As we all know from the 1st July 2013 the Superannuation Guarantee Rate will be increasing from 9% to 9.25%. The increase in contributions will continue each year until reaching a level of 12% as outlined for the financial year 2019/20.
With many recruiters in speculation at the moment, as to whether or not to charge the increase back to their end client especially in terms of any existing contracts that go beyond 30 June 2012. So with this in mind…What decisions are recruiters making to accommodate the increase?
We would like to hear your thoughts and how you are planning to manage the change.
Please see this article, for more information on the change;
The Federal Government is changing Super in Australia through the ‘Stronger Super” reforms. These planned developments aim to make the super industry more efficient for employers, employees and super funds. The changes mean that employers will need to plan, review and update their super processes.
Why are these changes taking place?
These changes are based on the finding of the Government’s ‘Super System Review’ carried out in 2010 by Jeremy Cooper. Basically, Australia was found to have an aging population and for most people the Age Pension is not sufficient to live comfortably in retirement.
What is changing and when is it happening?
Superannuation Guarantee rates will increase incrementally from 9.0% to 12.0% by the financial year 2020. These changes begin this year from 1st July 2013, with an increase from the current 9.0% to 9.25%. The increase in contributions will continue each year until reaching a contribution level of 12% as outlined for the financial year 2019/20.
These changes are illustrated in the table below:
Super Guarantee %
There is also another change accompanying the increase in the Super Guarantee contributions; this is the removal of the age limit on contributions. At the moment, contributions stop for employees aged 70 years plus, this change will also take place this year from 1st July 2013.
What does this mean for Employers?
Employers will have the challenge of handling this increase in the Super Guarantee contribution and the prospect of continuing Super payments to older employees.
There are essentially two options and the choice between them is strongly determined by the approach the employer has taken or will be able to take in the future in terms of how remuneration is presented and talked about.
It is expected that, over time, employees’ wages and salaries will increase. Almost inevitably, the annual increase in the Australian minimum wage drives increases in payroll costs. With the increase in the Super Guarantee contribution, employers have two options, either;
However, where wages/salaries are discussed as “base plus super”, it is more difficult to incorporate the Super Guarantee contribution costs in wage/salary increases. In organisations that advertise and discuss “salary packages”, it will be easier to incorporate the increased Super Guarantee contribution in wage/salary increases. Otherwise, the increase in superannuation contributions may result in a decrease in employees’ take home pay.
Things that Employers Can Do to Prepare for the Changes to Superannuation
Employers need to start thinking about how the increased level of Super Guarantee contributions will affect their employees’ remuneration packages and the overall payroll costs. It is important to pay the correct amount of Super Guarantee; otherwise employers will have to pay the SG Charge made up of overdue SG contributions, interest and administration fees. The SG Charge is not tax deductible; however correct Super Guarantee payments on time are tax deductible.
All SDP’s clients will be ready for these reforms, as our systems and process will be automatically updated.
To ensure all employers are ready for the changes ahead, from the 1st July 2013:
It is essential for all employers, to take the necessary action, as ignorance will only hinder continued successful business operations and companies will be penalised with SG Charges.
SDP’s Clients will enjoy peace of mind as we will take care of all these factors for you.
Basically we are wondering what recruiters are planning to do to accommodate this change. Any feedback would be greatly appreciated.
Thanks in advance