Part 1: Potential pay decrease from 1 July 2013 - Understanding Your Superannuation Series!

Super, Super, Super - that's all that seems to be in the media right now. So I have decided to do a small series educating people on what changes are actually happening with superannuation and how they affect you.

Employers currently pay 9% of ordinary times earnings to an employee's superannuation fund, this is referred to as the 'ESG' - Employer Superannuation Guarantee. This will transition to 12% of wages over the next 6 years, starting from 1 July 2013 to 1 July 2019. The increasing increments are below. 


Increasing the superannuation guarantee rate from 9 to 12%

Year	Rate (%)
2013-14	9.25
2014-15	9.5
2015-16	10
2016-17	10.5
2017-18	11
2018-19	11.5
2019-20	12

The key issue that affects employees and employers about this change is who will pay for this increase in super. Employers using a base wage plus superannuation may expect to have to pay the superannuation increases. But, those employees on a remuneration package including super will have to  pay the difference, which means a decrease in take home pay.

Here's an example of the difference in how your wage package will change with the 12% increase:

Super at 9%

Employee 1 - Base wage of $80,000 plus super (currently 9% - $7,200) - Gross Wage: $80,000 (before tax)

Employee 2 - Remuneration package of $87,200 including super - Gross Wage $80,000

Super at 12%

Employee 1 - Base wage of $80,000 plus super (now 12% - $9,600) - Gross Wage: $80,000

Employee 2 - Remuneration package of $87,200 including super - Gross Wage: $77,600

For Employee 1, the employer is paying the 3% super increase. But, for Employee 2, the employee is paying the 3% super increase with a resulting $2,400 decrease in their pay.

Whilst the super increase will be felt in small increments, its important for employers and employees to understand what's happening and communicate between each other.

For a review of how the changes affect your businesses payroll or your wage, please contact us.