- Who has to comply, and when the obligations attach
- Duty one: state clearly what your quoted figure includes
- Duty two: pay super on the right base, at the right rate, on time
- Duty three: keep the cash base above the minimum wage and any award rate
- Duty four: back out the super component correctly when you quote a package
- Duty five: make the contract, the offer, payroll and payslips consistent
- What happens if you get it wrong
- A practical checklist before you send the offer
- Where a lawyer actually helps
- The step that catches most employers
When you put a dollar figure in an employment offer, you are also committing to a set of legal obligations that most small businesses never think about. The number you quote can mean the salary excluding superannuation, with super paid on top, or it can mean a single package that includes super inside it. Those two readings are different by roughly the superannuation rate, and getting them wrong is one of the most common ways an Australian employer ends up with an underpayment, a Fair Work dispute, or a bill from the ATO.
This article explains the obligations that sit behind a salary offer in Australia: the duty to say clearly what your figure includes, the duty to pay superannuation on the right earnings base at the statutory rate, the duty to keep the cash base of the salary above the minimum wage and any applicable award rate, and the duty to make your contract, payroll and payslips tell the same story. We work through each duty, what non-compliance costs, and the steps you can take before anyone starts.
Who has to comply, and when the obligations attach
The superannuation guarantee (SG) obligation in the Superannuation Guarantee (Administration) Act 1992 (Cth) applies to almost every employer in Australia regardless of size. If you employ someone who is an eligible employee and pay them earnings, you must make SG contributions on their behalf. There is no turnover or headcount threshold that lets a small business opt out.
One scoping point regularly surprises small employers. Until 1 July 2022, employers were not required to pay super for workers who earned less than $450 in a calendar month. That threshold was removed, so super now applies to eligible employees regardless of how much they earn. If you still have casuals or part-timers below that old cut-off in mind, your payroll is almost certainly incorrect.
The obligations are triggered as soon as you make your first real offer and the person starts work, and they repeat every quarter after that. Because the SG rules interact with the Fair Work Act 2009 (Cth) and modern awards, whether a particular employee is covered by an award matters and needs to be checked at the offer stage rather than months later.
Duty one: state clearly what your quoted figure includes
The first and cheapest obligation is plain drafting. An Australian employer is not legally required to format its offers in any particular way, but the way an offer is written determines what a court or regulator will treat the employee as having been promised. If your offer letter says a salary of $100,000 with no qualification, and the employee reasonably reads that as a $100,000 base with super on top, a later decision to pay it as a package including super is an underpayment of the promised amount.
Two formulations are lawful if used properly:
- A salary excluding super, where you quote the base the employee receives in cash and pay super on top of it.
- A salary including super, where you quote a total package and the cash base is the package with the super component backed out.
The obligation is to say which one you mean, in writing, before the person starts. The safest wording gives both figures: state the cash base salary before tax, and state separately that superannuation will be paid at the statutory rate on top. If you genuinely intend a package model, say that it is inclusive of super, set out the base, and be clear that the split can change if the statutory rate changes.
Duty two: pay super on the right base, at the right rate, on time
The SG obligation is not to hand over a round number that feel reasonable. It is a precise calculation. Under s 10A of the Superannuation Guarantee (Administration) Act 1992 (Cth), SG is calculated on an employee's qualifying earnings, which includes their ordinary time earnings (OTE). OTE is what the employee earns for their ordinary hours of work, before tax, but generally excludes overtime and some other payments.
The relevant rate is set in the legislation. For the 2024-25 financial year the SG rate was 11.5 per cent, and from 1 July 2025 it rose to 12 per cent, which is the rate reflected in s 17A of the current Act. Because the rate has changed steadily over recent years, an offer drafted when the rate was lower will underpay if it is not checked. There is also a maximum contribution base, which caps the level of an employee's earnings on which SG is required. The cap is indexed from year to year, so it is worth confirming the current figure before finalising payroll settings.
Super must be paid into a complying fund at least quarterly, by the legislative due dates. If you rely on an employee choosing their own fund (choice of fund), you still have to make the contribution and issue the appropriate paperwork.
Duty three: keep the cash base above the minimum wage and any award rate
This is the obligation that catches most employers, because it is easy to miss. Superannuation is paid on top of an employee's entitlements. It cannot be counted as satisfying the minimum wage or a modern award's minimum rates.
If an employee is covered by a modern award or an enterprise agreement, the cash portion of the salary after super is backed out must still meet the award's minimum wage and other applicable conditions. A package can look generous and still produce a base salary below what the award requires once the super component is deducted. That is an underpayment regardless of how the total was framed.
