Stop denying thousands of teenager workers their super entitlements: ISA

An ‘outdated and unfair’ law denying automatic super payments is costing hundreds of thousands of young workers more than $10,000 in retirement savings.

Industry super funds are lobbying the Albanese government to remove old rules denying automatic super entitlements to hundreds of thousands of teen workers, with new research showing it cost them more than $10,000 in retirement savings.

A new report by Industry Super Australia says the 1992 rule – which was introduced when the minimum employer contribution was only 3 per cent of earnings amid fears that administration and insurance fees could erode low super balances – blocks about $330m a year in super to the young cohort.

“This is an out-of-date law that discriminates against our youngest workers just as they’re starting out,” said Bernie Dean, chief executive officer of ISA.

“It’s unfair and the law needs to be modernised.”

In 2018, administration and investment fees on low-balance MySuper accounts were capped at 3 per cent per year, removing the risk of erosion.

Workers younger than 18-years of age are only entitled to the 11 per cent super guarantee contribution from employers if they work more than 30 hours per week for the same employer.

But the vast majority of young people under 18 work part time – technically less than those 30 hours, the report says, quoting the Household, Income and Labour Dynamics in Australia survey. Only 8 per cent work more than 30 hours a week.

According to the report, extending the super guarantee to underage workers would mean an extra 375,000 employees would receive $885 in extra super contributions on average this financial year.

“How can we explain that young workers don’t get super while an older colleague doing the same job does,” Mr Dean said.

“Locking thousands of teen workers out of our world class retirement savings system is not giving them the super start to work they deserve,” he added.

The report shows that about 52 per cent of underage workers do so throughout the whole year, contrary to the stereotype of teenagers working for pocket money during the holidays.

The super payments could add up to a $2,600 super balance increase for the average teen worker by the time they are 18 years old, with that then growing to $10,200 by the time they retire on their 67th birthday.

The industry group also argues that removing the 30-hour threshold could also create less red tape for employers.

“(It) wouldn’t just be fair for young workers, it would be good for the employers who have to face the administrative nightmare of keeping track of the weekly hours of a highly casual workforce,” Mr Dean said.