Why YOU should read your employment contract very carefully to avoid getting a pay cut under new super rules that started this week
- Employer super contributions on July 1 rose to 10 per cent from 9.5 per cent
- RateCity research director Sally Tindall said this could come out of pay levels
- Former Labor PM adviser said professionals with salary, super packages at risk
Australians on employment contracts may soon have their pay docked under new superannuation rules.
As of July 1, compulsory employer contributions rose to 10 per cent from 9.5 per cent.
But in some cases, bosses may be docking your pay to cover the super increase.
RateCity research director Sally Tindall, an adviser to former Labor prime minister Julia Gillard, said this was more likely to happen if someone was on an employment contract that grouped superannuation with salary.
‘If you’ve negotiated a “package” salary which includes the company’s super contributions in the total amount, there’s a chance your company will cut your take-home pay to fund this super increase,’ she said.
Australians on employment contracts may soon be having their pay docked under new superannuation rules. As of July 1, compulsory employer contributions rose to 10 per cent from 9.5 per cent
‘Most people are likely to find their employers are footing the bill for the extra super, but for some employees, it could come down to the wording of their employment contract.’
Ms Tindall’s former boss Ms Gillard legislated to have super increase to 10 per cent on July 1, 2015 with the goal of reaching 12 per cent by July 2019.
But Liberal PM Tony Abbott’s government in 2014 delayed the super increase to 10 per cent to July 1, 2021.
Compulsory superannuation contributions are increasing in 0.5 percentage point increments on July 1 every year until they hit 12 per cent by July 2025.
Former Labor prime minister Paul Keating, the architect of the compulsory super scheme that debuted in 1992, wants 15 per cent superannuation and that is still the Labor Party’s position.
In some cases, bosses may be docking pay to cover the super increase. RateCity research director Sally Tindall (pictured), an adviser to former Labor prime minister Julia Gillard, said this was more likely to happen if someone was on an employment contract that grouped superannuation with salary
But Superannuation Minister Jane Hume, a Liberal, is unenthusiastic about legislated super increases, in March telling the ABC it would compromise pay levels.
‘We shouldn’t fool ourselves. A rise in the super guarantee will come at a trade-off, it will come as a trade-off to wages and particularly to wage growth,’ she said.
Australian wages grew by just 1.5 per cent in the year to March and have been stuck below the long-term average of 3 per cent since mid-2013.
The Grattan Institute think tank has also warned a super increase will hamper wages.
Compulsory superannuation contributions are increasing in 0.5 percentage point increments on July 1 every year until they hit 12 per cent by July 2025. Pictured is a cafe worker at Manly on Sydney’s Northern Beaches
Brendan Coates, an economist with this group, said Australians on median incomes of $60,000 only needed $150,000 for retirement, provided they had already paid off their home by retirement.
This is well below the $535,000 the Association of Superannuation Funds of Australia recommended for a comfortable retirement, with the pension age rising to 67 from 2023.
Ms Tindall said employees on contracts really needed to negotiate a better deal with their bosses so the superannuation increase didn’t affect their salary.
‘If you’re affected adversely by this super change, use it as an opportunity to take your pay packet back to the negotiating table,’ she said.