The Increased Cost of Doing Business

The Increased Cost of Doing Business

The Federal Government has announced a progressive increase to the Superannuation Guarantee Contribution (SGC) from the current 9% to 12% between July 2013 and July 2020. While the increase (as shown in the table below) has met with fairly broad approval, there has been much debate as to where the additional cost is going to be absorbed.

Employees with a Cash + Super employment contract would expect to see a rise in their overall package. However, those employees with contracts based on Total Employment Cost (TEC) may well be asked to forgo some of their cash salary to meet the increased contribution to Super.

Much of the commentary coming from on-line blogs and industry news indicates that most companies and organisations are either unaware of the changes or simply have not considered the impact on their businesses. However, one snap survey revealed that over one third of the respondents who offer fixed remuneration (TEC) are intending passing the cost onto employees. i.e. in the form of reduced cash salary. Others have said that they will absorb the cost but it will have an impact on the next round of salary negotiations.

This (passing on the cost to the employee) probably wasn’t the intention of the Government when they announced these changes however the current economic climate has seen a greater emphasis on cost saving by employers. This, coupled with their desire to protect their valued employees, is going to be a very delicate balancing act.

An employee benefits program, with an effective use of salary packaging can have yield a significant reduction of salary on-costs such as Payroll Tax and WorkCover Premiums. This together with efficiency and cost savings in Fringe Benefits Tax can go a long way to absorbing the increased cost of SG as well as aiding your attraction and retention strategies.

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