Can your employer dock your take-home pay to meet the new 10 per cent super increase?

Every Aussie worker is being encouraged to check their contract as soon as possible for three words that could cost them a fortune.

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After much kicking and screaming, the federal government has agreed to an increase to the Superannuation Guarantee, that is, the amount employers must pay into their workers super funds, from 9.5 per cent to 10 per cent from July 1, 2021.

For many, this will mean a welcome increase to overall remuneration with your take-home pay staying as is, and your employer tipping more into your superannuation, helping you in retirement.

That additional 0.5 per cent many not sound like much but it adds up over time. Compound interest is very powerful.

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Aussie workers have had their super contributions increased from 9.5 per cent to 10 per cent.

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Using a research agency’s super calculator, let’s say you are 30 years old now, female, earn $70,000 before tax and have a current super balance of $50,000. If your employer’s contributions had stayed at 9.5 per cent without any increases over the coming years, you will have $402,206 to support you in your retirement.

By contrast, using an industry super fund calculator which reflects the increase to 10 per cent and scheduled further increases to employer contribution rates from 2021 through to 2025 to 12 per cent, you’d end up with $562,828 by the time you retired. That’s the difference of $160,622.

These comparisons aren’t quite like-for-like, but give you a sense of the difference small increases can make over time.

So, the increase is unequivocally a good thing for workers.

However, reportedly some employers, including some of the largest and most profitable companies in Australia, are considering ‘absorbing’ the increase in super through workers salaries, that is, reducing take home pay to meet the increase. So, is that legal?

For workers paid pursuant to an award, superannuation must be paid in addition to your wages. There is no capacity for an employer to ‘absorb’ the super increase from your wages.

For many whose pay and conditions are set by enterprise agreements, the situation will be the same, though the wording will be important.

For workers who have written contracts of employment which provide that their remuneration is “inclusive of superannuation” or that superannuation forms part of a “total remuneration package”, it will really depend on the wording of the remuneration clause and the terms of the contract as a whole. The answer is not clear cut.

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Check your contact to see if you can insist your employers contributes more to your super.

For example, a contract of employment which expressly provides that remuneration is “inclusive of 9.5 per cent superannuation”, may mean that an attempt to reduce someone’s salary by a commensurate amount to meet the new 10 per cent rate without their agreement, would be unlawful.

If your contract expressly makes clear that your base salary is “$X amount, plus superannuation”, then, absent agreement from you, an employer will not be able to unilaterally reduce your take-home pay to meet the new rate.

Unsurprisingly, there are many different variations on remuneration clauses in employee contracts.

This issue has a real impact in that, going back to our example, the worker who is having the 0.5 per cent super increase removed from her take-home pay, effectively loses out on $350 gross in the hand each year.

With further increases to the superannuation rate mooted, it’s critical for workers to know their rights and where they stand if an employer is trying to have their workforce ‘absorb’ super increases.

The increase in super is due to take effect on 1 July 2021. If in doubt, get in touch with your union or an employment lawyer.

Patrick Turner is a workplace lawyer with Maurice Blackburn Lawyers.