Superannuation is on the Rise

Effective 1 July 2023, the Superannuation Guarantee will Increase from 10.5% to 11% of ordinary time earnings. The Superannuation Guarantee Cap (above which Superannuation Guarantee contributions are not payable) will also increase to $62,270 per quarter.

If you pay your employees wages or salary plus super, this increase will need to be applied in addition to current contributions. On the upside, this is a good-news story you can share with your employees in a positive way. HR Gurus can draft an announcement for your team if you like.

For employees on a remuneration structure that is inclusive of superannuation, your business may be in a position to decide whether the Superannuation Guarantee increase will be absorbed into the employee’s existing annualised salary or whether the increase will be added to the annualised salary.

You will need to have your employment contracts checked to ensure that you can legally absorb the increase – the devil is in the detail here, so don’t just assume.

If you are paying award-based annualised salaries that include superannuation, you will require an updated BOOT Test to confirm that you are still meeting Award minimums on base rates and entitlements, after the superannuation increase has been absorbed.

By the way, if you are paying an annualised wages (or a rate incorporating Award entitlements) and have never done a BOOT Test, you are playing with fire. Once again, don’t assume – errors resulting in underpayment can amount to allegations of wage theft.

While absorbing the increase into the existing annualised salary appears to be the cheaper option for the business, it may turn out to be the opposite.

Increasing Superannuation Guarantee payments by absorption into the remuneration package will effectively reduce your employee’s take-home pay at a time when living expenses are increasing at the highest rate in years (and let’s face it, everyone is feeling the pinch right now).

A drop in disposable income will leave a bad taste in people’s mouths and could become a catalyst for them to start looking elsewhere. Given the challenges many businesses are facing in attracting and retaining good staff and the resultant generous and ever-increasing salaries on offer, it’s likely that your best people will be snapped up elsewhere. So while the increase of a 0.5% cost on salaries in your business may be tempting to offset by absorption, it could end up costing you significantly more.

Need more information or assistance!

Reach out to HR Gurus for guidance on the best way for your business to tackle this.

Written by Louise Betts