Superannuation, minimum wage and Award changes from 1 July
Posted on June 30, 2021
Another financial year is upon us, and 2021-22 brings some important changes to the industrial relations landscape. There are significant superannuation changes to be implemented from 1 July 2021, as well as increases to the minimum wage and Award rates. These changes are going to impact most businesses and it is critical that you understand how they affect you.
As of 1 July 2021, the national Superannuation Guarantee rate will rise by 0.5%. The Superannuation Guarantee is the minimum percentage of an employee’s ordinary time earnings that an employer must pay into a nominated superannuation fund on behalf of the employer. The currently the rate is 9.5%. As at 1 July this rate will rise to 10%. There will then be a 0.5% rise each financial year until the rate reaches 12% in 2025. Careful consideration will need to be given to how this affects your workers.
The impact on workers, and employer budgets, will largely depend on the precise terms of employment agreements. The terms of the employment agreement will determine whether the additional 0.5% Superannuation Guarantee contribution must be added on top of the employee’s existing salary (that is, there is no change to the employee’s take home pay, and the employer wears the additional superannuation cost), or it can be incorporated into the existing remuneration package total (that is, the additional contribution is taken from the existing pay package meaning the employee’s take home pay is reduced). Therefore, it is critical that all employment contracts are reviewed to ascertain whether the remuneration paid to employees is inclusive or exclusive of superannuation.
For employers who pay a “total remuneration package” or “all inclusive remuneration package” to employees, they will have the option of utilizing that “all inclusive” arrangement to absorb all or part of the increase. A number of organisations have already declared that they will be taking this approach. This may mean those employees will take home less pay each pay cycle, with a greater contribution being paid to their superannuation fund.
For the employees who are paid an exclusive salary (i.e. exclusive of superannuation), the employer will need to pay the addition superannuation guarantee amount without impacting on the employee’s take home pay.
For employers who offer a salary sacrificing arrangement for their workers, they should note that they cannot use an employee’s salary sacrifice contributions to account for the additional percentage increase. Any contributions made by an employee through a salary sacrifice scheme are not considered “employer contributions” for the purpose of the Superannuation regime. Ordinary time earnings, which is the base used for calculating minimum employer contributions, includes any sacrificed amounts through a salary sacrifice scheme.
Minimum Wage Increases
On 16 June 2021 the Fair Work Commission handed down its 2021 Annual Wage Review decision.
This decision increased the national minimum wage by 2.5% to $772.60 per week, or $20.33 per hour. The decision also resulted in a corresponding increase to minimum Award rates.
For the majority of Awards this increase applies from the first pay period on or after 1 July 2021. However, the Commission did identify some Awards (those largely covering industries most significantly affected by COVID-19 restrictions) which will have the increase apply from 1 November 2021.
The Awards which have had the commencement date for increases delayed are:
- 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 2020
- 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
In addition to the above, the General Retail Industry Award 2020, which covers a very substantial proportion of the working population, will have the increases come into operation on 1 September 2021.
For any employer who has Award covered employees, these changes will have an impact. For employers who pay above Award rates, you may be able to absorb the increases within the existing payments. However, you will need to determine that the existing above Award payments are no less than the new Award rates. If they fall below the minimum, you must pay the new minimum amount.
For any employers who have employees covered by an enterprise agreement, you will need to ensure that the base rate of pay provided for in the enterprise agreement is at least equal to the new minimum amounts.
We strongly recommend you seek expert legal advice to determine how these industrial changes will impact you and to receive advice and guidance on how to navigate your way through them.