Incorrect superannuation guarantee (SG) rate used in pay runs

As you know, the government legislated SG (Superannuation Guarantee) rate increased from 9.5% to 10% on 1/7/21, this means that any pay run with a PAID date on or after 1/7/21 should have calculated 10% SG on all Ordinary Time Earnings (OTE).  NB. all pay runs are identified by their paid date, not the pay period, at the ATO.

This is the first time SG has increased since 1/7/14 so we’ve done a "post increase" audit and identified that the wrong rate may have been used when calculating super in some pay runs in the new/current financial year.  If pay runs in your account are affected then we'll have posted an Action Message on your payroll dashboard to let you know that this is the case (and directed you to this article for more information/advice).

NB. None of this will impact on your 2020-21 STP data, including finalisation, because all pay runs with paid dates on or before 30/6/21 were calculated with the correct default SG rate 9.5% (unless the SG rate has been deliberately overridden at the pay category or employee level).

We've provided a lot of information here so the article is broken down into sections - feel free to skip to the section of interest (just click on the appropriate link).

Overview / frequently asked questions

What happened/why?

How will it be fixed?

• we will assist you (with an automated process)
• you can do it yourself

Could this happen again?

What are the implications?

How will users know they may have missing super?

Dashboard notification...

Pay run warning on affected pay run...

Pay run warning in subsequent pay runs...

How do users apply the adjustment?

What is the recommended/preferred adjustment method?

How does a user know they’ve applied the adjustment?

Is there anything to stop users applying it more than once?

Can users delete an adjustment?

Will the dash notification/warnings trigger again?

What if users don’t want to apply an adjustment?

What happens if users change the date paid in a pay run?

Other miscellaneous scenarios / edge cases

Super at rates other than 10%

Super contributions cap

Negative adjustment amounts

Multiple super warnings on a pay run

What happened/why?

After applying the SG rate increase to the system, we noticed that pay runs where the pay period was wholly or partially in the 2020/21 financial year were still being calculated using the old rate, despite having a date paid after July 1. These were the only pay runs affected and it was due to the way the SG rate was being selected in certain circumstances.

This resulted in the system still calculating 9.5% SG in any pay run that was either wholly or partially in June (ie. the 2020-21 financial year), even if the paid date was in July 2021, whereas any pay run with a paid date and pay period wholly in July 2021 was calculating SG correctly at 10%.

We worked quickly to apply a fix to correct the rate in all accounts but any pay runs that were created in the period after the SG rate was deployed and before we were able to apply the fix were left alone, with incorrect SG rate calculations in place (we will never adjust your pay run data without direct instructions from you).  

How will it be fixed?

Via an automated process...

We have built a tool that will let you know, via a dashboard notification and pay run warning, if we've detected that a super/SG adjustment is required for an employee. 

Our automatic reconciliation process will apply to pay runs with a pay period wholly or partly in FY 20/21 but with a paid date on or after 1 July 2021 which have had super applied at 9.5% of Ordinary Time Earnings (OTE).

Pay runs with less than the expected 10% of OTE (the calculation will ignore non-OTE) will be flagged as having a potential calculation issue and an automatic dashboard notification will alert you to potential calculation issues to allow you to investigate the affected pay run/s.  Pay run warnings will also be displayed within a new pay run if an issue has been detected for an included employee.

When this happens the shortfall is calculated and displayed as a ‘missing super’ amount in the dashboard notification and on an ‘Apply bulk super adjustments’ modal within the new pay run.

You can either recalculate the affected pay run or apply the automatically calculated adjustments in later pay runs.

Please note - the recommended/preferred method is to apply the adjustment in the NEXT pay run (as opposed to unlocking and recalculating an existing pay run)  because adding the adjustment to a new pay run will leave clear record, in the pay run, (for the audit trail) and the adjustment will flow through into your accounts via the pay run journal.  If you choose to unlock and recalculate the original pay run please note you must re-send any pay run journals, otherwise your accounts will not include the adjustment and you'll end up with a variance.

Users will also be alerted about the rate change, and need to recalculate, if they change a pay run with date paid in June to a date paid in July.

More detailed information about how the adjustment process works is provided below - click on this link to go directly to the relevant section.

