As we should all be aware employers will need to contribute an additional 0.5 per cent into their employee’s superannuation funds with effect 01 July 2021.  This will continue each year until 2025 where employer superannuation contributions will reach 12 per cent.

It is important to note that an employer cannot reduce an employee’s salary to absorb the cost of increased superannuation contributions (even if the employer is paying above award rates).  In fact, reducing an employee’s salary carries the risk than an employer may be breaking the law by underpaying the employee and in most cases the employee will more than likely leave the business.  If an employee’s pay is reduced illegally, the employer can face up to $12,000 in fines.

However, there are circumstances where an employer needs to reduce costs e.g., COVID19 and if so, they can offer benefits to make up for reducing wages e.g., offer reduced hours or increase annual leave entitlements.  However, the employees pay must not fall below minimum wage and the relevant award.  Employers must ensure they understand which award their employees are covered under as it could be more than one and the employer’s ability to alter the employee’s pay will depend on the type of award they are under.  However, if the employer has an Enterprise Agreement then the award does not apply.  There also needs to be a consultation period if this is to be implemented and it must be authorised by the employee.

We strongly recommend that when a new employee is provided with their employment contract their salary and superannuation figures are kept separate.  In fact, it’s best not to include a superannuation figure at all, instead the employer can state that they will make superannuation contributions in accordance with relevant legislation.  By not including a superannuation amount the employer then does not have to provide a letter with the increased amount each year.

Needing advice and help?

If  you  would  like  assistance with  better  understanding of all  the  reforms, timelines and  Employer obligations, the team of advisors at People Matters Advice can assist you with practical advice and support.

AB Phillips' People Matters Advice is a dedicated 'people advisory service' that provides subscribers with practical and contemporary advice and support via phone or email. It is a 12-month subscription that provides direct access to HR Consultants, Workers Compensation and Safety & Wellbeing experts who are ready to discuss and advise on any employee related issues, questions or concerns you might have.

For support and assistance, please contact our team of advisors at AB Phillips, Monday to Friday between 9:00 am and 5:00 pm AEST by phone on 1300 208 828 or email advice@abphillips.com.au