Is super paid on redundancy payments?

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When facing redundancy, it's natural to have questions about what happens to your finances, including superannuation. One common question we often hear Australians ask is: "Is superannuation paid on redundancy?"

Understanding the rules around super contributions during redundancy can help you better navigate this challenging time.

Here, we explore your redundancy payment entitlements, whether super is payable on redundancy and provide suggestions to help you determine your next steps.

is super paid on redundancy payments

Redundancy payments in Australia - what you're entitled to

In Australia, redundancy payments are generally made when your job is no longer required due to business changes, such as restructuring, downsizing or closure. Redundancy entitlements often include:

  • Severance pay - Also known as redundancy pay, this is a lump sum based on your length of service.
  • Unused annual leave - Payment for any accrued annual leave, calculated based on your final pay rate. Keep in mind that unused sick leave is not payable upon redundancy.
  • Notice period - If you aren't given the required notice period, you may receive pay in lieu of notice.

These payments are designed to support you financially as you transition to a new job or career path. However, it's important to know that redundancy payments are treated differently from regular wages when it comes to superannuation - so, is super payable on redundancy?

Is superannuation paid on redundancy payments?

Unfortunately, under Australian law, employers are generally not obligated to pay superannuation on redundancy payments.

Your redundancy payments (severance pay, unused annual leave and notice period) are considered "lump sum" payments rather than ordinary time earnings (OTE), which means they don't fall under the Superannuation Guarantee (SG) obligations.

The SG contributions are only mandated on your ordinary wages, such as your regular salary, commissions and some allowances. Since redundancy payments are not considered part of your OTE, they do not attract super contributions from your employer.

Exceptions to be aware of 

While employers are not obliged to pay super on redundancy, there are a few exceptions and considerations to be aware of to double-check whether super is paid on redundancy:

  • Enterprise agreements or awards - Some employment contracts, enterprise agreements or industry awards might include terms that require super contributions on redundancy payouts. It's always worth checking the specifics of your contract or consulting your HR department to understand your entitlements.
  • Voluntary contributions - If you're concerned about the impact of redundancy on your super balance, you may want to consider making voluntary contributions. This can help you stay on track with your retirement savings goals, especially if you anticipate a gap in employment. Options include making personal contributions or salary sacrificing in a future role.

Money - helping Australians determine what to do next with their finances

If you find yourself facing redundancy, it's important to understand your financial options. While redundancy payments provide immediate financial support until you find employment, they don't contribute to your retirement savings unless specified in your employment agreement.

For more information about superannuation and managing your retirement savings, explore the wide range of resources available at Money. Our guides provide up-to-date information to help you make informed decisions about your super.

Visit Money's Superannuation Learning Hub to learn more about superannuation, redundancy and how to stay financially secure through life's inevitable changes.

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