Super increase will force businesses to cut take home pay: Survey

One in five businesses are considering restructuring how they pay staff to make sure the July increase in the superannuation guarantee will be offset by a cut in take home pay, according to a survey by human resources group Aon Hewitt.

The mandatory employer contribution to superannuation is increasing incrementally from the current 9% a year to 12% a year in 2019 and the first increase from 9% to 9.25% will come into effect from July 1, 2013.

Aon Hewitt surveyed over 160 different employers across Australia and found four out of ten of those businesses which pay superannuation on top of salaries are planning to set aside additional funds to cover the increase.

Just under half of businesses which use a remuneration package approach are planning to fund the increases through existing remuneration review budgets, while one in six are not planning to fund the increase in the super guarantee in 2013.

Ashley Palmer, senior consultant at Aon Hewitt, told SmartCompany lots of businesses are moving towards a total remuneration package so, all things being equal, the superannuation guarantee changes get passed to the employee.
He warns not taking action is not an option for businesses.

“It is complicated, because for some industries there may not be a pay review so there is a question is the employer going to increase the remuneration budget, so it may result in employees having less take home pay,” he says.

“There is also a concern that the concessional contribution cap has halved for those over 50 and that is an administrative hassle for employers, because some offer to keep an eye on contributions going in so they don’t exceed the cap, and that is a very risky prospect for employers.”

Peter Anderson, chief executive of the Australian Chamber of Commerce and Industry, told SmartCompany the changes were an increased headache for businesses.

“The main issue is that the government has imposed an increase in the levy without providing a funding basis for industry, the government therefore is responsible for the failure of policy development which will require many businesses to trade-off future wage increases for higher superannuation,” he says.

“We urge businesses not to be intimidated by the union push to add superannuation rises to existing wages unless the government comes up with a funding basis; then industry is encouraged to negotiate or apply superannuation rises in a manner that minimises the risk to jobs.”

Anderson says the increases in superannuation provide added administrative complication for business.

“There are six increases coming up over the next six years so businesses will have to be informed about the new obligations. Changes to super are a headache and this is just another, but it is a headache which comes with an additional cost on payroll,” he says.

 

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