The superannuation guarantee is increasing, which is good news for most given that funds are performing at record levels.

But one consequence of the rise has been largely overlooked – some employers are going to be taking the difference out of your regular pay. 

While you might have been happy to hear that more super is coming your way, research is showing that nearly two-thirds of firms are going to take the extra super out of employees take home pay, rather than add it to their existing package. 

This research was performed by consultancy Mercer, who asked 145 firms and 63% of organisations that pay staff with a ‘total package’ approach that is a salary ‘including super’, will deal with the increased superannuation contribution requirements by taking at least some money out of employees base salary. 

If you instead get paid a base rate, plus super paid on top of this specified salary, then your prospects are a little brighter. Mercer’s research says that 62% of firms with this pay structure would meet the difference of higher super costs out of their own pocket. 

While these surveys are not necessarily indicative of every single industry and their response to the increase, it is definitely a warning to keep a close eye on what happens to your pay after the increase comes into operation. 

The superannuation guarantee will rise from 9.5% to 10% on July 1 with legislation in place to make it reach 12% by 2025. This means that while for now a 0.5% increase in your superannuation could be disappearing from your pay, this figure could rise to 2.5% by 2025. 

Michael Vrisakis, a partner at Herbert Smith Freehills, told The Australian Financial Review that there is nothing in place to prevent employers from offsetting the rise in the super guarantee by reducing base bay. 

“For employees on a contract where the remuneration is inclusive of superannuation, the absorbing of the superannuation guarantee increase into the package without any increase [in the total package] is legally possible absent any contrary term of the contract and subject to any contrary voluntary decision by the employer.”  

The 2020 Australian Treasury ‘Retirement Income Review’ looked over every study that had ever been conducted on the relationship between higher super guarantees and wage growth. It concluded that “the weight of evidence suggests the majority of increases in the super guarantee come at the expense of growth in wages.”

Simply put, hearing you’re getting more super is not always good news.

Pin It on Pinterest