Superannuation rates rise – what you need to know as an employer

By Jenna Paulin | 29 Jun 2021 View comments

As a business owner it can overwhelming to run a business and keep up with the ever changing employment obligations. On 1 July 2021 changes are coming in relation to the minimum superannuation guarantee contribution and minimum wages.  

The last thing you need is for this date to come around and you are unsure of what impacts this has to your business and the obligations you have as a business owner to comply with these changes.

Superannuation 

The minimum legislative superannuation contribution by an employer is increasing. Currently the mandatory contributions from an employer to an employee is 9.5 per cent. As of 1 July 2021, the contributions are increasing to 10 per cent.  This increase affects all employers. 

Superannuation guarantee is legislated to increase 0.5 per cent annually until it reaches 12 per cent on 1 July 2025. The increase is compulsory and cannot be avoided by employers.  

It is proposed but not legislated yet that the current $450 per month minimum income threshold that employees must be paid before superannuation is contributed to will be removed. This will mean employees will not have to earn a minimum monthly income to receive superannuation.

The increase in superannuation contributions is an overall business operating costs to any business. Therefore, this should be an important item that is discussed within your organisation and added into your next budget.

Depending on how your employment contracts are written will depend on how the increase will impact a businesses bottom line. 

It is critical that employers process the increase correctly. If an employment contract is not written inclusive of superannuation then you cannot suddenly change how you process superannuation. 

In summary if your employees remuneration package is stated as:

  • Salary + super = payrise for the employee: the employer will need to pay extra to cover this increase.
  • Salary inclusive of superannuation = decrease in take home amount for that employee: the base salary will need to be deducted to compensate for this extra amount needing to cover the increase.

Taking action with employees

Personal actions

  • Communicate with employees about the change in superannuation 
  • Outline to employees what the change means for them – this will depend on if the employee is paid ‘inclusive’ or ‘exclusive’ of superannuation 
    1. Increase in the overall remuneration package 
    2. Adjustment in ‘take home’ pay 
  • Communicate the impact for the employee in writing

System actions

  • Inform payroll about changes to superannuation 
  • Ensure payroll software is updated to reflect changes come 1 July
  • Update budget and forecasts 

Minimum wage increase

The national minimum wage and the rates of pay under the modern awards traditionally increase every 1 July of each year. 

In 2020 due to the Covid-19 Pandemic the annual increase was rolled out in a staggered approach. This year, the Fair Work Commission is taking a similar approach to award increases as a result of the continued impact on the economy .

It has been announced that there will be a 2.5 per cent increase applied to minimum wages. The national minimum wage will increase effective the first full pay period on or after 1 July 2021, as follows:

  • $20.33 per hour 
  • $772.60 per week 

The award increases will occur in three stages:

Stage 1: 1 July 2021

  • All awards except those in stages 2 and 3 below

Stage 2: 1 September 

  • General Retail Industry Award 2020

Stage 3: 1 November 2021

  • Air Pilots Award 2020
  • Aircraft Cabin Crew Award 2020
  • Airline Operations – Ground Staff Award 2020
  • Airport Employees Award 2020
  • Airservices Australia Enterprise Award 2016
  • Alpine Resorts Award 2020
  • Amusement, Events and Recreation Award 2020
  • Dry Cleaning and Laundry Industry Award 2020
  • Fitness Industry Award 2020
  • Hair and Beauty Industry Award 2010
  • Hospitality Industry (General) Award 2020
  • Live Performance Award 2020
  • Mannequins and Models Award 2020
  • Marine Tourism and Charter Vessels Award 2020
  • Nursery Award 2020
  • Racing Clubs Events Award 2020
  • Racing Industry Ground Maintenance Award 2020
  • Registered and Licensed Clubs Award 2020
  • Restaurant Industry Award 2020
  • Sporting Organisations Award 2020
  • Travelling Shows Award 2020
  • Wine Industry Award 2020

When the wage increase takes place, it will mean:

  • If you are covered under the national minimum wage, you MUST increase these employee’s hourly rate 
  • If you are covered under a modern award and pay per the schedule (not above or better off) you MUST increase these employees’ rate of pay 
  • The increase will have an impact of the overall business operating costs and must be taken into consideration and budgeted for 
  • The increase is mandatory – for employees that are not paid above minimum wage there is no option other than to increase each employee’s rate of pay.

 What you need to do is:

  1. Review the minimum increases 
    1. The national minimum wage increase 
    2. The pay guides per the relevant modern award 
  2. Review your existing remuneration of each employee to determine if an increase is needed 
  3. Communicate changes to employees in writing 
  4. Notify payroll of the changes to remuneration that need to be processed  
  5. Process the changes 
  6. Update budgets 

Running a business comes with continual change and increased costs. It is important as employers that you are aware of your obligations and do not miss government legislative changes like the increase in superannuation and minimum wages.