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Wages and Super Guarantee Updates – How this May Affect Your Business
In the ever-changing landscape of the Australian legislative framework, particularly around business-related matters, it can be difficult to keep up. You may be aware of information released over recent months in relation to changes to wages and the superannuation guarantee, and as the 2021/22 financial year begins, those changes will start to come into effect. In order to ensure your business remains compliant, it is critical that you understand the wages and super guarantee updates, and how they impact you and your staff.
Fairwork Australia conduct an Annual Wage Review and following the most recent round they have announced a 2.5% increase to the national minimum wage. An increase has also been announced for award wages. Obviously, this is welcome news for employees currently on minimum wage, or those working under an award, and will no doubt have a positive impact on their hip pocket (as well as increasing income tax revenue for the Government). For businesses, though, this change means they are required to ensure that all employees are being paid a wage in accordance with the national minimum and award requirements. To ensure your business remains compliant with the requirements set out by Fairwork Australia, it is strongly recommended that you familiarise yourself the information on this page.
Aside from the obvious moral issues around underpaying employees, the penalties for not remunerating workers in accordance with the relevant award or contract agreement can be significant. Maximum fines of $12,000 per underpayment matter for individuals and $63,000 for corporations are in place, signifying the importance of ensuring you are paying your workers the right amount.
So, what should you do? First and foremost, conduct a review of your staff wages. This information should be easily accessible via your payroll software. Compare this with the relevant awards for your staff (if any), as well as their employments contracts. Should there be any discrepancies, it is best to follow the information on the page linked earlier, and take the necessary steps to rectify any underpayment issues before things get worse.
Super Guarantee Updates
Effective 1 July 2021, the Superannuation Guarantee (SG) paid on behalf of employees will increase from 9.5% to 10%. Over the next five years, the rate will increase at 0.5% increments to 12%. Much like the increase to the minimum wage and updates to some award payment rates, this is welcome news for employees in the long-term, as they will see an increase in contributions to their superannuation fund – where they will ideally reap the rewards when it comes time for them to retire. For employers using payroll software (e.g. Xero, MYOB) and reporting through Single Touch Payroll (STP), most users will find that the SG rate will update automatically on 1 July 2021 (and subsequently on 1 July for each of the next five years), assuming they have the calculation setting on “Statutory Rate”. This means an automatic increase from 9.5% to 10% on any gross employee earnings exceeding $450 per month.
Note: If you are processing a pay run on Thursday 1 July 2021 for the period ending 30 June 2021, but the scheduled payment date is 1 July 2021 or later, then superannuation will be calculated at 10%. Please keep this in mind when processing your next pay run and adjust where appropriate. MYOB and Xero have some information for their users which may make the transition a bit smoother, so feel free to check out those links: MYOB; Xero.
Wages and Super Guarantee Updates – Looking Ahead
Payroll and Superannuation changes will be an unavoidable part of the evolving business landscape over the coming years, and particularly over the next five with the incremental increase to super contributions. As is the case with many other compliance matters, any issues should be addressed and resolved sooner rather than later. If you’re unsure as to whether your wages and SG contributions are meeting the requirements set by legislation, seek professional advice and support. Remember – directors of companies found to be uncompliant could be personally liable for any shortfall – so make sure you’re doing the right thing!
If you require assistance updating the SG settings in your payroll software, please do not hesitate to get in touch with the CFO2GO team at McKinley Plowman via our website, or call us on 08 9301 2200 (Joondalup) or 08 9361 3300 (Victoria Park).
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