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‘Superannuation stapling’ and a minimum wage increase for some awards come into effect from today, 1 November.

Here’s what you need to know.

The Fair Work Commission rolled out stages one and two of its annual wage review earlier this year, which saw changes to certain awards, as well as a 2.5 per cent increase to the national minimum wage, taking it to $772.60 per week or $20.33 per hour. Stage three is in place from today, and includes a raise to 21 more modern awards.

At the same time, a significant change to superannuation, colloquially termed ‘superannuation stapling’, comes into force from today. It places a greater onus on employers to identify whether an employee has an existing super fund they need to contribute to.

Increases to modern award minimum wages

In mid-2021, the FWC’s annual wage review included an increase to the national minimum wage and Modern Award minimum wages by 2.5 per cent.

This change has been rolled out in three stages, the third of which comes into effect as of today, 1 November 2021.

The stage one increase for Modern Awards came into effect from the first full pay period after 1 July 2021.

The stage two increase was for the General Retail Industry Award 2020 only, and was enforced from 1 September 2021.

Under stage three, twenty-one Modern Awards will have to implement the 2.5 per cent increase to minimum rates of pay from today. This includes the Airservices Australia Enterprise Award (2016), Restaurant Industry Award (2020), Fitness Industry Award (2020) and more.

Paying Award Rates?

Employers paying Award rates need to ensure they are aligned to the increase in rates.

Paying Above Award Rates?

Employers paying rates that exceed the minimum rates under the Award, need to ensure the increase is capable of being absorbed in their ‘above award rates’ already. This includes employers who have entered into annualisation pay arrangements. In this circumstance, employers will need to ensure there is still sufficient above Award components or excess. These employers also have specific audit obligations. They must ensure auditing and checking to make sure the annualised arrangements have left the employee in a position where they are receiving more than they would under the Award.

Covered by an Enterprise Agreement?

For those employers covered by an enterprise agreement, the rates of pay under the agreement can’t fall below the rates of pay under a Modern Award, so it may be that employers who have older enterprise agreements need to check that their rates of pay (if they are still only paying the rates in their enterprise agreement) are still sufficient to meet their obligations.

New ‘Superannuation Stapling’

Under the previous arrangements, when an employee moved from employer A to employer B, the employee had the option to choose a superannuation fund. But often employees would forget, or choose not to, hand in their super choice form.

Many employees will therefore have multiple superannuation funds, requiring them to pay duplicate account and management fees, and potentially fees for overlapping insurance arrangements under those funds.

Under recent changes to the Superannuation Guarantee (Administration) Act (1992), an employee’s superannuation fund will now be ‘stapled’ to them.

If a new employee does not select a super fund or doesn’t submit their choice form, rather than the employer choosing their default fund, the employer must contact the ATO.

One of the following categories may apply to some employees joining your organisation:

  • The employee has multiple super funds. In this situation, the obligation to select a fund does not lie with the employer, but the ATO will inform the employer which one they should contribute to.
  • An employee doesn’t have a ‘stapled super fund’, which the ATO will inform the employer of.
  • The contributions that are going into the stapled fund aren’t accepted (i.e. if there’s an administrative error). The employer will then need to make a second contribution. If the second attempt is unsuccessful, the employer must inform the ATO, who will propose an alternative stapled fund if one is available. Otherwise, the employer will likely be advised to contribute to the organisation’s default fund.

Other Useful Tips

Employers should also review employment contracts to ensure the language complies with the new rules.

For employers that have enterprise agreements in place with prescriptive superannuation obligations, they will need to check the language of the enterprise agreement and get specific advice to ensure that they are complying with the new requirements in the face of potentially contrary obligations under the enterprise agreement. In particular, enterprise agreements formed prior to January 2021.

Under the current arrangements, the concept is choice, staple, then default. Under some enterprise agreements, it may be that the choice issue does not come into play, but the issue of stapling still does.
‘Superannuation stapling’ applies for any circumstances where an employer needs to pay superannuation contributions – i.e for contractors, too.