The recent Budget announcement reiterated that payday super will be implemented starting 1 July 2026. This upcoming change requires businesses to pay superannuation contributions concurrently with wages, marking a significant shift from the current quarterly payment system. For those in the labour hire and recruitment industries, this adjustment introduces new challenges in managing cash flow and administrative workloads.
We explore the potential issues posed by payday super and offer insights into how businesses can navigate these changes.
Paying superannuation on payday versus quarterly
The shift from quarterly superannuation payments to payday superannuation, where businesses will be required to make super contributions every payday, will bring about a significant change in cash flow management and administrative processes for many businesses. This change can have various implications for both the businesses and the contractors they employ.
Impact on businesses
Businesses that pay their contractors fortnightly will move from making four superannuation payments per year to making 26 payments. This means that the funds that would traditionally be held for up to three months will now need to be available every pay cycle.
Businesses will need to have more precise and consistent cash flow management to ensure they have the necessary funds available every payday. This could require more sophisticated forecasting and cash flow management to avoid shortfalls.
The frequency of superannuation payments will increase significantly, leading to more administrative work. Businesses will need to update their payroll systems to handle more frequent super contributions, which could also mean more frequent reconciliations and reporting. Keeping up with the increased frequency of payments means businesses will need to ensure compliance with superannuation laws more regularly.
Benefits for contractors
With payday super, contractors will see their superannuation contributions deposited more frequently, which may help to grow their super balance faster through the compounding effect of more regular deposits. It also helps to reduce the risk of unpaid super as a result of bankruptcies.
The transition to payday superannuation is part of a broader effort to improve the superannuation system's transparency and efficiency, ultimately benefiting employees and contractors. However, for businesses, particularly those that have a high frequency of payroll cycles, this change necessitates a significant adjustment in cash flow management and administrative processes.
Strategic adjustments for businesses
As businesses deal with the complexities of managing payroll and maintaining smooth cash flow, strategic adjustments become essential for sustained growth and efficiency.
Outsourcing to workforce experts
Outsourcing administrative tasks, such as payroll management, can help by streamlining operations and reducing the burden on in-house staff. Utilising a service like APayroll, which uses cloud-based technology to manage back-office and payroll functions, allows businesses to focus on their core activities without the distraction of payroll administration. APayroll ensures accurate and timely payroll processing, supported by an experienced, Australia-based team that understands the unique needs of recruitment and labour hire industries. By integrating with your existing systems, APayroll takes care of payroll, including superannuation, invoicing, and compliance reporting.
By outsourcing, you effectively minimise the risk of errors and non-compliance and free up your team to focus on other business tasks — like growth and strategic initiatives!
Improve cash flow
Finding the cash to fund your payroll (and payday super) can be difficult when you’re outlaying money more often than you’re receiving it. AFinance helps you access cash to fund your payroll, without having to wait for clients to pay your invoices.
With long payment terms delaying the inflow of money and frequent payroll increasing the outflow, many labour hire and recruitment agencies find that invoice finance removes the cash flow pressure. It works by providing upfront funds against unpaid client invoices (up to 90% of total invoice value). These funds can be used to cover payroll when it's due, with the balance repaid when the client pays the invoice.
Our APayroll payroll management solution is designed to work with AFinance, our invoice finance product. Our team will manage your payroll, and the client invoices will be sent to our finance team to fund them prior to your contractors’ payday for a complete payroll funding solution.
We’re here to help
Regardless of any upcoming changes to the timing of superannuation payments, the advantages of partnering with workforce experts and optimising cash flow remain significant for businesses in the labour hire and recruitment industries.
If you’d like to learn more about our solutions, please get in touch with us today.