NB. If you terminated an employee in an affected pay run then they will not show up in any future pay runs, this means you will need to manually add them to a pay run in order to use the fix/tool.  You can either:

• add the terminated employee to your next pay run (add employee is an option on the pay run actions button at the top of a pay run)
• refresh the pay run page and the pay run warning should include the newly added employee (you can use the tool to fix the super)
• if any earnings lines show up in the pay run "by default" you need to remove them, hover over the earnings line and you'll see the delete option to the far right of the line

or

• create an ad hoc/nil earnings pay run with the same pay period and paid date as the original pay run
• add the terminated employee to the pay run
• if any earnings lines show up in the pay run "by default" you need to remove them, hover over the earnings line and you'll see the delete option to the far right of the line
• the pay run warning should show up to offer you the tool to fix the super (you may need to refresh the pay run page if the warning doesn't show up)
• use the tool to fix the super
• finalise the pay run, export the journals and lodge the pay event

NB. if a terminated employee was added to a pay run and a super adjustment added, then this employee may not show up in the pay event created from that pay run, because they've already been marked as Is Final in an earlier event.  If that happens you will need to create an Update event, add the terminated employee to it and lodge that.

You can fix it yourself if you don't want to use the new tool...

If you don't want to use our "fix/tool" then you can either recalculate the pay run now or calculate the amount of SG that was underpaid and add a super adjustment to the next pay run yourself. 

To check out where/if there is a problem with your pay runs you can either:

• run the Ordinary Time Earnings Report for 2021-22, it will show you at a glance where SG is not 10% eg...
  • click on the employee's name to expand the data and you'll see which pay category was used and the pay period of the pay run that incorrectly calculated the SG.  Once you know this follow the instructions below to fix the problem

OR

• go to the pay runs tab on your payroll account, you'll need to check any pay runs with paid date on or after 1/7/21.  

Luckily it's not difficult to immediately see if the SG calculated for any employee is not 10% of the total earnings (ie. if gross earnings are $1710.24 SG should be $171.02, if gross earnings are $3465.50 then SG should be $346.55) so you can perform a quick check without even opening up employee pay run records.

The quickest option to fix the SG calculation is a simple recalculation.  You can do this in one hit for the entire pay run or for each employee, individually. 

To do it for the entire pay run:

• unlock the pay run (an option on the pay run actions button)
• click on the pay run actions button at the top of the pay run and select Recalculate pay run
• you should see the SG amounts update in the pay run to be (the correct rate) 10%
• finalise the pay run and re-export the journals
  • if this pay run was the last lodged from your payroll account you can lodge an amended pay event, choose this option from the Lodgement options button at the top of the finalised pay run.  
  • if this pay run was not the last lodged from your payroll account then you will not have the option to lodge an amendment - if this is the case simply create and lodge an Update event to correct the data at the ATO

***NB. If you've made any manual adjustments to the pay run a recalculate "may" affect PAYG, earnings and deduction totals and it's important that these are not affected (because you've already physically paid your employees and possibly the PAYG and/or deductions) so we suggest you take the extra (precautionary) step of only doing a recalculation after you've downloaded a detailed pay run audit report to excel from the original pay run - to do this click on the Reports button on the pay run and select Audit Report, tick the boxes at the top of both lists, Summary and Employee details (to extract all possible data), then hit the Download button and choose excel.  This way you can download another Audit report after you've recalculated the pay run and compare the PAYG, earnings and deductions totals in it to those in the original pay run Audit report - any discrepancies will need to be carefully investigated and any adjustments that the recalculation may have affected will need to be reinstated.

To recalculate each employee individually

• click on the Actions button within the employee record in the unlocked pay run
• choose the Recalculate option, again, be careful to check that the net earnings, PAYG, deductions figures have not changed
• you should see the SG amounts update in the pay run to be (the correct rate) 10%
• finalise the pay run and re-export the journals
  • if this pay run was the last lodged from your payroll account you can lodge an amended pay event, choose this option from the Lodgement options button at the top of the finalised pay run.
  • if this pay run was not the last lodged from your payroll account then you will not have the option to lodge an amendment - if this is the case simply create and lodge an Update event to correct the data at the ATO

If you're not comfortable recalculating the pay run for any reason, and you don't want to use our "tool/fix", then you can check and adjust the super yourself.  To do this: 

