Ready or not: The pay rise you’re giving employees this year, and the year after…

One in five Australian companies hasn’t made any preparations for the higher superannuation guarantee they have to pay their staff from July, a new study has found.

Human resources firm Mercer’s Superannuation Challenges Pulse Report asked 270 Australian companies about what steps they’ve taken in relation to the increase in the superannuation guarantee. Employers pay 9% of employee wages into their superannuation accounts. The government has mandated that the amount they have to pay will rise 0.25% every year until July 2019, when the superannuation guarantee will be 12%.

More than one in five (21%) of those surveyed hadn’t looked at the cost impact the rise in the superannuation guarantee would have on their bottom line. Another third of employers were aware of the impact, but hadn’t made a decision as to how to deal with it. For the large companies surveyed – many of whom had thousands of workers ?- the increase in the superannuation guarantee will cost them millions of dollars if not offset by wage cuts in other areas.

A third of those surveyed had decided how they would respond to the changes – the most common response (given by 75%) being to pay the additional super on top of current wages, effectively giving everyone a pay rise.

Garry Adams, the head of Mercer’s Talent business, said while he was surprised by the results, further investigation led him to conclude the issue for large companies was very complex.

“On the one hand, a 0.5% increase to the wages bill is a significant cost for organisation to absorb, while on the other hand employee and union expectations are clear that organisations should do the right thing and add the increase on top of the current remuneration package.  To not do so paints the organisation in an unfavourable light and many are unsure as to whether they’re prepared to take this employee relations battle on.

“In this situation a carefully planned approach is necessary so that organisations strike the right balance between the messages they send to their employees with the need to manage costs.”

Complicating the matter is that whatever companies chose to do this year will set a precedent in how they respond in the next six years the guarantee is scheduled to rise.

Generally, what will happen to employer’s wages given the superannuation guarantee has not been well communicated, Adams says.

“Given many organisations have yet to make a decision or are in the process of making a decision it is likely that employees are somewhat in the dark over how the organisation will respond to the change.

“However, there are also a number of organisations who are effectively communicating their approach because from the outset they have treated this as a significant change they need to respond to and implement and have the resources to do this. These organisations are also likely to invest more in identifying alternate ways to fund the cost increase, providing more support to managers when holding pay conversations with their employees and finally more broadly reminding employees of why their organisation is a great organisation to be working for.”