To ensure they meet their super obligations, employers are required to make the minimum superannuation contributions for their employees. How they are required to do that depends on the type of employment arrangements that were agreed with the employee.
Here are three possible scenarios:
- Salary plus super – the employer will be required to pay the increase in super on top of the employee’s salary, resulting in higher payments by the employer.
- Salary plus a specified percentage of super (above the minimum) – the employer may need to update the employment contract to reflect the new minimum SG rate, which is included in the total super percentage. As the employer is already paying above the minimum contribution rate, there is no impact to the employer.
- Total salary including super – known as Total Employee Cost (TEC) salary or Total Remuneration Package (TRP), this contract includes both salary and superannuation contributions. This means the employer can decrease the employee’s take home pay as a portion of the overall package, effectively making the employee absorb the increase in the SG rate through lower take home pay. If your employees are employed under this form of contract, it’s important to notify them of the impact to their take home pay before 1 July to avoid any confusion or distress.