Suzie Slingsby | Head of Sales & Relationships
24th April 2024
I attended the Australian payroll summit in Brisbane in early March 2024 and, not surprisingly, payday super — announced by the government in May 2023 — was an especially hot topic. The 1 July 2026 start date is meant to provide employers, superannuation funds, payroll providers and other parts of the superannuation system with ample time to prepare for the change. The audible groans at the summit when discussions veered towards general readiness of the ecosystem, however, made it clear there's plenty of work to be done to be ready for 2026.
The payday super mandate means that employee superannuation contributions will have to be paid at the same time as their salary and wages. That might sound simple. But during a virtual fireside chat with Ozedi's Ann White and ReadyTech's Paul Orford, we found out there's more to it than what it says on the tin.
The payday super reform, the official release states, could see a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly around $6,000 or 1.5 per cent better off at retirement. It's no small change, and another example of the economic uplift that money moving fast and more frequently can deliver.
With the advent of the real-time rails of the New Payments Platform [NPP], money is moving through the Australian economy faster than it ever has. And with the 2030 target date set for the retirement of Australia's legacy BECS payments infrastructure, the volume of payments moving in real-time will grow enormously. In a post-BECSit Australia, all digital account-to-account payments will move in real-time, all the time. It's an exciting — if not a little daunting for some — new paradigm with plenty of upside for those willing to embrace it now.
One of the suite of upsides of real-time payments is improved cashflow. With funds flowing and settling with immediacy and accuracy straight into business bank accounts, the cash flow benefits seem quite clear. How that relates to payroll and super contributions is something we dived into in quite a bit of detail during our chat with Ann and Paul. I think the cash flow considerations in this context are curious and almost contradictory. Although, as I've learned through the years, two apparently contradictory things can be true at the same time.
But the first thing I wanted to learn from Ann and Paul was how much our desire for instant gratification is influencing employee expectations of payroll.
Paul described what it's like for his family from a pretty practical point of view.
"In our household, many direct debits come out the day after payday and, until the money clears, there can be a level of stress. If pay is running late you don't know when it's going to clear, and sometimes it doesn't clear until late in the evening. So, it does impact employees on payday when those things happen."
Ann responded from the employer's standpoint.
"Like most employers, we get queries from staff asking about their pay, wondering why it’s not in their bank account," said Ann.
"Understandably, they need that money. They've got bills to pay and direct debits timed for collection after their salary goes in. The money has left our account, of course, and is being distributed via BECS to other banks, who also have their own processes and quirks apart from the BECS system itself. The current system is erratic and unpredictable. The money eventually gets there, but most people these days are expecting a much higher performance than the system is currently providing."
'Higher performance' provided a nice segue to discuss the NPP.
"As we start moving into the NPP, the messages between banks are real-time. So, as those messages push around, the money between the banks is also moving at the same time. It means things can happen as fast as the electronic infrastructure behind it. So, it's going from hours of messages being pushed around to just a few seconds between monies being sent and monies arriving," noted Paul.
Additional benefits will come from the shift to the NPP, particularly — as Paul pointed out — around error handling.
"With the BECS system, you can wait weeks before finding out a superannuation payment has failed before you can start doing anything about it. So, being able to get these transmissions in real-time means that the people in the payroll space can start acting upon failures much sooner," he noted.
Ann agreed.
"That's one of the things with the NPP. You've got far more control of the details to give back to the employer, so they can correct that employee's pay. The NPP will be a better service than BECS in this particular environment."
It was at this point that we ventured into cash flow territory. I found Ann and Paul's insights fascinating.
Describing the impact of real-time payroll on larger players, Paul said, "There are some businesses that are processing their pay and putting the ABA file into the bank three days ahead of time. I know some fairly large businesses with multimillion dollar payrolls that are doing it. They can now probably go off and process two days later on the NPP. So those businesses will see cash flow benefits."
Interestingly, it seems that smaller businesses might find the cash flow impact of payday super a bit of a drawback.
As Ann put it, "We've been talking to bookkeepers, and it will affect their cash flow. They currently have that cash for up to three months if they're paying super quarterly. Payday super means they will have to pay with every pay run and unfortunately, there is no right of reply – it's mandated. So, will it affect cash flow? Yes."
How are these business bookkeepers preparing for payday super paradigm?
"They're moving their small clients from quarterly to monthly super contributions now," said Ann
"They're taking the couple of years we've got before it comes in to move from quarterly to monthly. From there the step to payday will much less impactful."
BECSit and payday super are coming. 2026 is the blink of an eye away in business terms. As Ann sagely articulated, starting your payroll modernisation journey now is vital to your business success and employee experience.
Zepto already enables real-time superannuation payments over the NPP. And we were delighted to partner with Ozedi to deliver a solution that allows Australian businesses to instantly and securely pay contributions to super funds with a PayTo-powered SuperStream service — an industry first.
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