• check the pay run totals - is the SG total 10% of the total gross earnings total? 
  • If the answer is yes then no further action is required 
  • If the answer is no don't be surprised, there are a number of reasons why SG might not be calculated on all earnings
    • now you'll have to check each employee's record in the pay run, is SG 10% of gross earnings? 
      • If the answer is yes for some employees then it's more than likely all employees have been correctly calculated at 10% and the reason your pay run totals don't show SG is 10% of total earnings is due to a legitimate reason.  If you're not comfortable assuming then carry on...
      • If the answer is no then there are several "legit" reasons why this might be the case:
        • have the employee's earnings breached the $450 per month threshold under which SG is not payable?
        • if the employee is under 18 then they not only have to breach the $450 per month threshold but they also have to work a minimum of 30 hours per week to be eligible for SG
        • If neither of those explain the SG amount calculated then you'll need to expand the employee's pay run record to expose the earnings lines and look further:
          • make sure each of the pay categories used attracts SG
            • to check if the pay category is OTE/"superable" go to the pay categories page under the pay run settings heading on the payroll settings tab, scroll through to find the pay category, click on the name to expand the settings then check the super rate field, if that is blank or different to the default SG rate then this may explain the variance in the pay run
          • if any of the pay categories are not OTE (do not trigger SG) then deduct those earnings from the earnings total in the pay run and again check if SG is 10% of that earnings (sub) total
            •  
              • If the answer is yes, move on, no further action required
              • If the answer is no then a super adjustment will be required for affected employees.  To work this out:
                • total up all earnings paid to the employee who met the monthly threshold for SG (as per above) with pay categories that are OTE/attract SG
                • calculate 10% of that total
                • deduct the SG calculated in the pay run for that employee to get your super adjustment amount ie. the amount of super that was underpaid for this employee
                • the super adjustment amount will need to be added as a super adjustment in this employee's next pay run
                  • use a Pay Run Task to remind yourself to do this the next time this employee is paid  
                • If the employee has been terminated and/or is not likely to be paid any time soon then you should
                  • create an ad hoc/nil earnings pay run with the same pay period and paid date as the original pay run
                  • add the employee to it
                  • if any earnings lines show up in the pay run "by default" you need to remove them, hover over the earnings line and you'll see the delete option to the far right of the line
                  • click on the Actions button within the employee's pay run record and choose Adjust super
                  • choose Superannuation Guarantee as the type of super
                  • add the super adjustment amount, hit Save
                  • finalise the pay run, export the journals and lodge the pay event
                    • if a terminated employee was added to the ad hoc pay run and a super adjustment added, the this employee may not show up in the pay event created from that pay run.  If that happens you will need to create an Update event, add the terminated employee to it and lodge that.

Super adjustments added to any pay run in July will be included along with all other contributions when you next pay your super.

Could this happen again next year?

We really hope not!  The fact is we plan to change where we "store" the default super rate in our system so that it can more easily be updated.  Given the SG rate is scheduled to gradually increase at a rate of .5% a year to reach 12% from 1/7/2027 this is an important project and therefore a very high priority for us. Once that is in place then the types of issues we experienced when increasing the default super rate this time will not reoccur.

What are the implications/repercussions of not fixing this?

In Australia you are obligated to pay SG for your employees at the legislated rate.   If you choose not to fix this anomaly in your initial pay runs in this financial year then you will not be meeting that obligation, with possible repercussions down the track (from the ATO).

There won't be any implications with regards to meeting your SG obligations around paying super for your employees if you adjust the super in a July pay run - based on the assumption that you've not paid any of your employees' super to the super funds yet.  Meaning, as long as you add the super adjustment to a July pay run the adjustment will be picked up and paid along with all other super in the period when you get around to paying your super, be it monthly or quarterly (depending on your business processes).  Note you are only "obligated" to pay your employee super guarantee contributions to the nominated super funds quarterly but we recognise that some employers to choose to pay super monthly.

How will users know they may have missing super?

1. Dashboard notification
2. Pay run warning on the affected pay run
3. Pay run warning on subsequent pay runs

Consistent with current pay run warnings behaviour, these warnings will display on both finalised and unfinalised pay runs, and users can filter the pay run by the employees contained in the warnings.

Dashboard notification

Users can expand the dashboard notification to view the affected employees by clicking on ‘View affected employee(s)’. The following will be displayed:
 

• Employee name - users can click through to the employee file
• Affected pay run date - users can click through to this pay run to view
• Missing super amount - users can then crosscheck this on the affected pay run or in the adjustment tool in a later pay run.

Users can dismiss the notification per employee, by clicking on the ‘x’ - you will then see a confirmation dialogue box.

