“Qualifying earnings” (QE) is a new term under Payday Super: it’s what employers use to calculate their employees’ superannuation guarantee contributions. Previously, it was calculated based on ordinary time earnings (OTE) paid, but now employers need to calculate it based on QE.
Payday Super and 1 July 2026
Payday Super is the new government legislation that requires employers to pay superannuation into an employee’s nominated super fund within 7 business days* of salary and wages.
A major part of staying compliant with these changes is calculating the superannuation liability you must pay each employee. This is where qualifying earnings (QE) come in. QE absorbs OTE and determines each employee’s superannuation contributions.
*Hot tip: The deadline for super fund receipt extends to 20 business days for new employees, or employees who switch super funds during the pay cycle.
Ordinary Time Earnings (OTE) and Ordinary Hours Of Work
Qualifying earnings is an expanded definition that absorbs ordinary time earnings under the new Payday Super rules.
QE is in place because it accurately calculates super based on a pay run, where OTE was better for calculating super over a quarterly period.
So what payments count as qualifying earnings?
- Base salary and wages
- Certain types of paid leave
- All commissions and bonuses
- Some allowances
- Some lump sum payments
Base salary and wages
Base salary and wages help you calculate the minimum super contributions for your employees. They cover:
- Employee’s ordinary hours of work
- Casual loading
- Shift penalties (like holiday loading)
- Workers’ compensation for hours worked, or for the time required to attend work.
- Flexi-time arrangements (employee’s choice of hours)
- Public holidays not worked or worked as ordinary hours
- Breach of break payments
- Daily rates
- Piece rates (pay per piece, such as a fruit picker)
Paid leave
There are a number of different paid leave components that are part of qualifying earnings:
- Paid annual leave (AL) & annual leave loading (except AL linked to lost overtime opportunities)
- Long service leave (LSL) that isn’t paid under a portable LSL scheme
- Sick leave
- Rostered days off (paid out at ordinary rates)
However, not all leave constitutes as qualifying earnings, such as:
- Parental leave
- Jury duty
- Defence reserve
Bonuses and commissions
Previously, commissions paid for work performed outside ordinary hours weren’t included in super contributions. However, under Payday Super, this is no longer the case. Now, all commissions are part ot qualifying earnings.
However, for bonuses, all bonuses (except those earned for work performed outside ordinary hours) are considered qualifying earnings.
Lump Sum Payments
Lump sum payments include payments in arrears, return-to-work payments, and termination payments. For termination payments, only payments in lieu of a termination notice are QE.
Unsued sick leave, annual leave, long service leave, gratuity, genuine redundancy, or severance are not considered QE.
Allowances
Most allowances constitute qualifying earnings, such as on-call hourly rates, task allowances, and partial compensation. They do not, however, cover expense allowances such as meals or overtime allowances.
Salary sacrifice super contributions
QE only covers some salary sacrifice contributions. This means that where the salary sacrifice amount would have been paid as an employee’s qualifying earnings, it is considered QE. But if there is any salary sacrifice related to paid parental leave, overtime payments, or fringe benefits, it isn’t considered QE.
Directors fees
Director fees include any remuneration you pay to working and non-working directors. This includes:
- A person who performs the duties of a director of a company, or
- A member of the committee of management of a company, or someone who performs those duties of an unincorporated company.
Overtime, contractor rules, and opt-outs
Under Payday Super, there are rules covering certain payments, employment types, and opt-outs from the super guarantee. Let’s run through the main ones.
Overtime rules
Overtime payments do not constitute qualifying earnings because they are for hours worked outside ordinary hours. Time off in lieu (TOIL) is also not considered part of qualifying earnings.
Contractor rules
Generally, independent contractors paid for work you have given them aren’t covered by Payday Super rules. You compensate employees with superannuation guarantee payments.
However, if your contractors meet theย means testย for employee status, you will need to pay superannuation contributions for them.
Maximum contributions base and employee opt-out
As an employer, there is a maximum contributions base, which, once reached, means you are no longer required to make super contributions on an employee’s qualifying earnings for that financial year. The threshold is $250,000 per employee. This covers the 26-27 financial year.
On the other hand, employees can also opt out of super contributions. Employees are only eligible for opt-out if they meet these two conditions:
- The employee has more than one employer in a financial year,
- The employee expects that their SG contributions to exceed the concessional cap ($30,000) for the year.
Qualifying earnings in action
Understandably, what constitutes QE can be confusing when considering all the payments involved or excluded. It is worth noting that under Payday Super, the amount of super most businesses pay won’t increase: only the frequency of payments will.
Here is an example to help explain QE.
Retail worker and a lump sum payment example
Jenny works at a local grocery store. She has been working for the business as a part-time employee while at uni. Now that she has graduated, Jenny has found employment related to her studies and has put in her two weeks’ notice.
Qualifying earnings break down:
- Paid weekly, works 18 hours a week at ($28/hr)
- Ordinary hours of work + weekend penalties (Saturday rates 125% for 8 hours)
- 20 hours of annual leave remaining.
- Payments in lieu of termination (Jenny’s last week paid out instead of working).
With these factors in place, Jenny’s employer calculates super contributions on:
- The first week Jenny worked of her two-week notice of 18 hours + penalty rates = $504.00
- Payment in lieu of termination, Jenny’s last week of work, is getting paid out instead of working = $504.00
- Qualifying earnings:$1,008.00
- Superannuation guarantee: $1,008.00 x 12% = $120.48
Jenny’s employer pays her the full amount of her wages, a lump sum that includes her payment in lieu of termination and unused annual leave. Jenny earns superannuation only during her ordinary hours and on her lieu of termination payment. Her unused annual leave isn’t considered QE, and she doesn’t earn super on it.
For more examples check out the ATO’s qualifying earnings page.
Reckon Payroll: Prepare To Pay Super
On July 1 2026, employers need to ensure that their employees’ super contributions are paid to their nominated super fund within 7 business days of each payday. Employers must also report qualifying earnings and superannuation contributions (superannuation liability payments) in their Single Touch Payroll (STP) submissions each pay cycle.
To pay super contributions, you need a payroll system that allows you to remain compliant under the new Payday Super legislation and avoid an ATO fine called the Superannuation Guarantee Charge (SGC). By using Reckon payroll, you will be able to:
- Calculate SG contributions from qualifying earnings.
- Report STP correctly.
- Integrate with a superannuation clearing house.
- Pay super contributions into your employee’s super fund within seven business days of salary and wages being paid.
Get ready for Payday Super today with our Payday Super checklist.