The same principle applies to award-based entitlements such as overtime, penalty rates and allowances. Some employers assume that paying a higher annual salary automatically absorbs these. It does not. An all-in salary can validly absorb those entitlements only if it actually covers them in practice for the hours and work the employee performs, and only if the arrangement is documented in a way that supports it. If it does not stack up, the higher salary is not a defence to a later underpayment claim.
Duty four: back out the super component correctly when you quote a package
If you do use a salary including super, the calculation itself is part of the obligation. The cash base is the package divided by one plus the SG rate, and the super component is the difference.
Using the current 12 per cent rate as a simplified illustration, a $100,000 package splits like this:
- Cash base salary (excluding super) equals $100,000 divided by 1.12, which is about $89,285.71.
- Super component equals $100,000 minus $89,285.71, which is about $10,714.29.
So an employee told they are on a $100,000 package including super is actually on a base of roughly $89,286 before tax. That is the figure you compare against the minimum wage and any award rate, not the package total.
Real payroll is more nuanced than the simple formula. Because SG is calculated on ordinary time earnings, and because there is a maximum contribution base and items such as overtime and some allowances are excluded, the split an accountant's payroll system produces can differ from the back-of-napkin number. The obligation is to make the payroll system apply the correct rules for the employee's circumstances, not to rely on the rounded example.
Duty five: make the contract, the offer, payroll and payslips consistent
A salary obligation does not exist only in the offer letter. If the offer says one thing and the payroll system does another, the payroll version effectively becomes the default, and the mismatch is where disputes start.
Before anyone starts work, check that the written offer, the employment contract, the payroll setup and the payslips all use the same description. If the offer says salary excluding super, payroll must calculate super on top of ordinary time earnings. If the offer says salary including super, payroll must split the package into base and super, and the base must still clear the minimums. Payslips and the quarterly super cycle then need to match what the contract promised.
This consistency also matters when things change, most obviously the SG rate. If you have offered a package including super and the statutory rate rises, you need a documented position on whether the package stays the same and the base adjusts down, or whether the base is protected. Either can be lawful, but only if it is agreed in advance and still leaves the base above the minimums. Leaving it unresolved means an awkward conversation, or a dispute, every time the rate changes.
What happens if you get it wrong
The consequences operate through two regulators. For unpaid or late super, the ATO can impose the superannuation guarantee charge, which is deliberately more expensive than paying on time. It is made up of the shortfall in the contribution, a notional interest component that accrues at the general interest charge rate, and an administration component, and it is not tax deductible. s 59C of the Superannuation Guarantee (Administration) Act 1992 (Cth) also exposes an employer to penalties for failing to pay an amount specified in a notice, and persistent non-compliance can attract prosecution.
Separately, if the cash base falls below the minimum wage or an award rate, the Fair Work Compliance and Enforcement framework treats it as an underpayment. That can mean backpay, interest, and civil penalties under the Fair Work Act 2009 (Cth), and the exposure compounds the longer it runs because each employee is affected over their whole period of service.
A practical checklist before you send the offer
Run through this before any salary figure goes out:
- State in writing whether the figure is salary excluding super or a package including super, and give both the cash base and the package where useful.
- Confirm the current SG rate before finalising any figure, because it has changed recently.
- Identify whether a modern award or enterprise agreement covers the role, and check the cash base after super is backed out against the applicable minimum wage and conditions.
- Confirm super is payable for the employee regardless of earnings level, given the old $450 threshold no longer applies.
- Check that hours, full-time, part-time or casual status, and how pay is calculated are all stated.
- Make sure payroll handles OTE, overtime exclusions and the maximum contribution base correctly, and that payslips and the super cycle match.
- Decide and document what happens to the base and the package if the SG rate rises.
Where a lawyer actually helps
A lawyer adds the most value at the drafting and review stage, before the offer goes out rather than after a dispute begins. An employment lawyer can identify whether an award applies to a particular role, review the wording of an offer so it cannot be read against you, check an all-in salary against award entitlements to confirm it actually absorbs them, and make sure the contract and the payroll setup are consistent. Because the super rate has been changing for several years, a review also catches figures that were right when first drafted but are now outdated.
The step that catches most employers
Across Australian small business, the pattern is almost always the same. The headline figure looks fine, the offer is sent quickly, and nobody backs the super out and compares the cash base against the award minimum until an employee questions it or a regulator does. The single most useful action is to compare the cash base, excluding super, against the applicable award or minimum wage before you send the offer. It takes five minutes, it catches the most expensive mistakes, and it turns a risky package into a defensible one.