Accommodating Increasing Superannuation Contributions

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On 1 July, the percentage of employee salaries to be paid under Superannuation Guarantee Legislation as compulsory superannuation contributions increases from 9% to 9.25%. This is the first in a series of incremental steps increasing the superannuation guarantee from 9% to 12% over six years.

Egan Associates broadly supports the progressive increase in the funding level of retirement benefits. We also recognise, however, that funding the increased retirement payment within the bounds of agreed levels of annual pay has the potential to raise employment costs in an economy of variable capacity. Therefore, while we favour employees’ increased provisioning for their retirement, we endorse the total employment cost approach as an appropriate and realistic foundation for managing these progressive cost increases from 1 July 2013.

We are aware some leading corporations have embraced the total cost construct for many years. Employees at all levels understand the construct and accept contributions to their retirement are part of their negotiated employment cost and reward for fulfilling their obligations as employees.

There is another category of employer, which adopts a retirement benefit contribution at present in excess of 9%. One perspective for those organisations is not to adjust their current defined contribution level in order to retain their current margin over the Superannuation Guarantee, but to continue the provision of a retirement benefit in excess of the mandatory level.  We are supportive of those organisations retaining a contribution margin, albeit progressively diminished, until such time as there is an alignment between the mandatory contribution requirement and their present contribution on behalf of employees toward their retirement benefit.

Where organisations believe it is appropriate to retain their present contribution margin due to their prosperity and financial capacity or to retain competitive advantage, we would encourage them to do so, but do not believe it should be an imposed cost as employers endeavour to meet the expectations of a variety of stakeholders.

We note that many employers have been reviewing wages in relation to the output for Australian-based employees per dollar of cost. In a number of instances, these organisations have observed that the costs arising from enterprise bargaining agreements are challenging their capacity to compete globally, prompting them to increase the ratio of output per dollar of expenditure by relocating activities offshore or employing skilled residents from other countries on key projects under the government’s 457 visa program. 

We endorse a policy of retaining employment in Australia for existing residents where an enterprise’s competitiveness and capacity to pay supports such initiatives. In this context, we understand that the government’s initiative to support the relocation of skilled workers from the eastern seaboard to higher paying positions in Western Australia has not realised its objective.

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