NB. Once you've dismissed the notification there is no way to go back/get the notification to show up again.  Also, once the notification has been dismissed you lose access to the tool we've built, you can still adjust the super if necessary but you'll have to do it yourself, how to do this is explained above.

So, it’s very important that you understand that if you dismiss the notification for an employee you are basically saying that you have read and understood the message but you do not want to take any further action, or you simply want to make your own adjustments/arrangements to fix it. 

It should also be noted that dismissing the notification will permanently remove any indication that this employee ever had this super issue and so that employee will not show up in any of the pay run warnings or in the adjustment tool. 

In other words, dismissing the message amounts to you saying, ‘I know what happened and I do not want to make any adjustments/I'll deal with this myself'. 

If you dismiss the notification and then realise you shouldn’t have, you can still recalculate the original pay run or if that can’t be unlocked, make the adjustment manually (as explained above) - but our tool won’t be available to you any more.

Pay run warning on affected pay run

Users will see a pay run warning on the pay run identified as being affected by the super guarantee calculation issue. 

You can click on an employee and it will take you to that employee’s record in the pay run.

The pay run warning gives basic instructions on recalculating and what to do if the pay run can’t be unlocked, plus a link to the relevant support article.

Even if the pay run can be unlocked, applying the adjustment in a new pay has the advantage of being transparent, that's why doing it in a new pay run is our preferred/recommended method.

Pay run warning in subsequent pay runs

On any pay runs after the affected pay run(s), users will see a pay run warning alerting you to the fact that previous pay(s) may have an issue with super calculation. 

You'll need to unlock the pay run to apply the adjustment, but just in case you forget / don’t read the warning (which also includes a reminder) and click on ‘Calculate and apply super guarantee etc.’, a friendly reminder will pop up to explain how to proceed.

Once you’ve unlocked the pay run or created a fresh pay run, clicking on the link will open a modal, which shows the employees and pay runs affected and the amount pertaining to each.  NB. Only amounts from finalised pay runs will be included in this modal.

It will list all employees who are included on the pay run. If an employee is excluded from a pay run, they will be removed from the modal, and vice versa. The warning will only show where the employee is included in the pay run. 

Likewise, where there are multiple pay schedules, the pay run warning will only show super adjustments pertaining to the pay schedule for that pay run.

If an employee has multiple pay runs affected, multiple lines will display for the employee per affected pay run - see the section below Multiple super warnings on a pay run.

How do users apply the adjustment?

From the modal, you can apply as many or as few adjustments as you desire.

Apply all

• If you click the checkbox at the top it will toggle on all adjustments
• You just need to click ‘Apply super adjustments’

Apply individually

• Select which lines you want to apply – the tool will only apply what is selected

If you don’t tick a line (or any lines), the adjustment will not be applied and the warnings will continue to display for the affected employee(s).

What is the recommended/preferred method of adjustment?

The recommended/preferred method is to apply the adjustment in the NEW/NEXT pay run because this method will

• leave behind a "neat" record in the pay run (for the audit trail)
• will allow for the SG adjustment to flow "neatly" in your accounts, via the pay run journal from the (next/subsequent) pay run.

NB. if you choose not to use the recommended method and instead unlock and recalculate the original pay run to fix the super calculation, and pay run journals were posted from the initial pay run, then you will need to re-post the journal after you've recalculated and finalised so that your super expense/liabilities are up to date.  To be clear, if you don’t re-post the pay run journal after recalculating it to adjust the super calculation you’ll end up with a variance in your accounts.

How does a user know they’ve applied the adjustment?

If you’ve applied via the bulk apply modal, the adjustment will be clearly added to the pay run. Once you click ‘Apply super adjustments’, the adjustment will be added in the pay run for each selected employee - an adjustment note will reference the affected pay run with ID and pay period.  NB. This line is editable – you can change the category, description and amount if you want, it’s entirely your call.

Is there anything to stop users applying an adjustment more than once?

Users will not be able to apply an adjustment in another pay run once they’ve applied it in a pay run. 

The warnings will be automatically dismissed on the pay run and the affected pay run as soon as the adjustment is applied, irrespective of whether the pay run is finalised. Likewise the dashboard notification will be dismissed. 

Also, if the affected pay run (the one with the issue) is recalculated, the warning on that pay run as well as later existing pay runs will be dismissed, and will not trigger for newly created pay runs.

