The Superannuation Guarantee (SG) rate will increase from 9.5% to 10% on 1 July 2021. Employers with staff on salaries that are inclusive of superannuation will need to make a decision – whether to incorporate the increase in the existing salary package of staff or apply the SG uplift as an increase to total employee costs.
Which way employers decide to go with handling the SG increase could be influenced by existing employment arrangements for employees.
Incorporating the increase
When the salary package of staff is ‘including super’, some employers may not be facing a rise in employment costs from 1 July 2021 as the decision could be made for the increased SG to reduce the amount of take-home pay for employees. According to a recent report in the Australian Financial Review, two-thirds of surveyed Australian firms currently employing people under this kind of ‘total package’ arrangement are planning to adopt this method to help keep a lid on employment costs. The ‘total package’ approach is sometimes used in individual agreements in the private sector.
Absorbing the increase
When people are employed on a base rate or salary package ‘plus super’, the employer may decide to meet the full cost of higher superannuation contributions and maintain the take-home pay of employees. Neither the national minimum wage nor award minimum wages include superannuation, which is good news for many low-income earners, although some studies have suggested that increases in superannuation can lower overall lifetime earnings through broader economic effects.