Employers expect us to do what we always have, and that is to care deeply about our members getting their contributions on time,” Mat said. 

“They need us to have good underlying tech, be good at communicating and educating them on the Payday Super changes, be advocates for the change and be there to support them as they try and comply to the new timeframes to pay super,” he added. 

One example, Mat suggests is the likelihood that the messaging for Super Stream and contributions will change. 

“Employers are expecting us to explain, implement and educate them about how timings and reporting will work.”

What are the biggest gaps where employers will need to focus their efforts?

To understand the biggest challenge for employers ahead of Payday Super, Mat points out that around half our employers currently make SG contributions quarterly, while ART as a fund then has 20 days to allocate these funds into a member’s account. 

“The imperative to have high quality data isn’t there right now because employers can send imperfect data and we have the time to fix it and put it in the right member’s account,” Mat said.

The big difference under proposed Payday Super rules, is that super funds are unlikely to have the time to return unallocated funds to employers when there is an error and still meet the 7 calendar-day timeframe to have money in members’ accounts.  

“It’s highly likely that super funds won’t accept that data,” Mat warned. “Having high quality data and being able to fix data issues quickly is a gap for many employers at the moment,” Mat explained. 

“After all, data issues need to be fixed by the next pay run, which could be in as little as a week.”

Secondly, Mat suggests employers will need to look at the tech they’re currently using to pay super and consider if they will be able to use these under the proposed Payday Super regulations.

“Employers use all sorts at the moment,” Mat said. “Many employers use the BEX system and a portal – or even several different portals to pay contributions.”

“When it comes to the admin of super, employers will need to also have to look at the tech they’re using now, and see if that’s going to increase the risk of missing timeframes.”

How is ART helping employers and the industry prepare for Payday Super? 

“Like everyone else, we’re waiting on the legislation to pass through Parliament, but we’re making sure we’re as prepared as we can be,” Mat said. “With the allocation time frame moving from 20 days to 3 days, we’re uplifting our processes, and we’re investing in increased automation and checks to ensure the quality of data we have is high.”

“We’re keen to validate data and help employers understand any changes they need to make, so that data that works before Payday Super is going to work after Payday Super.” 

“We’re also working with gateway providers, payroll and software providers to get a better understanding of how the Payday Super process will work and what people will need. “

At ART, we own and operate our own clearing house, gateway and super payment technology (Beam Connect¹), as well as connecting ATO services such as the Fund Validation Service and Stapling service.

“This puts us in a unique position to engage with the regulators, with Treasury, with Ministers in the Parliament.” Mat said. “In April, we made an individual submission to Treasury to make sure the draft Bill is in the best interests of our members and employers, including recommending a grace period for employers and super funds to meet the new time frames before any Payday Super penalties begin.”

ART sees Payday Super as a positive step for the industry. “Payday Super will actually improve our members’ retirement balances. So we believe in it,” Mat explained, “but we know we’ve got to be really good on engaging and helping our employers to make it work for everyone.”

To find out more about Payday Super speak with your Relationship Manager.