Does your business need to increase employee remuneration from 1 July 2021? Planning for Superannuation Guarantee Increase


Does your business need to increase employee remuneration from 1 July 2021? Planning for Superannuation Guarantee Increase

Planning for Superannuation Guarantee Increase

On 1 July 2021 minimum superannuation guarantee contributions (SGC) is set to increase from 9.5% to 10%. The SGC will increase in increments of 0.5% until 2025. Employers should be prepared to review the current remuneration arrangements of their employees to determine what changes (if any) are required to comply with the increase in SGC.

Set out below, we unpack some of the common remuneration arrangements to identify what steps are required to be taken by employers to accommodate the SGC increase.

The planned SGC increases are as follows:

Financial Year % SGC increase
Up to 30 June 2021 9.5%
1 July 2021 to 30 June 2022 10%
1 July 2021 to 30 June 2023 10.5%
1 July 2022 to 30 June 2024 11%
1 July 2024 to 30 June 2025 11.5%
1 July 2025 onwards 12%

Unpacking remuneration arrangements

Base pay inclusive of superannuation

  • No change is required to the total remuneration packages that include SGC.
  • The SGC increase will be absorbed within the package, provided minimum rates of pay are satisfied.
  • Employers will need to decide whether to reduce the employee’s take-home base pay or increase the SGC by 0.5%.

Award-covered employees

  • The SGC increase will require employers to increase their SGC rate.
  • Employees remunerated under an Award cannot be paid less than the minimum Award rate.
  • If employees are paid above the Award rate, employers may choose to reduce their take-home base pay to offset the SGC increase, subject to any contrary terms under the Award.

Base pay exclusive of superannuation

  • Where employees are paid their base rate plus a specified % of SGC, employers are required to increase the SGC by 0.5% from 1 July 2021.
  • The employee’s take-home base pay remains the same.

Removal of the $450 minimum threshold for SGC eligibility

From 1 July 2022, eligible employees who earn less than $450 per month will be required to be paid compulsory SGC. Employers should also be prepared for the removal of the $450 minimum threshold, especially where they employ a lot of casuals or employees below the age of 18 years who might not meet the $450 minimum threshold.

Key Takeaways

As the higher SGC rates come into fruition, it’s worth exploring your current employment arrangements to determine how employees’ pay is calculated and whether any changes are required to accommodate the SGC increase.

Employers should be mindful of the risks of making unilateral changes to an employee’s remuneration arrangements including claims for breach of contract, unfair dismissal or general protections claims under the Fair Work Act 2009 (Cth). In addition, cutting take-home pay runs the risk of harming workplace morale with the risk of losing valuable employees.

For assistance in accommodating the SGC increase and implementing any changes to employment arrangements contact our employment team.

 

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