SG increase a communication imperative for HR

by Stephanie Zillman10 Apr 2012

SG increase a communication imperative for HRThe super guarantee (SG)  will increase incrementally  from nine to 12% by 2019/20. This means one of two things will happen: either the employer takes the change as a direct, and potentially huge, increase in labour costs, or it convinces its employees to see the increases as part of the normal pay increases they will be expecting over the next seven or so years.

In addition to increasing the level of SG contributions to 12%, the legislation also removes the age limit on SG contributions. Presently, SG is not required for an employee who is aged 70 or more.

Schedule of increases in the level of SG contributions

Year starting on

Super guarantee

1 July 2013


1 July 2014


1 July 2015


1 July 2016


1 July 2017


1 July 2018


1 July 2019 and after


Workplace Relations Minister Bill Shorten insists that, rather than constituting a ‘tax on business’, the super increase will be covered by ‘deferred wage increases’ worked out between employers and employees during wage negotiations, and that an increase in super means an increase in remuneration or wages by any other name.  In other words, over the next seven years employers will be able to present SG increases as another form of pay increase, and employees’ demands for increases in their wage excluding super will be correspondingly lower. If worker X is expecting/demanding a 3% wage increase in 2014-15, for example, her employee can present this in the form of a 2.5% increase to her wage excluding super, plus a 0.5% increase to her super.

The real challenge for HR departments, then, will be in ensuring wage negotiations follow this pattern – or specifically, making sure employees perceive SG to be part and parcel of their remuneration. The challenge will be greatest in companies or industries where pay is usually expressed and perceived to be net of super.

A recent survey revealed that 95% of workers believe that job salaries should not be advertised as a figure inclusive of super and that the fairer way to advertise a salary package was with a base salary figure plus super. More to the point, 31% of respondents did not see superannuation as a legitimate component of their salary package but rather as an ‘obligatory payment’ that is the responsibility of their employer.

These figures would suggest convincing workers that superannuation is a legitimate part of their remuneration will not be easy – especially younger ones for whom super is still a distant concept . “It’s going to be an uphill battle for employers to convince young workers that their future wage increases will have a superannuation component, when their priority is very much on the cash they receive in their fortnightly pay packet,” Tudor Marsden-Huggins from Employment Office says.

The attitudes towards superannuation can vary greatly across industries. “People working in finance or accounting fields seem to understand that super is a significant cost to an employer and look at the salary package more holistically. In other industries the tendency is to focus on the cash salary and treat superannuation as merely an afterthought,” says Marsden-Huggins.

Practical steps

Natalie Gullifer from Lander & Rogers Lawyers advises employers wanting to manage the SG increase well to consider the following key points:
  • Start thinking about how the increased level of SG contributions will affect remuneration packages from 1 July 2013. In time for the commencement date, employers will need to make sure that their payroll systems are configured to remit the increased contributions to each employee’s superannuation fund.

  • Any implications for employment agreements and remuneration packages will also need to be considered, and this may require employers to review all staff contracts.

  • Consider any older workers aged 70 or more, as SG contributions will need to be made for them from 1 July 2013.

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