Superannuation for Contractors and Employees: Payroll Compliance Tips

Whether you’re managing payroll for a growing team or juggling contractor invoices for your startup, there’s one thing that often trips businesses up: superannuation. And the biggest head-scratcher? Knowing when to pay it for contractors.

It’s a common misconception that super is only for employees. But under certain conditions, even your independent contractors could be entitled to super. Getting it wrong can lead to back payments, penalties, and a visit from the ATO that no one wants.

So, let’s clear the air. Here’s what you need to know about handling super for employees and contractors, without the guesswork.

What’s the Difference Between an Employee and a Contractor?

Before diving into super rules, it’s important to understand the distinction between employees and contractors, because your super obligations depend on it.

Here’s a quick breakdown:

Superannuation Obligations for Employees

For employees, the rules are crystal clear. If someone is classified as an employee, you’re required to pay them super.

The basics:

• As of 2025, employers must contribute 11% of an employee’s ordinary time earnings to their nominated super fund.
• These payments are due quarterly, with deadlines on the 28th of October, January, April and July.
• You must report these through Single Touch Payroll (STP) to stay compliant.
  
  

If you’re using a platform like Romeohr, much of this process is automated, reducing the risk of missed payments or deadlines.

Superannuation for Contractors: When Do You Need to Pay?

Now, here’s where things get murky. You might think that if someone has an ABN and sends you invoices, you’re off the hook. But that’s not always the case.

Under the Superannuation Guarantee (SG), you must pay super for contractors if you’re paying them mainly for their labour, even if they’re invoicing you and appear to be self-employed.

Ask yourself:

• Are you paying the contractor personally (not a company or trust)?
• Are they performing the work themselves rather than delegating?
• Is what you’re paying for primarily their time and effort, not a finished product or outcome?

If the answer is “yes”, you may be legally obligated to pay them super.

What If You Don’t Pay Super When You Should?

Ignoring or misunderstanding your super obligations, especially for contractors, can be costly.

Here’s what could happen:

• You may be required to back-pay unpaid super (plus interest)
• You could face Superannuation Guarantee Charge (SGC) penalties
• The ATO might initiate an audit or compliance check

How to Stay on Top of Super (Without the Stress)

Staying compliant with super obligations doesn’t have to be a chore. Here are some practical tips:

Review contracts regularly – Make sure you’re classifying workers correctly
Use payroll software – Romeohr helps automate super contributions and flag errors
Seek expert advice – When in doubt, consult with an accountant or payroll professional
Set reminders – Don’t miss those quarterly super deadlines
Keep good records – Invoices, contracts, timesheets—it all matters

Quick Recap: Your Super Checklist

Here’s a handy list to double-check whether you need to pay super:

• Is the worker paid mostly for their labour?
• Are they an individual (not a company)?
• Are they working under your control or direction?
• Can they delegate the work to someone else?

If the answer is mostly yes, chances are you owe them super, even if they call themselves a contractor.

Final Thoughts: Know the Difference, Avoid the Drama

Superannuation is more than just a legal requirement—it’s part of treating your team fairly and supporting their financial future. Whether someone is a permanent employee or a contractor helping out for a few months, you need to know where your responsibilities lie.

When you understand the key differences and get the setup right from the beginning, you’ll avoid headaches, protect your business, and do the right thing by your people.