NB There’s nothing stopping a user from unlocking and recalculating a pay run which had the super issue after they’ve applied the adjustment in a later pay run. 

If a user does this, the super will be calculated correctly at 10%, and you’ll effectively have added the “missing super” twice - via recalculation and via the adjustment. If you do this, you can solve the problem by adding negative adjustment in a later pay run. 

Can users delete an adjustment?

Yes. Once you’ve applied the adjustment in the pay run, you can delete it the same way that any pay run line is removed.

If you delete the pay run, obviously the adjustment will be removed.

Will the dash notification/warnings trigger again?

Yes:

• Until you apply the adjustments in a pay run
• If the pay run in which the user has applied the adjustment is deleted then the pay run warnings and dashboard notification will trigger again
• If an individual adjustment line is deleted in the pay run, then the dash notification and pay run warnings will display for that employee

No:

• If you've dismissed the notification from the dashboard by clicking on the x (as explained above)
• If you've dismissed the individual adjustment in the model, in the pay run, by clicking on the trash icon (as explained below)

What if users don’t want to apply an adjustment?

Similar to the dashboard notification, a user can dismiss the adjustment in the modal and it will no longer display in the warnings. Again, by doing this you're saying “nothing needs to be done here”.

In the modal, you simply click on the trash icon on an individual line. NB. There is no option to bulk delete - each adjustment has to be individually dismissed.

When the user clicks on the trash icon, a confirmation dialog will open - the dialogue box makes it clear that the adjustment will not be able to applied once it is dismissed.

What happens if users change the date paid in a pay run?

If a pay run has been created with a paid date in June but the user changes the paid date to a date in July, by either:

1. Pay run actions > Adjust pay period
2. Finalisation dialogue box

...you will be alerted to the fact that the SG rate has changed and advised to recalculate the pay run. Users will also be required to confirm that they’ve read the alert!

Miscellaneous scenarios / edge cases

Super at rates other than 10%

The reconciliation process does not apply.

Super contributions cap

Employees who have reached the maximum quarterly superannuation base will be excluded from the reconciliation process, so users will not see any warnings pertaining to those employees.

Negative adjustment amounts

There may be situations where the missing super identified is a negative amount, such as where super has been paid but an employee has not yet met the $450/month threshold... 

EG. Say the employee’s first pay run included OTE of $100 and SG of $9.50. Normally, super would not have been paid on that pay run and the correct amount of $10 would have been added to the next pay run in which the employee’s OTE met the $450 threshold (or whatever threshold has been set up for the employee). 

In the next pay run, the negative super amounts will show up in the Apply bulk super adjustments modal.

If that’s the case, you are advised to review the adjustment, and if necessary, edit the adjustment amount in the pay run.  

Multiple super warnings on a pay run

If a business has 2 or more pay runs affected by the super calculation issue, then both pay run warnings will display, like this:

This is because the other pay run(s) in the affected period are treated as “previous” pay runs by each other.

This is expected behaviour and will still enable the user to resolve the missing super issue.

To illustrate how this would work, in a business there are 2 pay runs where the pay period falls in June but the paid date is in July.

Provided the same (or some of the same) employees are present in each pay run, the pay run will display both warnings.

• The first warning shown pertains to the other pay run.  NB. only employees who are on the current pay run will show up in the ‘Bulk apply adjustments’ modal. Users will need to either apply the adjustments in a pay run that includes all the employees or recalculate the pay runs separately.
• The second warning shown displays the employees on the current pay run with affected super.

To apply the missing super, there are two steps:

1. the user should click on ‘Calculate and apply etc’. The modal will open and display the super adjustments for the employees on the other pay run eg:
   1.  
      • These amounts are the missing super from the other pay run for those employees.
      • When the user selects all and then clicks ‘Apply super adjustments’, the pay run will not only apply the above adjustments but recalculate the current pay run for those employees. 
      • Those employees will then be removed from the pay run warning pertaining to this pay run. Here you can see there are now just three remaining when originally there would have been six.
2. the user will recalculate this pay run which will correct the super for the remaining employees.

Both the warnings will be dismissed on this pay run and on the other pay run for the employees for whom the adjustments were applied. If there are employees on the other pay run who weren’t included in this pay run, then there will still be a warning on that pay run.

In the above example, both warnings would be dismissed on both pay runs because of the overlap of employees.

Alternatively, users can of course simply include all affected employees in a subsequent pay run and apply all the adjustments from the modal at once: