tl;dr: Construction companies often have large wage bills and long payment cycles. Paying super on payday will increase funding pressure, especially on subcontractors who operate on thin margins. Construction firms should model cashflow, negotiate progress payments and consider project‑based finance to manage the transition. This article explains specific issues for the construction sector and links to our broader Payday Super resources.
Why construction is exposed
- Progress payments: Construction contracts often pay progress payments at key milestones rather than on a regular schedule. Between milestones, the contractor must cover wages, super, materials and equipment costs. Under Payday Super, super contributions must be remitted every time wages are paid. If progress payments are delayed, contractors may need finance to bridge the gap.
- Subcontractors: Many small subcontractors are deemed employees for super purposes if they are paid mainly for their labour. Head contractors must ensure that labour payments include super contributions and that those contributions are remitted on payday. Failure to do so can result in director penalty notices for the company directors.
- Retention monies: Retention clauses hold back a portion of payment until project completion or defect liability periods. These funds cannot be used for super contributions.
- Fluctuating workforce: Construction crews often scale up and down depending on project phases. Payroll can spike dramatically, making weekly or fortnightly super contributions volatile.
Strategies for construction SMEs
- Align payroll with progress payments: Where possible, align wage payment cycles with contract payment schedules. Weekly wages may need to move to fortnightly if progress payments are monthly.
- Use project‑based finance: Facilities such as progress claim finance advance funds against certified progress claims. Invoice finance can advance against invoices to builders or developers. These products are often provided by non‑bank lenders with quick approval.
- Negotiate contract terms: Include clauses for quicker payment of labour costs and retention releases. Discuss the impact of Payday Super with your clients and incorporate super remittance schedules into project cashflow.
- Budget for super: Historically, quarterly super may have been under‑budgeted. Update project budgets to include super contributions in each payroll cycle.
FAQs
Does super apply to subcontractors? Yes, if a subcontractor is paid primarily for their labour they are treated as an employee for super purposes.
Can we pay super monthly? No. From 1 July 2026 the super must be paid on payday and reach the fund within seven business days.
Definitions
- Progress payment: Payment tied to a project milestone rather than a fixed schedule.
- Retention money: Portion of a contract price held back until the contractor has fulfilled obligations, typically to cover defects.
External links
- [ATO – Payments to contractors].
- [RBA – Insolvency trends in construction].
- GPS Finance Payday Super Calculator.
Construction cashflow is complex—connect with our advisors to structure funding. We also partner with industry professionals to help their clients prepare.