Aussies headed for a shock pay cut on 1 July

Australians could receive a shock in their pay packets after 1 July this year.

While the government’s announcement that it would not stop the legislated increase of 0.5 per cent to the superannuation guarantee (SG) going ahead in 1 July this year was greeted as a win for employees, some employers are looking to take the increase out of workers’ take-home pay. And the government may be powerless to do anything about it.

Depending on what type of employment contract a worker has, they may be forced by their employer to pay for their own super increase.

Read more: What are the different contributions you can make to super?

Workers whose employment contract states a base salary plus super will be safe from a pay cut when the superannuation guarantee rises from 9.5 per cent to 10 per cent on 1 July, but those workers with an inclusive superannuation package will be left to the whim of how their employers want to treat the increase.

This potential cut in the take-home pay of workers could then happen annually with the superannuation guarantee set to rise by 0.5 per cent every year until it reaches 12 per cent by 2025.

The number of employers planning to make their workers pay for their own super increase is surprisingly large, according to a report by asset management firm Mercer.

Read more: Superannuation co-contributions explained

According to the Mercer report, a recent survey of businesses found that of those companies with a choice, only 30 per cent said they planned to pass the super rise on to their employees, while one in five bosses said they had not yet decided whether or not to pass it on.

“Asking employees to absorb or split the additional SG, or even subsume the increase in existing above-minimum employer contribution all might be perceived as putting economics before empathy,” the Mercer report warns.

“Moreover, reducing the real or perceived employee benefit is likely to put pressure on employee engagement and retention. Employers should be mindful of the current – and extraordinary – socio-economic context when strategising their SG approach, not just for 1 July this year, but towards 2025.

Read more: Older Australians paying too much interest on property loans

“Reducing take-home pay (by passing the SG increase on to employees) in the face of stagnant wage growth is likely to impact employee advocacy,” the report warns.

“Employees are potentially more likely to seek new opportunities in order to secure salary increases.”

Labor’s superannuation spokesman, Stephen Jones, told that employers should simply “do the right thing”.

“Real pay has been frozen for a decade,” he said. “The 0.5 per cent super increase has already been delayed for eight years and is less than $6 a week for average workers.

“Businesses should not use tricky words in an employment contract to avoid doing the right thing.”

Australian Council of Trade Union (ACTU) president Michele O’Neil told it was unacceptable for employers to try and deny workers the true super increase.

“It is absolutely shocking to me that employers would be trying at this point to try and avoid paying that small increase in superannuation,” Ms O’Neil said.

“For the economy, and for our social security and pension system, we’ll be better off if people have enough money to retire on and retire without living in poverty.”

Superannuation minister Jane Hume told that she had no plans to step in and stop employers from taking part in the practice and claimed the government always knew that a superannuation increase was a trade-off between wage increases.

“Despite months of Labor and Industry Super Australia denying the trade-off between super increases and take-home wages, ignoring the findings of the Retirement Income Review, the RBA, Grattan, ACOSS and others, the government has always been aware that there is in fact a trade-off,” Ms Hume said.

Do you know what your employment contract says with regards to superannuation? Have you spoken to your employer about what will happen to your pay on 1 July? Is your employer asking you to pay for your own superannuation increase? Should the government step in to stop this from happening? Why not share your thoughts in the comments section below?

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Written by Ben Hocking

Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.

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