Leading small business group rejects bid to extend super to teenage workers

A leading small business group said an end to age-based discrimination in super would cost jobs.

The Council of Small Business Organisations Australia (COSBOA) has rejected a push for workers under age 18 to be included in the superannuation system, claiming it could cost jobs.

COSBOA CEO Luke Achterstraat told news.com.au: “It’s costly to employ people at the moment with acute labour shortages and adding super to a cohort of younger workers would just make it more expensive to employ people who obviously aren’t motivated by super at this point in their careers. The timing would be unfortunate for a change like this.”

Lobby group Industry Super Australia (ISA) has been pushing for employer super contributions to be extended to all workers under 18s.

Currently, under 18s only receive employer super contributions if they work more than 30 hours a week for the same employer, which means 92 per cent of teenage workers are ineligible.

Most under 18 workers currently work less than 30 hours a week. Picture: Industry Super Australia.

All other workers currently receive super contributions equal to 11 per cent of their pay.

Mr Achterstraat said many small businesses are having to pay above award rates to attract workers due to staff shortages, something employers may not be able to do if the super scheme is extended.

“Adding super will either make that person 11 per cent more expensive to employ or it would be taken out of their salary meaning they’d get less take home pay,” he said.

“Obviously a lot of high school age students seek casual work for some pocket money and the real driver for them is to have cash for discretionary spending.”

If the super guarantee was extended to workers under 18, ISA report Super Start to Work found that 375,000 teenage workers across Australia would receive an average of $885 each from their employer in super every year.

For a teen who began working at age 15, that would total more than $2,600 by their 18th birthday, and would grow to an estimated $10,200 (in today’s dollars) by the time they retire on their 67th birthday, thanks to the way super is invested.

“That’s a huge amount of money and the fact that I’m working alongside colleagues that are getting paid super and I’m not isn’t right,” 15-year-old Robyn told news.com.au.

15-year-old worker Robyn said it’s unfair that under 18s are “singled out”. Picture: Supplied.

Robyn, from Sydney, works around four hours a week at grocery chain QE Foodstores.

She said it’s unfair that under 18s are “singled out” as the only group of workers not to receive employer super contributions.

“I’m working equally as hard as other employees and my retirement should be considered equally as important,” she said.

She rejects Mr Achterstraat’s claim that younger workers are only interested in earning money to spend on discretionary purchases.

“I’m not only working for money for now but I’m saving for the future and getting super would help with that.

“It’s so unfair, and there’s no way we would be able to change this regardless of our opinion because we can’t vote.”

When the super system was introduced in 1991, teenagers, workers over 70 and those who earned less than $450 a month were excluded.

This was due to concerns that small super balances would be eroded by fees and insurance costs, and to minimise the administrative burden on businesses for what would have been small super contributions.

But due to recent changes, fees are now capped at three per cent a year for members with a balance of less than $6,000, and insurance cover is no longer automatically applied to the accounts of members aged under 25 with a balance of less than $6,000.

In 2013 the maximum age limit of 70 was abolished and in 2022 the earnings threshold of $450 a month was abolished.

This means teenagers are the only group of workers now excluded from the super system.

Head of super at the Institute of Financial Professionals Australia, Natasha Panagis, told news.com.au that the digitisation of payrolls meant that the administration burden “is no longer an issue”.

“A lot of the reasons for why minors were excluded are now outdated,” Ms Panagis said.

Council of Small Business Organisations Australia (COSBOA) CEO Luke Achterstraat rejects a bid to pay super to under 18s. Picture: COSBOA.

Instead, Ms Panagis said the current system adds a burden on employers who have to track the birthdays and hours worked by teen workers closely.

“Any time there’s a carve out it does add to complexity.”

ISA said there is “significant confusion among employers and employees regarding super entitlements for U18 workers”.

It agrees that removing the 30-hour threshold will remove a significant administrative burden for employers, a job that is made more complex in industries where casual workers are prevalent, and where employers only pay super quarterly.

“The current U18s exclusion adds significant complexity for employers trying to administer super accurately,” the report said.

Mr Achterstraat said that while small businesses could accommodate the change within their systems, the 30 hours a week threshold was “reasonable and logical” and there wasn’t “a strong case to change the status quo”.

Small businesses are the largest employers of under 18s in Australia with data from the most recent Household, Income and Labour Dynamics in Australia (HILDA) survey showing 38 per cent of teenage workers work for a business with less than 20 employees.

A survey commissioned by ISA found 72 per cent of respondents agreed in principle that rolling out super to under 18s is a good idea.