The Superannuation Guarantee Rate increased to 10.5% on 1 July 2022. From then, the rate is legislated to increase by half a percent each year until it reaches 12% in July 2025.
What do I need to do before 1 July 2022?
Before 1 July 2022, contact your Payroll/Accounts Department and ensure that they are aware of the upcoming changes so that all payroll activities processed from 1 July 2022 include the additional half a percent Superannuation increase across all employees.
Inform all your employees of the new Superannuation increase and what this may mean for them
Review and update remuneration packages or other related documents and/or agreements accordingly.
Employers are required to contribute additional money into their employee’s super accounts in line with Superannuation increase.
What documents should be reviewed and updated or what documents need to be provided?
You can either:
Update all Agreements, Employment Contracts or any other related documents that stipulate the Superannuation Guarantee Rate increase and/or
Send employees a letter that stipulates that their superannuation contribution rate will increase
Contractual Obligations
The impact to employers of the increase will largely depend on how its employment arrangements are structured, what is provided for in the employment contracts, enterprise agreements and modern awards. There are three main possibilities:
Employment arrangement provides that the employee is to be paid their base salary plus the minimum superannuation contributions. The employer must make the increased contributions, but isn’t required to amend the employee’s contract to reflect the higher superannuation contribution. A letter on this occasion will suffice to send to employees notifying them of the increased superannuation contributions.
Employment arrangement provides that the employee is to be paid their base salary plus a specified superannuation contribution (eg 10.00%). The employer must make the increase contributions and should update their employment contracts to reflect the minimum level required rather than a set %.
Employment arrangement provides that the employee is paid a total remuneration package including superannuation contributions. No change required to contracts as the increase will be absorbed within the package rate subject to the new base salary component satisfying any applicable minimum rate of pay. Consideration should be made to the impact on employee morale, due to the wage reduction resulted from the increase in superannuation guarantee. This would need to be considered, communicated and a plan in place to mitigate any fall out.
HR Adviser Australia is able to assist with the review and updates of documents, contracts and the preparation of employee letters.
Questions
Am I able to reduce an employee’s remuneration package because of the increased Superannuation contribution?
An employer is not able to reduce the employee total remuneration package to substitute the half a percent increase. The half a percent Superannuation Contribution increase is in addition to the ordinary time earnings (base salary paid).
What is Ordinary Time Earnings constituted as?
This ATO checklist identifies payments that are considered as Ordinary Time Earnings, where superannuation contributions must be paid.
Is there still a Superannuation Guarantee threshold?
The $450 monthly minimum wage threshold to qualify for employer Super Guarantee contributions has been removed, therefore employers are now required to make super contributions for all their employees (including casual and part time employees) regardless of how much they earn. The only exceptions are employees are under 18 and working less than 30 hours per week.
Should you have any questions or need further clarification on the superannuation changes, please do not hesitate to contact
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