Superannuation Increase – Who wears the cost?
From 1 July 2021, a superannuation (super) increase from 9.5% to 10% of employee’s ordinary time earnings will occur. This is the first step, with further increments at the rate of 0.5% per year to come over the next five years.
The degree to which an Employer or Employee will be impacted by these changes will depend on the terms and conditions of the employment contract.
Employer Impacted
Where an Employee’s contract stipulates that they are paid a base salary plus super, the Employer must make the increased payment. However, where a contract stipulates that the salary is plus super at the rate of 9.5%, the Employer must make the increased payment and we recommend that the contract be updated to reflect the current increase as well as future increases.
Employee Impacted
Where an employment contract provides for a total remuneration package inclusive of superannuation, there will be no impact to the Employer and the increase will be absorbed within the package rate subject to any contrary terms of an applicable Award. In other words, the impact of this will be to the Employee. We recommend that Employers review the remuneration of Employee’s to ensure that they are not paid less than the minimum Award rate after the absorption.
What to do
We recommend that Employer’s review the terms and conditions of their current contracts of employment to determine the impact to their business and what changes to contracts need to be made (if any) prior to 1 July 2021.
Changes to an Employee’s terms and conditions of employment cannot occur without their consent. Any unilateral change made by the Employer may give rise to an unfair dismissal, general protections and/or breach of contract claim.
Please do not hesitate to contact our employment team (Simon Abraham, Amy La Verde, Bianca Mazzarella or Madeline Hearn) if your business needs further guidance or support in relation to navigating the superannuation increase.
