Small business squeezes wages as rise in super comes into effect: SmartCompany survey

One in two small business owners plan on giving their staff lower pay rises this year to help offset the government-mandated .25% increase in superannuation, according to a SmartCompany survey.

Effective from July 1, employers now must pay staff 9.25% in superannuation, up from 9%.

The survey, taken by 212 SmartCompany readers, allowed employers to list all the ways they planned to help offset their higher wage bills, which are set to keep rising until the superannuation guarantee hits 12% in 2019.

Nearly four in ten (39.4%) said they planned to hire fewer staff as a result of the increase, while 13.3% said they intended to cut back on staff amenities.

One in three (33.5%) said they planned to squeeze their profit margins and absorb the cost, while 14.9% said they would find savings in areas other than staff costs.

The survey shows the rise is a controversial issue, with small business owners split on its desirability.

Half (103 out of the 206 respondents) said they disagreed with the increase in superannuation, while 45.1% said they approved. Another 10 respondents said they were undecided.

Most of those who supported the increase cited the necessity of helping people save to pay for their retirement. Several said that given the ageing population, the rate of superannuation savings should be quickly increased beyond the 12% figure being worked towards.

Many offered qualified support, saying that while Australians do need to save more for their retirement, the timing of the increase wasn’t ideal.

Some said that while they agreed with the increase in principle, in their business, it would likely result in them hiring fewer staff or outsourcing their labour costs as many factors meant they could no longer afford to pay Australian workers.

Among those who disagree with the rise, most said it was a cost of doing business they could not afford.

Many said they resented how the government had sold the increase as something it paid for, as opposed to a cost being borne by employers and employees. This was also raised by many who supported the increase.

Others said that while the rise increased staff costs for them, their employees never actually considered their superannuation entitlements in salary negotiations, as it wasn’t available to them as take-home pay. This meant they would have to absorb much of the cost, they said.

Several respondents questioned the entire superannuation system, saying that it often delivers poor returns, and that it wasn’t fair for employers to have to shoulder the burden of their employees’ retirements. Others said they didn’t trust that the government wouldn’t simply tax away any extra money raised by this increase to pay for future spending.

Far fewer employees than employers took the survey, but of the 18 who did, nine (50%) said they approved of the increase, eight said they disapproved, and one was undecided.