The increase in the Super Guarantee (SGC) rate from 9.5% to 10% is just around the corner, commencing 1 July 2021. With this upcoming change, both employers and employees will need to understand what this increase means to business costs and to take-home wages.
How the employer deals with the increase may differ depending on the salary structures and agreements that apply to each employee in your business. There are several scenarios:
Where wages are paid under a super-inclusive package:
In the absence of a remuneration review, the employee will most likely have their take-home cash payment reduced by the amount representing the SGC increase. For example:
| Annual super-inclusive package | $120,000 |
| Super applicable (at 9.5%) | $ 10,410 |
| Gross wage | $109,589 |
With increased SGC (10%)
| Annual super-inclusive package | $120,000 |
| Super applicable (at 10%) | $ 10,909 |
| Gross wage | $109,091 |
Outcome: employee’s take home pay reduces.
Alternatively, the employer could consider implementing a pay increase to keep take-home pay the same as before the SGC increase. This increase obviously will impact business costs and budgets.
Where employees receive SGC on top of their cash income
In this instance, the employee continues to receive their usual wage, with the employer paying the increase in the SGC amount. Again, this additional cost needs to be reflected in the business’ budget.
Other remuneration and super arrangements
Some employers have top-up arrangements for super (eg 5% on top of the SGC rate). The impact of the SGC rate increase would need to be reviewed on a case-by-case/agreement by agreement basis.
So what steps to take now?
- Review your employment arrangements, to understand what options are available
- Decide whether to maintain take-home pay levels
- Have good communication with your team members – especially if your decision will impact their take-home cash
- Finally, as we start the new financial year – ensure your payroll systems reflect the new SGC rate.
If you would like to know more about how we can support you as a small business owner, please call our office on (08) 8172 9150 or email our friendly team.
