You may remember that a couple of weeks ago we released a blog on the required increase to superannuation contributions, due from 1st July 2013. Well, in the interim, I have heard more and more stories of employers reducing their employees’ base salaries to compensate for the increase in contributions. Can employers do this? No, no, no!
For starters it is a breach of contract to reduce employees’ salaries and if you are paying close to the minimum Award salary anyway, you may risk a breach here as well. The other potential internal risk you might face is resignations which, should you want to replace people, would cost you far more than the super, not to mention the adverse impact on morale and productivity.
Employers need to consider, as hard as it is sometimes, that this is a cost to doing business in Australia. There is a reason why it is a phased increase and also why we have had a long lead time to introduction. It was to enable businesses to factor it in to their budget forecasting and to make a decision to either absorb the cost or increase prices.
An alternative option is to consider, as part of your employee value proposition, paying above the minimum super – say 13%, as there are tax benefits for you and your employees.
So what is your business doing? Have you heard of any instances of salary reductions happening in your industry?