What is employer super?
Paying your employees' super
If you run a business, you’re usually required to make superannuation contributions for your staff. So it’s important to know how much, how often and where to pay your employees' super.
We can help you understand what you need to do and where to go for help.
Knowing your super obligations
Legislation sets out employers’ superannuation responsibilities.
- you need to make contributions on behalf of almost every staff member
- you need to pay these contributions into a default fund
- you need to pay a percentage of each eligible employee’s ordinary earnings into their super fund—these are their employer superannuation guarantee contributions.
It’s important to know exactly what you need to do so you can help your employees save for their retirement—and avoid having to pay contributions, interest and administrative fees to the Australian Taxation Office (ATO).
Learn more about exceptions and your obligations
Choosing the right super plan
When selecting a default super fund there are some things to consider:
- Is the fund able to receive MySuper contributions?
- The default fund may already be specified by industry requirements (eg an industrial award or enterprise agreement).
- Your default fund must meet certain ATO requirements.
- Your employees may have the option to select a super fund to receive employer contributions.
By knowing what to look for in a super fund you can be confident you’re making a suitable choice for your employees.
Investment options in super
To be an employer of choice, offer freedom of choice
As a business owner or employer, you may already know that employees generally appreciate the freedom to choose their own investment options. The more options you can offer that suit their needs, the more likely you are to be thought of as an employer of choice.
Employees will appreciate a wide range of investment choices so they can select one or more for their particular needs. And if your employees don’t choose an investment option, there’s always the MySuper investment option for them.
MySuper is a simple default investment option for your employees. It is intended by the government to make comparing superannuation products easier, based on key differences like cost and investment performance. MySuper authorised means it meets the specific standards set under legislation, including fee structures and generally a basic level of insurance coverage.
An employee’s super will be invested in the default MySuper investment option unless they make an investment choice.
What your employees need to think about before selecting investment options
Are your employees expecting high returns from their investment goals, or will they be comfortable with moderate, stable returns? Once they have settled on their personal investment goals, they’ll need to see how well various investment options match their goals. The information on each investment option covers a number of aspects, such as the targeted returns and the level of risk to which an investor would be exposed.
How long do your employees want to invest for? It’s important for them to remember that as markets move up and down over time, the value of the investments also changes. For example, if they want to access their money in the near future, they may want to choose investment options with returns that are less likely to vary. This will give them greater protection against losing money in the short term.
Attitude to risk
Are they comfortable with receiving low or negative returns in the short term for potentially higher returns in the long term? Or would they be more comfortable with moderate but consistent returns? Attitude to risk is one of the most important factors to consider before investing.
Investment options for your employees
Investment options can generally be divided into three broad categories. These depend on how prepared your employees are to see their returns go up and down based on movements in the market.
Conservative or cash options
Conservative options, such as investments in cash or fixed interest accounts, tend to have lower returns over the long term, but also don’t tend to lose money when the economy or the markets are performing badly.
This option may suit those who don’t want to take much risk, don’t like to see negative returns on their investments, or who are close to retirement and want to protect their accumulated wealth.
The investor’s main objective is to protect their super and they’re prepared to accept lower returns to achieve this objective.
Aggressive or growth options
Aggressive options, such as investments in shares and property, tend to have higher returns over the long term, but can experience significant losses during times of economic difficulty or market downturns.
This option may suit those who want to see high returns, are prepared for fluctuations or even negative returns, and those who have a long timeframe and can wait out volatile economic cycles.
The investor’s main objective is high long-term growth. They’re happy to trade off more market ups and downs for potentially greater long-term returns.
Balanced options tend to have a mix of growth or aggressive investments, as well as cash or conservative investments. They don’t tend to perform as well as aggressive options over the long term, but the loss is less when there are downturns in the economy.
This option may suit those who don’t want to take on as much risk as is needed for aggressive investing, but want to see their investment grow more rapidly than what might be achieved through a conservative option. It may also suit those who may not have a long investment horizon and need some protection for their investment.
The investor’s main objective is balanced returns to meet their medium to long-term financial goals. They’re happy with some ups and downs in the market to achieve these returns.
Understand insurance inside your employee's super
Insurance and super
The superannuation fund which you nominate as your employee’s default fund needs to provide insurance cover under superannuation law. This fund should be MySuper-authorised—which means it will automatically meet these requirements. However, your employees may also have options to change how much insurance cover they receive through their super.
What types of insurance are available through super?
There are generally three types of cover a super fund offers:
- Life insurance
- Total and permanent disablement (TPD) cover
- Temporary salary continuance cover (income protection).
A MySuper-authorised fund must provide at least some life and TPD insurance cover. It must be on an opt-out basis, which means your employees can choose not to accept the cover.
It’s MySuper authorised. What does that mean?
MySuper is a simple default investment option. It is intended by the government to make comparing super products easier based on key differences like cost and investment performance. MySuper authorised means it meets the specific standards set under legislation, including fee structures and generally a basic level of insurance coverage.
If you don’t select an investment option, your contributions will be paid into a MySuper investment option.
Employees can change the default cover
The default level of insurance cover provided may be a comparatively small amount. As an employer you must make sure your default fund provides the insurance but your employee can generally choose to increase, decrease or cancel the default cover offered.
If your employee chooses to do this they should refer to the relevant super fund’s product disclosure statement for detailed information on costs and the steps involved in making changes.
Your employee should be aware that changes to cover will most likely change the cost of their premiums.
What are the benefits of insurance through super?
It can be advantageous for your employee to take insurance through their super fund. This is because through super, insurance can be:
- easy-to-manage - premiums are automatically deducted from your employee’s super account balance
- cost-effective - premiums are generally cheaper
- simple to get - there’s often no medical assessment required to get cover.
What are the limitations of insurance through super?
When an employee chooses how much insurance to hold through super, there are some things for them to consider:
- A super fund may not offer the level of cover or the types of insurance that your employee prefers
- There can be delays when it comes to life insurance benefits—money will first be paid to the super fund and then passed on to the beneficiaries.
Your employee should check the relevant super fund’s product disclosure statement to understand the full details of how insurance through their super works.
Services to help your employees
If talking about insurance with your employees, you can remind them to consolidate their super. If an employee has many different super accounts they may be paying multiple fees. Remind them to consolidate their super to limit their costs.
Insurance is a personal choice. The amount of cover and the type of cover an employee needs will depend on their own circumstances and what they feel will give them peace of mind. They should get some help from a financial adviser if they’d like information about options to suit them.
It’s important to consider your particular circumstances and read the relevant product disclosure statement before deciding what’s right for you. This information hasn’t taken your circumstances into account.
This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.