Businesses that use bonuses or commissions to reward employees could be forced to pay more in compulsory superannuation contributions under rule changes that came into effect this week.
Businesses that use bonuses or commissions to reward employees could be forced to pay more in compulsory superannuation contributions under rule changes that came into effect this week.
As of 1 July, employers must include bonuses, commissions and allowances in a worker’s income for the purpose of calculating the 9% superannuation contribution to make on their behalf.
For employers with a large bonus or commission based wage component that means either a big change to the way employees are paid or a higher superannuation bill.
Businesses in the retail, resources and manufacturing sectors that are heavy users of overtime or commission payments are likely to be hit particularly hard by the change.
Many employers have already adapted to the new rules, which have been in the pipeline for several years. For those that haven’t, now is the time to work out a strategy, according to Institute of Chartered Accountants in Australia superannuation policy manger Hugh Elvy.
Elvy says that whether an employer plans to absorb the extra costs or change employee remuneration structures to diminish any impact, clear communication with staff is vital.
“If employees are going to receive a boost to their superannuation contribution that is a benefit they should be aware of, or if not you may need to sit down and talk about the change and how it will affect their pay packet,” Elvy says.
But, he says, employers should receive advice to ensure any changes are workable and comply with both superannuation and employment laws.
“What you can do may depend on the relevant award or contract employees work under. If the contract sets out that the super contribution will always be on top of the cash component, the employer may have to revisit that contract with the employee,” Elvy says.
Checklist for salary or wages and ordinary time earnings
|
Payment type |
Salary or wages |
Ordinary time earnings |
|
Expense allowance that is paid with the expectation that it will be fully expended in producing income (for example, car allowance paid to real estate agents) |
No |
No |
|
Allowances paid (other than a reimbursement of expenses or expense allowance) |
Yes |
Yes |
|
Reimbursement of expenses (for example travel costs) |
No |
No |
|
Bonuses that don’t relate to specific performance criteria (for example Christmas bonuses) |
Yes |
No |
|
Other bonuses |
Yes |
Yes |
|
Commission |
Yes |
Yes |
|
Over-award payments |
Yes |
Yes |
|
Shift loading |
Yes |
Yes |
|
Overtime |
Yes |
No |
|
Casual loading |
Yes |
Yes |
|
Benefits subject to fringe benefits tax (FBT) |
No |
No |
|
Workers compensation payments, including top-up payments where no work is performed |
No |
No |
|
Workers compensation payments, including top-up payments, paid by the employer, where work is performed |
Yes |
Yes |
|
Top-up payments (for example when serving on jury duty or with reserve forces) |
Yes |
No |
|
Payments when on maternity or paternity leave |
Yes |
No |
|
Pay for annual holiday leave taken |
Yes |
Yes |
|
Government wage subsidies (for example Wage Subsidy Scheme allowance) |
Yes |
Yes |
|
Annual leave loading |
Yes |
No |
|
Pay for sick leave taken |
Yes |
Yes |
|
Pay for long service leave taken |
Yes |
Yes |
|
Accrued annual leave, long service leave and sick leave paid as a lump sum on termination |
Yes |
No |
|
Payments in lieu of notice |
Yes |
No |
|
Redundancy payments |
Yes |
No |
|
Other payments paid by an employer on termination of employment |
Yes |
No |
|
Director’s fees |
Yes |
Yes |
|
Payments for performance in, or provision of services relating to entertainment, sport, promotions, films, discs, tapes, TV, or radio |
Yes |
Yes |
|
The labour portion of payments to contractors who are employees for super guarantee purposes |
Yes |
Yes |
|
Dividends |
No |
No |
|
Partnership and trust distributions |
No |
No |
|
Payments for entering into a restraint of trade agreement |
No |
No |
|
Payments for domestic or private work under 30 hours per week |
No |
No |
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