The super loophole being exploited by the gig economy

Imagine what it must feel like not to receive compulsory superannuation – despite it being a mandated part of our employment landscape for more than three decades. For many Australian workers this is a reality.

The Super Guarantee legislates that employers have to pay super contributions of 11 per cent of an employee’s ordinary time earnings, regardless of whether they’re a casual or full time employee.

But the legislation that is meant to protect working rights falls short for an increasingly large group of workers.

We’re referring to the gig economy, which appeared out of nowhere around 2006 when Menulog launched Australia’s first online meal delivery service and has since grown nine-fold to employ as many as 250,000 workers across platforms such as Upwork, Fiverr, Uber and Airtasker.

While the system is providing Australians with flexibility, autonomy and options for an additional source of income, its participants are also being exploited. More than half of gig workers are under 35 and a similarly a large number are international students and migrants who can struggle to get a foothold onto the career ladder in Australia – sometimes due to language or cultural setbacks. It appears nearly two decades later, the super system appears to still be playing catch-up with a changing workforce.

Despite some contractors being eligible to be paid super if they meet the additional eligibility requirements, gig economy workers miss out on the same rights as most working Australians. These workers trade basic workplace entitlements, such as sick leave and holiday pay, for flexibility, and critically, they also miss out on the Superannuation Guarantee, despite the national mandate.

Scratch the surface, and it’s clear to see that a significant loophole exists in current labour force regulations, meaning that most gig workers are likely to be classified as independent contractors.

The superannuation system was built to ensure that Australians can retire comfortably without having to rely on the Government-funded Age Pension, taking significant pressure off government coffers so that funds can be diverted into health, education and other critical infrastructures.

Quite simply, it’s a crime not to pay super. The Australian Taxation Office clamps down on employers that don’t pay superannuation in full, or who fail to keep adequate records. The system works well, and is under constant review as reforms continue to make improvements solely aimed at growing our retirement nest egg.

But despite the removal of the $450 threshold so that workers earning even a small amount from an employer in a month are still eligible for super, the legislation hasn’t yet caught up with the gig economy, creating a deep chasm between the haves, and the have nots.

This is because most gig workers are paid per job, and not as part of a company’s payroll. In the eyes of the Australian Taxation Office, these workers are considered self-employed, or sole traders. As such, any super they put aside for themselves is a choice, rather than a legal requirement.

As a result, gig workers risk falling well short of the super they should have accrued during their working life, bringing about longer term concerns around financial security. For example, if someone worked in the industry for a decade, their super balance upon retirement would dip to $92,000 less than a minimum wage employee. Consequently, gig economy workers are more likely to rely solely on the government-funded Age Pension in retirement.

This disparity raises questions about current superannuation legislation, which doesn’t go far enough to provide protections for all workers.

While Industry Super chief Bernie Dean has made public calls for gig workers to be paid super so they can be self-sufficient in retirement, it has so far fallen on deaf ears.

Fair Work Legislation sets out to close loopholes by creating minimum standards for all workers and proposes a new definition of casual employment, but until all workers earn the same rate of super regardless of how they are employed, it doesn’t look to be all that fair.

So what is our responsibility to those caught in the gap?

Long term disparities about who is and isn’t entitled to Super raises serious questions about inequities in the system and how we consider all types of workers as part of our community and the economy.

While real change comes with policy and regulation, workers do bear some responsibility to prevent inequity falling on them. With many workers in the industry lacking practical information about their rights, education is paramount. Users of the gig economy should seek to better understand industry rules and their options, which starts by asking the right questions: What protections do I have by taking on this job? What are the risks involved? Am I setting up the right fund for myself? And how can I best think about my future self?

And in the meantime, the law might just catch up with consideration for all.