Budget 2022 – What is in store for Employers?
Apprentice and Trainee Incentives
- The current Boosting Apprenticeship Commencement subsidy is being extended to 30 June 2022. Through the wage subsidy, any business that engages an Australian Apprentice or Trainee before 30 June 2022 may be eligible for a wage subsidy of 50 per cent of wages paid to the apprentice or trainee for a 12-month period (maximum of $7,000 per quarter.)
- From 1 July 2022, a new Australian Apprenticeships Incentive System will commence, to provide financial assistance to employers of Australian Apprentices in priority occupations. Further information on the incentive and priority occupations is available here.
Small Business Support
- Reducing company tax rate for small businesses to 25% from 1 July 2022
- Small businesses with annual turnover less than $50 million will be able to deduct a bonus 20 per cent of the cost of expenses and depreciating assets that support digital uptake. This includes portable payment devices, cyber security systems or subscriptions to cloud-based services. The boost will apply to eligible expenditure of up to $100,000 per year, incurred from Budget night until 30 June 2023.
- Access to a new 20 per cent bonus deduction for eligible external training courses for upskilling employees. The Skills and Training Boost will apply to expenditure incurred from Budget night until 30 June 2024
Personal/cost of living expenses (for employees)
- Increase of $420 ($840 for eligible couples) in the 2021/22 Low- and Middle-Income Earner Tax Offset (LMITO), with payments made in this year’s tax return.
- Cost of Living Payment – $250 each to Income Support recipients to be made in April 2022.
- Petrol and Diesel Fuel Excise reduction of 22.1c per litre for 6 months.
- $215.3 million to provide bonuses of up to $800 to aged care workers (home care and residential aged care).
Super changes (already legislated)
- Super rate to increase from 10.0% to 10.5% (scheduled to increase by 0.5% each year to 12% from 1 July 2025)
- The $450 minimum monthly earnings threshold to be eligible for super contributions will cease to apply
- The Super Maximum Contribution Base will increase from $58,920 per quarter (equivalent to $235,680 per year) in 2021/22 to $60,220 per quarter (equivalent to $240,880 per year) in 2022/23
Annualised Wage Changes
The Fair Work Commission has issued draft determinations to vary/add to the annualised salary clauses in the following awards:
- Health Professionals and Support Services Award 2020 (HPSSA)
- Hospitality Industry (General) Award 2020 (HIGA)
- Restaurant Industry Award 2020(RIA) and the
- Marine Towage Award 2020 (Marine)
Effective 1 Sept 2022 HIGA and RIA will have the following outer limits for those paid an annualised salary of 125%:
- An average of 18 hours over the pay period/roster for penalty rate hours; and
- An average of 12 hours over the pay period/roster for overtime hours.
Effective 9 May 2022 the Marine Award will have the following outer limits for those paid an annualised salary of 140%
- An average of 20 hours over the pay period/roster for penalty rate hours; and
- An average of 15 hours over the pay period/roster for overtime hours.
Effective 9 May 2022 the HPSSA Award will be varied to include an annualised salary option for the classifications:
- Support Services Employee Level 8 and Level 9 and
- Health Professional Level 2, Level 3 and Level 4.
For a refresher on annualised salary requirements for other awards, review our webinar available here.
Victoria – Sick Pay Guarantee for casual employees
The Victorian Sick Pay Guarantee provides casual and contract workers in certain occupations with a guarantee they will receive sick pay for up to 5 days/year when they need to take time off when they are sick or need to care for loved ones. This is paid at the national minimum wage.
The Victorian Sick Pay Guarantee will operate for 2 years, starting in 2022 and is fully funded by the Victorian Government.
The eligible occupations are:
- Hospitality workers
- Food preparation and assistants
- Food trade workers
- Sales support workers
- Sales assistants
- Other labourers working in supermarket supply chains
- Aged and disability carers
- Cleaners and laundry workers
- Security officers and guards
What’s your remuneration strategy?
Many organisations determine the salary for a position by either:
- Looking at what salary the candidate is asking for and determining if the business has the budget for the role and/or
- Reviewing the minimum hourly rate in the applicable modern award and ensuring the salary is at or above the minimum requirements
Whilst this approach can work initially for a small business, once the total number of employees increases and you have multiple people performing the same role, as well as a competitive labour market, a more strategic approach to remuneration is needed.
Practically, what does this look like to get started?
Step one: Set your labour cost budget. To do this, you need to consider the total percentage of your labour cost to your total revenue. This will allow you to ensure you are managing your overall labour cost effectively, particularly for a business in its growth stage.
When considering your labour cost, you should factor in base salary, superannuation, workers compensation insurance, payroll tax and any other monetary incentives paid to employees. The ATO has a great benchmarking tool for small business https://www.ato.gov.au/Business/Small-business-benchmarks/Compare-your-business-now/
Step two: Review your current salaries against the market. This is commonly referred to as market remuneration benchmarking. You can approach this a few ways. You can purchase a market remuneration benchmarking survey and match your roles with the most appropriate role in the survey or you can research roles currently advertised in the market.
Step three: Assess employee performance and rate employees based on performance and potential (this can be used to provide additional insight or reasoning behind a particular salary).
Step four: Utilise the data above to look at:
- Individual remuneration – are there any anomalies to the market data?
- Remuneration within categories of employees e.g. Executive remuneration, senior leaders, functional leaders, frontline etc.
- Remuneration for individuals performing the same role
Step five: Create your remuneration strategy by utilising the above data and:
- Developing an entry, mid and max point for each role
- Developing remuneration bands for categories of employees
- Identifying monetary and non-monetary benefits outside of base salary + superannuation
- Approach for reviewing remuneration within the organisation
Ask an Expert
With another superannuation increase coming in from 1 July 2022, do we need to pay the additional 0.5% if the employee is on an inclusive salary? For example, our contracts state “You will be paid an annual salary of $100,000, inclusive of superannuation”. From my understanding, this means that with the increase to 10.5%, the employee will then receive $10,500 super and a base salary of $89500 (currently $90000 salary and $10000 super with the 10% superannuation).
The wording of your contract is critical here. In the above example, if your contract is worded to state that the salary is inclusive of super, then yes you are correct. However, if your contract is base + superannuation, then you will be required to pay the additional 0.5% superannuation. This cannot be deducted from the base salary. We also encourage clients to think of the big picture here and the impact it would have on an employee should their take home pay be decreased due to a superannuation increase. Whilst you may save 0.5% now, you should consider the broader implications on performance, engagement and commitment to the organisation based on the perceived action taken by the company.
For more information on the above, please contact us on 1300 887 458 and speak with one of our HR Consultants. If you are interested in learning more about our HR services, including HR Outsourcing, HR Consulting, HR Advisory Services, contact us at email@example.com.