- The Government have announced an incremental increase in superannuation from 9.5 per cent to 12 per cent over 4 years.
- Employees should review their employment agreements to work out whether their employer is permitted to fund the increase on their existing remuneration package by reducing the employee’s take-home pay.
- Employees who do not have an employment agreement allowing the increase in superannuation to be taken from their remuneration package will result in the employer being required to fund the increase.
As a result of people enjoying a longer life span in the modern era, people are also enjoying a longer retirement period which requires the appropriate funding. To accommodate our longer life spans, the Government has recently introduced an increase in superannuation. From July 1 this year, superannuation will increase by 0.5 per cent from 9.5 per cent to 10 per cent. It is also set to increase incrementally from 10 per cent to 12 per cent until 30 June 2025. Employees and employers are advised to check their employment agreements to determine how they will be affected by this change.
Due to the COVID-19 pandemic, the wages and salaries of many have either been decreased or remained stagnant over the course of the last few years. Even though most of the salary cuts have been restored to their usual status, the remuneration loss during that time has not been compensated. Therefore, an additional 0.5 per cent decrease in pay added on to the decreased wages of an employee could be detrimental. Given the high cost of living in cities much like Sydney and Melbourne, the effect of this on employees entering the workforce is a cause for concern. This is due to the financial stress the 0.5 per cent reduction of take-home pay may cause.
What should you do?
If you are an employee that is having their take-home pay reduced, have a chat with your employer. Just because your contract states that they can fund this increase from your pay, does not mean that they must. In addition, other benefits may be instead provided to offset the loss. For most employees, these increases in superannuation on 1 July of each year will also coincide with pay reviews. So, both employees and employers should use this process to help manage the issue.
Employees should feel valued in their workplace and it is necessary that employers consider the effect a 0.5 per cent loss of wages will have on an employee’s already stretched finances, especially when the cost of housing has risen dramatically over the past 12 months.
This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever to this blog, including all or any reliance on this blog or use or application of this blog by you.