As a business owner, you are probably aware that there are some planned changes to superannuation and the minimum requirements paid to employees.
However, do you know exactly what they are, and how they will affect your business?
Some changes were implemented last year, and there are further changes that will take effect from 1 July this year. In this three-part series, I will provide an overview of what the changes are and help you understand what it means for you and your employees.
Increase in compulsory super contributions
As an employer, you are required to make minimum superannuation contributions on behalf of your employees. The amount you contribute is calculated as a percentage of your employee’s salary and is currently set to a minimum of 9%, which is paid into a nominated superannuation fund.
The main change to super arrangements is that compulsory employer contributions will rise from 9% to 12% incrementally over the next seven years. As an employer, this means that you need to start planning now.
What does this mean for your business?
Employers are going to be faced with increased superannuation costs, which they will either have to pay on top of normal salaries or mitigate via reduced remuneration and the restructuring of an employee’s overall package.
Although you might be tempted to reduce your employees’ remuneration to make up for the extra superannuation contributions, please be aware that this may not be as simple as it sounds. A change in package might breach the employment contract and your employees will need to agree to any changes or new clauses, before you can legally implement them. If they don’t agree, you may need to pay the extra amount.
Another thing to be aware of is that reducing your employees’ remuneration might lead to them dropping below their minimum award entitlements which is a breach of the Fair Work Act.
One way that you might approach these changes, and keep your costs under control, is by keeping the increase in mind when conducting annual pay reviews. Additional superannuation costs can be factored in there rather than by reducing overall employee remuneration.
Planning for the superannuation changes now, rather than later, means that you can avoid any unexpected surprises, and help prevent your business struggling as a result of the new legislation.
While the biggest change to superannuation is the increase to compulsory contributions, there are other changes that include alterations to how contributions are recorded on pay slips and group certificates, the removal of the upper age limit, and new compliance responsibilities for company directors which are also important to be aware of.
We’ll explore these other changes in more depth as part of our three-part series on super.