Chapter 3 - Current arrangements
Introduction
3.1 Superannuation first entered federal industrial awards in 1986, as
part of a national wage case. It was introduced on a case by case basis
and accordingly, varies considerably between awards. The introduction
of the SG legislation in 1992 greatly increased coverage, extending it
to employees who did not previously benefit from award superannuation.
3.2 The SG legislation requires employers to make superannuation contributions
where an employee's wages exceed $450 per month. This threshold was originally
introduced because of concerns about the cost of managing small superannuation
contributions and balances.
3.3 Following SG's introduction, employers were (and are) still obliged
to also fulfill award obligations. In some cases, different coverage rules
applied which meant that people who might not have been eligible for contributions
under SG were entitled to receive them under the relevant award. For example,
coverage rules in awards based on entitlement through length of service
are different to those under SG (which is based on the amount earned)
and may entitle employees to receive payments where monthly wages are
less than the $450 SG minimum. Differing arrangements were negotiated
and agreed to suit the differing circumstances of particular industries
and workplaces.
3.4 The Government considers that the multiple obligations imposed on
employers by both the awards system and SG are excessively complex and
add to employers' administrative burdens. The Minister for Workplace Relations,
the Hon. Peter Reith MP made the Government's intentions clear in the
second reading speech on the bill:
The removal of superannuation provisions will remove a layer of complex
detail from awards and relieve employers of the burden of complying with
an extra set of obligations which have done nothing more than add to the
complexity of superannuation administration. [1]
3.5 Mr Mark Paterson, the Chief Executive of the ACCI, agreed with the
Government's assessment. He advised the Committee that ACCI considers
there is 'strong potential for inconsistency in the proper application
of superannuation entitlements for employees' if the current arrangements
were permitted to continue in respect of awards and the impending Choice
of Fund obligations. [2]
3.6 Mr Paterson told the Committee that the ACCI's views were longstanding:
…we have indicated for a long period of time that there are overlapping
and, in some cases, inconsistent sets of obligations under the superannuation
guarantee charge provisions and award provisions, and we have argued for
a long time that there ought to be a consistent and single set of obligations
in this area, preferring that superannuation be removed from awards. [3]
3.7 Mr Paterson concluded that the ACCI's objectives were to ensure that
employers have a clear understanding of the nature of their obligations.
He was of the view that the bill would help clarify the nature of those
obligations and remove some element of complexity which exists at the
present time:
I am saying that there will be a reduced potential compliance burden
and complexity for employers if superannuation is removed from the award
in the environment of a choice of fund that is being proposed...they will
not have an overlapping sense of obligations with an employer trying to
resolve which set of obligations it is required to meet. [4]
3.8 Evidence provided by Mr Philip Drever, Assistant Secretary, Legislation
and Policy Services Branch, Department of Workplace Relations and Small
Business, showed that while the SG applies a single set of rules to all
members, the award system applies standards that vary greatly and lack
consistency with SG requirements. In some cases, award provisions are
inferior to SG requirements. For example, some awards specify a three
per cent contribution rate, whereas the SG requirement is currently six
per cent of gross wages. [5]
3.9 Mr Drever also described a range of other areas in which there are
significant differences including:
- choice of fund;
- thresholds (amounts above which contributions are required);
- qualifying periods for entitlement (for example, no payment for first
six months);
- membership requirements; and
- payment intervals. [6]
3.10 Mr Steve Partridge, giving evidence to the Choice of Fund inquiry
on behalf of William M. Mercer Pty Ltd, also supported removing superannuation
from the awards system. Mr Partridge, while conscious that there might
be some disadvantage to some groups as a result of this initiative, considered
that the advantages outweighed the disadvantages:
Our primary reason for supporting the removal from awards was to simplify
the whole regime so that you do not have this layer of award requirements
overlaid on the choice of fund requirements. It was simply that. We are
conscious of the fact that it has a few adverse side effects as well,
but we think that reason outweighs the others. [7]
3.11 However Ms Philippa Smith, the Chief Executive Officer of ASFA,
was less certain about whether there was any significant simplification
of administration as a result of removing superannuation from the awards
system:
I think that the answer is that superficially it might look to be simpler,
but in the day to day operations of employers - and you will need to ask
them - I am not sure that it is simpler. Simplification really has to
be weighed against the practical implications of coverage, equity and
having practical systems there. [8]
3.12 Representatives of the trade unions argued that from an employee
perspective, awards are easier for employees to understand than the SG
legislation. Mr Joe de Bruyn, National Secretary/Treasurer of the Shop,
Distributive and Allied Employee's Association (SDA) told the Committee
that awards provide an easy and ready access for any employee to their
superannuation entitlements:
If superannuation was to be limited to the superannuation guarantee legislation,
accessibility by employees to the precise terms of their entitlements
would be significantly reduced. An ordinary worker would find greater
difficulty in comprehending the terms set out in that legislation compared
to the easy to read English which is now used in award provisions. [9]
Footnotes
[1] Second reading speech, p. 1.
[2] Evidence, p. 34.
[3] Evidence, p. 34.
[4] Evidence, p. 48.
[5] See for example Evidence, p. 51.
[6] Evidence, 49-50.
[7] Evidence to Choice of Fund inquiry, p. 160.
[8] Evidence, p. 31.
[9] Evidence, p. 3.
Top
|