A string of corporate failures across South Australia in recent months has left affected employees, in some cases, chasing years’ worth of unpaid entitlements.
While unpaid wages, annual leave and long service leave are covered by the Federal Government’s Fair Entitlements Guarantee safety net scheme, many workers end up short-changed when it comes to unpaid superannuation.
In one of the more recent cases, employees of an Adelaide chain of salons run by The Edit group - Fresh Hair & Body - were left chasing $200,000 in unpaid super, dating back as far as 2014.
That prompted industry group Industry Super Australia (ISA) to renew calls for stricter legislation around compulsory super payments.
The ISA, which represents 15 industry super funds, says the “scourge” of unpaid super is getting worse every year, with more than 170,000 of the state’s employees missing out on $283 million in unpaid super each year.
“When we’re seeing large established chain stores such as Fresh Hair & Body fail to pay their workers super, we know there’s something wrong with the system,” ISA chief executive Bernie Dean says.
“While most employers do the right thing, unless we see action from members of parliament,
these dodgy employers are going to continue taking advantage of lax laws, a weak regulator and insufficient penalties to rip off these hardworking Australians.
“Super is a low interest issue, especially for younger workers, and if you go back to the young workers at the chain of beauty salons, they’re some of the least likely Australians to think about their future life in retirement.
“But the majority of people we talk to believe the system should be set up in a way to cater for low levels of engagement, especially for young workers, with more protections in the system.”
Under current laws, employers are only required to pay super into a worker’s account on a quarterly basis, so while a super amount may appear on an employee’s pay slip, it does not always mean it has been paid into their fund.
A 2017 Senate inquiry found that besides short-changing workers, unpaid super gave some businesses an unfair advantage while driving up public pension costs.
Its 32 recommendations included giving more power and resources to the Fair Work Ombudsman, and considering the potential extension of the Fair Entitlements Guarantee scheme to cover unpaid super.
Mr Dean says little action has been taken since the inquiry, and is urging the Federal Government to press ahead with one of its key recommendations - to mandate the payment of super in line with an employer’s regular pay cycle.
“The easiest way to end this exploitation and ensure workers are paid their super, is practice what they (politicians) preach in their own workplace and simply legislate that all employers must pay money into a worker’s super account at the same time as they pay salary into their bank account,” he says.
Business SA chief executive Martin Haese supports firmer rules regarding the timing of payments.
“Business SA would need to consider any changes that are raised, but would in principle support changes which ensured employers met their legal responsibilities in regards to superannuation and paying their employees fairly, and into designated accounts at the same time as their regular pay,” he says.
In February the ATO was given new enforcement and collection powers following the passing of a range of new measures through Federal parliament.
Where employers defy directions to pay their super liabilities, the ATO is now able to apply for court ordered penalties, including up to 12 months’ imprisonment, while rules around director penalties have also been strengthened.
From next month, single touch payroll rules will be extended to small businesses, ensuring a near real-time transfer of wages and super information from employers’ internal payroll systems to the ATO.
“They’re welcome developments but they’re going to do very little to solve the problem,” Mr Dean says.
“The ATO doesn’t consider this as their main job - it’s not their man job - they’re reticent to throw the book at anyone and I can’t see it resulting in more director fines or directors going to jail.”
The ATO says it contacted more than 24,000 employers about the potential underpayment of super last financial year, raising approximately $850 million in liabilities, including penalties, from around 16,000 employers who failed to meet their obligations.
“The ATO takes non-compliance of employers in relation to employer obligations including PAYGW and superannuation guarantee seriously,” an ATO spokeswoman says.
“The ATO monitors employer’s compliance with superannuation guarantee through the use of sophisticated data models using data provided by employers, individuals and superannuation funds.
“We also undertake a range of strategies including education, reviews and audits.”
Barry Nilsson senior associate Amy Davis, who has offered employees affected by the collapse of Fresh Hair & Body initial pro bono advice, encourages employees to keep on top of their super payments and entitlements.
“It is clear that employees place a lot of blind trust in their employers and sadly, in some circumstances, that trust is being abused,” she says.
“Often by the time an employee or employees find out that the employer has failed to meet their superannuation obligations, there is a substantial amount of money required to rectify the problem.
“If they (employees) believe there is a problem then they should speak to their employer about it and find out what is happening.
“If they are still concerned then they could get in touch with the Australian Financial Complaints Authority for some advice and assistance with lodging a dispute if necessary.”
Originally published as How to plug SA’s $283 million super gap
By Giuseppe Tauroello
14 June 2019