Choice of Superannuation

[Gail]

Hi,

We are finding that with each new staff member that we engage that are electing to use their default superannuation fund rather than our Company superannuation fund. This is placing an increasing burden on our payroll staff and our Finance Director is unhappy due to the administrative costs associated with the number of cheques that he has to draw each month.

My question is as follows : Are you experiencing the same problems and if so how are you preventing these issues.

Many thanks
Gail

[kevinh]

Gail,

When you say "how are you preventing these issues." do you mean how are others reducing the admin costs or how are we persuading new employees to use the company super fund?

Kevin

[Gail]

Thanks for the quick response. My questions are numerous:

1. How are companies reducing the administrative costs in terms of drawing so many cheques when employees elect to use their own fund?

2. If we are dictated by the award fund most of the casuals that join our organisation will elect to join this fund unless we can provide them with an alternative that will be of benefit to them. We are aiming to be an employer of choice with regards to benefits and as such are trying to source a new company fund other than the default award fund which I believe we have to offer from a legislative perspective.

If we are to source a company superannuation fund that will be of benefit to both the company and the employee what are the major components we should be looking for in the fund i.e. would this mainly be with regards to to insurances and disability coverage? What other components would we be looking at, would there be any advantages for us to entice the casuals to move to a company fund or should we mainly be gearing our communication at our full time work force and leaving the casuals in the award superannuation fund?

3. With regards to casuals are employers obliged to contribute th 9% SGC if they earn less than $450 per month.

Thanks for the assistance.

[John_M]

Some thoughts Gail:

• Arrange electronic transfer of super payments, where possible. My experience it has always been possible.
• I understand some employers used to offer a higher contribution to "their fund" (say 12 to 14%) versus the minimum (9%) to any employee-chosen fund (not sure if this is still occuring).
• Work on selling the benefits of "your" fund. Has it historically provided a better than average ROI? Are fees lower and insurance cover provided at competitive rates?
• Cost of internal admin of super choice should only be one element of a big picture cost comparison against recruitment, retention and engagement. If you want to be an employer of choice, maybe the employees looking for choice need to be treated as customers.

[kevinh]

Gail,
Last time I looked employers were not required to pay casuals super if they worked less than $450 per month. However, if the casual's hours vary much from month to month it may cost more administering it than it costs to just pay it! (maximun saving is $40 per month).

I don't think it would do much for goodwill with the casual employees who are probably on low rates of pay to begin with.

John, I wonder if paying more super to those who use the company fund could be considered discriminatory - I'd be seeking some specialist legal advice before doing that.

You may even be open to litigation if you persuaded employees to go with a company scheme at a higher contribution rate and that fund then performed worse than other funds which they would have contributed to at 9%.

I think trying to thwart a law which is designed to give people a choice of superannuation is asking for trouble. Personally I would work out the most efficient way of administering it and get on with core business.

[John_M]

Originally Posted by kevinh

I wonder if paying more super to those who use the company fund could be considered discriminatory - I'd be seeking some specialist legal advice before doing that.

I checked my source and it was apparently the Australian Workplace Authority that had been doing this and have recently changed to offer the same contribution rates no matter which fund. They must have had some legal advice ;-)

[Gail]

Hi
Thanks to both of you for the advice given so far. I really am a layperson! when it comes to superannuation, so if I am understandinding your posts correctly are you suggesting that we still offer :

- The same contribution percentage to everyone irrespective of which fund they elect to use? That does make sense.

- My MD is now saying that we offer 2 funds - the industry fund that our casuals can use per the award and then offer a more "upperclass" fund to our executives. My concern is that is discrimination. Why not offer both to everyone to chose from. What are the negatives for him for a cost perspective?

- Is fund choice and assoicated benefits something that is not a cost strictly borne by the employee?

- What difference does it make to the employer which fund the employee is in other than admin costs?

- Where does the employer pick up the cost other than in the admin fees and for some reason my employer who I have recently joined INSISTS on writing cheques.

Thanks

[SoniaK]

Hi Gail

Regarding administration costs, you could investigate the use of a superannuation clearing house. While I don't have any details for you, the basic principle is that you send all contributions to the one company (thus write one cheque) and they then distribute the contributions to all the relevant funds. Sorry, I don't know how the clearing houses charge for their services.

I don't believe you would unlawfully discriminating if you were to offer a higher contribution rate for employees who choose Fund X, as long you as offering at least the minimum for all funds (9%). When I last looked, "choice of superannuation fund" was not a grounds for discrimination listed in any of the State, Territory or Commonwealth equal opportunity / anti-discrimination legislation. I imagine other companies offer a higher contribution to any fund because they want to be seen as an employer of choice, not because they are concerned about discrimination claims.

I also don't believe you are breaching any laws in offering different funds to award staff and executives. You already discriminate (presumably) by paying the executives far higher salaries than award staff. It is only unlawful discrimination that you need to avoid. Of course, if you are aiming to be an employer of choice you might choose to offer the same benefits to all staff regardless of status.

Regards
Sonia