There is a significant question arising from the upcoming increases to the Superannuation Guarantee (SG): can the SG Increase be offset against an employee’s wages? In this article, we will delve into this hot topic question, looking into employment legislation and contracts to find out whether the super guarantee can be offset against your employees’ wages.

The Changes to the Superannuation Guarantee

Compulsory superannuation guarantee (SG) contributions have remained at 9.5% of an employee’s ordinary time earnings (OTE) since 2014. However, come 1 July 2021 this will change. 10% will be the new SG rate, with the percentage increasing by 0.5% each year till 2025. Some employers have anticipated the issue of whether these increases can be offset against their employees’ wages. Some have, in preparation, expressly written into employment contracts a right to adjust salaries to compensate for the SG increases. This poses a problem.

While generally, an employment contract will provide the employer sufficient authority to decrease an employee’s base salary to increase the superannuation guarantee contributions, if the employment contract specifies a salary as being separate from SG contributions, there are issues.

Issue 1: The Employment Contract

If the employment contract has the salary separate from SG contributions, it does not authorise the reduction of salary commensurate with the increased superannuation guarantee contributions. Any attempt by the employer to implement this reduction may lead to claims that the employer has effectively cancelled the employment contract, which if accepted, may lead to claims of wrongful and unfair dismissal.

Issue 2: Fair Work Act 2009

The Fair Work Act 2009 (Cth) explicitly prohibits unauthorised deductions from an employee’s salary where they are not for the employee’s primary benefit. A deduction to an employee’s base salary can only be implemented with the signed, written authority of the employee, and where it can be shown the deduction is for the primary benefit of the employee. Notably, a signed contract will not be considered written authority where the amount of the deduction is unspecified. 

So, can the Superannuation Guarantee Increase be Offset against Employee Wages?

In summary, the Superannuation Guarantee cannot be offset against an employee’s salary unless super is included in the salary amount stated in the employment contract. If salary and superannuation are separate, the SG cannot be offset against wages.

Are you Prepared for the Changes?

Knowing all this information regarding superannuation guarantee changes and obligations, you should now be asking how your business is positioned. 

  • Are you ready to manage the new issues posed by this increase? 
  • Are your contracts beneficial to both you and your employees? 
  • Are you equipped to handle your increased superannuation guarantee obligations? 
  • Is your business able to afford this increase?

Not only does this superannuation guarantee increase highlight the need to draft your contracts properly and intelligently (as not doing so can possibly lead to legal action against you), it also demonstrates the importance of knowing where you’re at as a business and the vitality of questions like ‘how will we afford this increase?’ If you’re an employer and you need some help or advice regarding your employment contracts or your cash flow, contact our team at The Quinn Group. We are lawyers and accountants with expertise in employment law, taxation and accounting matters for small businesses and can assist you with all your business needs.

Need Help?

If you would like help with respect to any area of improving your business and meeting your obligations, particularly employment law matters, contact our team of experienced lawyers and accountants by submitting an online enquiry, calling us on 1300 QUINNS or alternatively, +61 2 9223 9166 to arrange a teleconference or appointment. 

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