From July 1, all Australian business owners will have to do two things to their pay rolls:
- Increase the amount they pay employees in superannuation from 9% to 9.25%;
- Start paying superannuation contributions for any employees aged 70 years or over, as the upper age limit for super payments is being removed.
I’ve pulled those figures from a one-page summary the ATO is mailing out to employers to help them get on top of the new changes.
The ATO’s mail-out is welcome, because last we checked, even large businesses weren’t entirely sure how they would manage the superannuation increase coming in just under two months.
In March, global human resources firm Mercer asked 270 large Australian companies what steps they’d taken to prepare for the superannuation guarantee. One in five hadn’t even looked at what impact the rise would have on their bottom line, while another third had looked at it, but had no plan for how to deal with it.
These were large companies, with dedicated human resources and finance teams you’d expect to be all over these sorts of things.
But as Garry Adams, Mercer’s Talent business head, told us at the time, it’s a really complex issue for even the largest business. Employers don’t want to give everyone an effective pay cut (i.e. less take-home pay), because that sends a wrong message. But on the other hand, for a large company, just paying everyone 0.25% more without cutting something is millions added onto a wage bill.
And that’s not even counting any employees over 70, who’ll have to be paid 9.25% of their salary in super from July 1.
SMEs need to plan now for how they’re going to deal with this. Will you cut salaries, offer lower wage increases, cut back on benefits, or bear the burden and up wages by a little bit more than you would have otherwise?
If you don’t have one already, you need a game plan. After all, the legally required superannuation contributions employers have to pay their employees will keep rising every year till 2019, until they hit 12% of salaries.
How you deal with the guarantee increase now will set a precedent for what your employees expect next year, and the years after that.