Explained: What does the legislated increase to superannuation mean for employers?
Employers will be required to pay their workers a higher rate of superannuation from July 1 under legislated changes to super.
Changes to superannuation will kick in on July 1, meaning that employers will face new requirements when paying compulsory superannuation payments to their workers.
Under the legislated changes, the superannuation guarantee, which is the rate of compulsory payments employers make on workers’ wages, will rise 0.5%.
What do the changes mean for employers?
Under current legislation, increases to the superannuation guarantee are scheduled to increase by 0.5% each year.
This year, the superannuation guarantee will rise from 9.5% to 10%, before gradually increasing to 12% by 2025.
Why was the increase debated?
Following the release of the Retirement Income Review in November, the Morrison government announced it wanted to delay the legislated increase to superannuation payments. However, the government abandoned those plans, saying it would instead consider making the system more flexible.
Ahead of the May 11 budget, the government re-confirmed it wouldn’t try to change the current system, meaning that gradual increases to the superannuation guarantee would go unchanged.
Can employers avoid passing on the superannuation rise?
Employment lawyers have reportedly received an influx of enquiries from businesses regarding whether it’s possible to pay the rise in their employees’ super from their pay.
Fay Calderone, partner at Hall & Willcox, said this may be an option for some employers, but it depends on each individual employment contract.
Some employment contracts specify that superannuation should be paid on top of a worker’s base salary, while others state that super is included as part of a worker’s entire package.
Calderone told the ABC that it could be legal for employers to pay for a super increase from a a worker’s wages if that worker’s contract does not state that super is paid on top of their salary.
While this might be appealing to businesses, Caldrone said employers will need to consider all the consequences of using an employee’s pay to fund the 0.5% super rise.
“Employers need to balance what the financial consequences are going to be from passing on the pay reduction to employees, against the potential that those employees will go elsewhere,” she said.
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