Superannuation has come into the Australian government’s radar this week and Finance Minister, Chris Bowen, triggered a whole lot of discussion after he suggested that the employer contribution be lifted from its current nine per cent. Mr Bowen has not been the only one thinking this way but employers, understandably, don’t even want to discuss it.
It’s a subject that has crept into the headlines recently since the release of a few pretty damning reports. The reports by political think tanks, industry bodies and interest groups, all predict that many Australians will be unable to fund their own retirements but they offer different causes and varying solutions to what could become a huge burden on taxpayers.
Left out of discussions almost entirely are the dwindling superannuation accounts of the nation’s casual workers. This group, while being almost entirely ignored when it comes to the subject of superannuation, is far from insignificant. Even modest estimates claim casual workers represent more than a quarter of the entire workforce.
Factors that have been cited as contributing to the overall problem of declining superannuation accounts are inadequate employer contributions and the administrative fees of the funds and interest groups have called for government intervention.
While some reports say that the minimum employer contribution needs to be lifted, others call for more regulation of the superannuation funds and the fees they apply to their members.
Today, in the middle of all these reports and discussion, came the release of a report by wealth management company, Mercer, that rated Australia second in the world on superannuation, second only to The Netherlands.
Despite this, Mercer failed to give Australia an “A” rating and suggested a few remedies of its own, one being that Australia lift its compulsory contribution to relieve itself of future debt.
Superannuation has been one of the most neglected areas of policy for a long time now. It was introduced across the board a few decades ago and employer contributions were raised to nine per cent in 2002.
What most of the reports and commentary avoid discussing or even making public, however, is the superannuation accounts of the burgeoning casual workforce. This is poised to be a major problem for taxpayers in the future but it generates very little discussion.
The issue did get a little airing recently when The National Foundation for Australian Women called out for more assistance for women, claiming that many of them were relegated to part-time work because of the lack of child care services and that generally female retirement funds were lower because of the gap between men’s and women’s wages.
However, statistics are also telling us that the number of men in part-time and casual work is increasing and is closing what was a much larger gender gap in the casual workforce.
Superannuation contributions work like this. Current compulsory employer superannuation contributions are nine per cent of a worker’s earnings but there is a threshold of $450 per month. This in effect means that an employee or worker has to earn at least $450 from one employer in a month before the employer is committed to any superannuation contribution at all.
This may seem reasonable on the surface as presumably the rule was imposed to exempt employers from paying contributions for part-time student workers. However, since compulsory superannuation was introduced a few decades ago, the workforce has changed dramatically as more and more people have been forced on to either casual and contract work.
Recent figures from the Australian Bureau of Statistics estimate the casual workforce to be around 27 per cent of the total workforce. This is unlikely to get any smaller, and many commentators have suggested the estimated figures are probably significantly understated.
Many of these workers have been either forced to work as a single business and fund their own superannuation (and for many there is not enough left over to do so) or work for several employers who will all pay them below or not much above the threshold of $450.
Nine per cent of that amount will only just about cover the fees if there is any contribution at all and it is a loophole that is open to a lot of abuse.
It must be remembered that an employer who employs a casual worker is under no obligation to give them set hours or even a minimum of hours work in a week or a month. Therefore, it is in the employer’s own interest to employ as many casuals as possible – far more than there is work for – and have them all work minimum hours to avoid having to make superannuation contributions at all.
This has opened up a lot of work for international students and traveling backpackers but it has come at a mighty cost for many of our own workers – in terms of superannuation payments as well as work.
This is how a lot of employers, particularly those running small businesses or sole traders, get around the employer contribution payment. It also forces workers to seek casual employment from several places just to survive and it is depriving them of any contributions to their retirement.
Superannuation for this group deserves a lot more attention from government and from commentators but the difficulty for these workers is that they have no voice. There is no “industry body” that speaks out for them and no union who looks out for their welfare. This is despite their numbers growing significantly over the last decade.
We don’t have to go back far to work out how this situation has developed. It has been one of the remnants of Australia’s embracement of the market economy. One of most talked about characteristics of neo-liberalism and the market economy was the contracting out of labour.
This new way of employing people, theorists claimed, allowed companies and bureaucracies to focus on their “core” businesses. It would save them money they said because they could employ people for as little as as much as they wanted. What they didn’t say, was that this method of employment was shifting the retirement funding burden back on to the tax payer.
What grew out of this whole new style of employment was a whole industry of casual recruitment agencies in all fields including hospitality, building and construction, nursing, executive, administration and just about anything else. It is not that contracted work hadn’t existed for a long time before that but now it has become more or less an industry of its own.
Competition policy also makes a significant contribution to the livelihood of the casual worker. Multiple agencies are forced to sell off their workers at the lowest price and with minimal conditions attached to compete in what has been a booming industry.
An area where money can be saved in all this, is superannuation and employers can ensure they don’t employ the same person too often in any given month so as to avoid any commitment for superannuation contributions.
To be fair, the Rudd Government under Julia Gillard’s direction corrected some of the most appalling characteristics of the Howard Government’s Work Choices legislation. The individual workers contracts that impacted so heavily on the casual worker finally made it into the garbage bin.
Superannuation for casual workers, however, has had very little discussion and there is every reason to believe it is being largely ignored.
Some of the loopholes in current superannuation legislation need to be closed, the neglect of which has already placed a large burden on tomorrow’s taxpayer.
We can’t expect our Federal Opposition to be too keen about any cleaning up of this area either for two reasons. First, because closing the loopholes would prevent small business operators from exploiting the superannuation system and this could cost votes. Second, because they did nothing to address the retirement of this sector during its long term in government and in a time of unprecedented growth of the sector.
Age pension costs to the taxpayer in the 2009-09 year alone were $26.7 billion. If the current government has any commitment at all to the future of Australia, it would do well to not only give superannuation legislation a careful examination and revamp but urgently address the dwindling retirement funds of Australia’s casual workers.
Sourced:
www.watoday.com.au; www.tai.org.au; www.smh.com.au; www.dailytelegraph.com.au;
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