Superannuation is predominately regulated by Federal legislation, with the Superannuation Guarantee (Administration) Act 1992 imposing a nine per cent charge on ordinary time earnings of $450 or more per calendar month. However, as Modern Awards are allowed to contain superannuation provisions, it is essential that businesses understand how superannuation may be affected by Modern Awards.
The implication to superannuation within Modern Awards include:
- wider span of hours being ‘ordinary time earnings’;
- superannuation payable on wages of less than $450;
- contribution of superannuation on workers compensation; and
- nominated default superannuation funds.
A Modern Award commonly provides for different ordinary hours of work compared to the award that previously covered a business. Specifically, hours that were previously deemed overtime and consequently paid at overtime rates may now be ordinary hours of work. This is relevant for superannuation as contributions are made on ‘ordinary time earnings’, which includes ordinary hours but not overtime hours.
This means that a greater number of hours may now require superannuation contributions. Consequently, while an increased span of ordinary hours may contribute to lower overtime costs for employers, the cost of superannuation may increase as an indirect result.
Some Modern Awards also require contributions to be made on wages less than the legislated $450 per calendar month. For example, the Hospitality Industrial (General) Award 2010 requires contributions to be made on wages of $350 or more in a calendar month.
This means that employees that would not be entitled to superannuation under the Superannuation Guarantee (Administration) Act 1992 may be entitled to superannuation under the provisions of a Modern Award. Employers therefore must consult their relevant Modern Award as to whether it requires the payment of superannuation to employees otherwise not entitled.
Where employees are receiving workers compensation payments and have not yet returned to work, these payments are not ordinary time earnings and therefore superannuation is not payable under the legislation. However, Modern Awards commonly require employers to pay superannuation on the workers compensation payments received by an employee for a maximum of 52 weeks.
Where an employee is receiving workers compensation payments, it is important that businesses consult their relevant Modern Award to determine whether superannuation is payable.
The right of employers to utilise default superannuation funds has also been affected by Modern Awards. A default superannuation is a fund nominated by the employer to which superannuation contributions will be made where employees fail to exercise their choice of superannuation funds. Many Modern Awards limit the funds that can be utilised as default funds to those specifically nominated in the Modern Award.
However, any fund that was utilised as a default fund as of 11 September 2008 is protected and can be retained. This means that employers must be careful when implementing a default fund to ensure the fund is allowable under the relevant Modern Award.
Therefore, as Modern Awards may affect a business’ superannuation arrangements, it is essential that businesses have a good understanding of the superannuation provisions in their relevant Modern Award. For further information about Modern Awards and superannuation, call the Business Advisory Centre on 08 8300 0101.