Majority of SMEs believe boost in super guarantee will come on top of pay rises

More than 90% of small businesses say lifting the level of compulsory superannuation contributions from 9% to 12% will increase business costs, according to new research from the Cameron Research Group.

More than 400 businesses, employing between 20 and 500 staff, were surveyed. More than half see the proposed increase as a negative for their business, with smaller SMEs most likely to be most negative about the increase.

“This isn’t a good time to increase costs in any case,” Cameron chief executive Ross Cameron says. “So it’s not an attractive proposition for them.”

The research shows 56% of businesses surveyed believe the increase will be in addition to pay rises, while 32% believe the super increase will be “as part of” a pay rise.

“They believe this will be in addition, not in substitute to, and that’s causing these reactions,” Cameron says.

Only 4% of businesses surveyed don’t believe the change will increase business costs.

Pressure on wages has been rising over the past year due to the skills shortage, and major industries have already scored pay deals for the next few years that will put even more pressure on companies before they are forced to increase super payments.

Some of the 405 businesses that responded to the research say they are still reacting to the modern award system and the increased costs will hurt them – one business stated it sometimes paid staff “huge” commissions.

The super legislation is expected to come before parliament this year, and take effect from July 2013. The super contribution guarantee is expected to rise by 0.25% from July 2013, and by another 0.25% from 2014. From July 1, 2015-19, the guarantee will be lifted by increments of 0.5%, resulting in a target 12% guarantee by the end of the decade.

At the time the change was announced, during its response to the Henry Tax Review, the government said it acknowledged the changes would affect wage negotiations.

However, the survey also shows businesses aren’t aware of the latest events regarding super. While 89% are aware of the proposal to increase the super levy, only 39% say they are aware of the MySuper proposal – which will create a single, default super account.

“That response doesn’t surprise me entirely,” Cameron says.

“Especially for smaller business, there is a lot of talk about the changes they’re going to have to deal with, and many of them choose not to worry about it until it’s all introduced because there’s so much hot air around.

“There is simply too much to keep up with [and] many just worry about it later. And they also think they can’t do anything about it anyway.”

However, the changes represent a hurdle for the government as more businesses will need to become aware of the MySuper account, thus forcing them to adopt some administrative changes.