No guaranteeThe superannuation guarantee rose from 9 per cent to 9.25 per cent on Monday, but not everyone will be better off from the increase in compulsory super. Some employers will reduce their employees’ pay by the same amount as the increase so their employees are no better off.
Both Labor and the Coalition are committed to increasing the guarantee over the next few years until it reaches 12 per cent, though each has a different timetable for reaching the 12 per cent.
While all employers have to pay the increase in super for this financial year, as it is the law, some employees are going to have to negotiate with their employers if they want to get the benefit. That is because some employees, usually senior staff, are on ”total remuneration” packages. And it is quite possible these staff, while receiving the higher superannuation guarantee, will have a cut to their pay to keep the total remuneration package the same.
The other category of workers who may be no better off is those whose employers pay a premium or margin above the guarantee. These employers may decide to reduce the premium they pay on super by the same amount as the increase in the guarantee.
Most workers will receive the higher guarantee with no change in their pay because they are covered by industrial awards and agreements.
But those on packages that are subject to individual pay negotiations are well advised to find out what the employer intends to do about the rise in super now, rather than waiting until the next pay review. It may come down to wording of the employment contract over how the super is treated.
A survey late last year by human-resources consultant Aon Hewitt found about 30 per cent of employers pay more than the guarantee. Of these employers surveyed, only about one in 10 indicated that they intended to maintain the same margin when the guarantee started rising. The rest said they intended to decrease the margin as the guarantee rose, absorb the rises in the guarantee until they were paying the legal minimum, or that it depended on the outcome of enterprise bargaining.
Some employers follow the letter of the law but not its spirit, by calculating the guarantee on the employees’ ordinary weekly earnings, less the pay that the employee sacrifices. There is nothing illegal about this. The anomaly could be fixed by a change in the wording of the law to restrict the definition of salary for the guarantee so that it is ”salary plus any salary sacrificed”. But anyone thinking of sacrificing should ask their pay office whether sacrificing means they receive less compulsory super.
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