11 July 2023
A discriminatory legal relic that largely denies under-18-year-old workers super contributions could ultimately cost them more than $10,000, a new Industry Super Australia report warns.
About 375,000 of Australia’s youngest workers are locked out of the nation’s world class retirement system because they are not entitled to compulsory super contributions unless they work more than 30 hours a week for the same employer.
New Industry Super Australia (ISA) modelling finds that this law blocks about $330 million a year in super contributions to workers who are under-18.
On average these young workers would get an extra $885 a year in super contributions. If these contributions were paid to workers under-18 , after decades of investment returns, it would grow to $10,200 by the time they retire at 67.
ISA’s Super Start to Work Report argues the 30 hours per week threshold should be removed, as it discriminates against young people at the very start of their working life.
This early career discrimination not only financially penalises young workers it creates an administrative burden for employers who must keep track of the hours under-18s work. An especially complex task for this highly casualised workforce and when employers pay super quarterly.
Most under-18-year-old workers are denied super contributions most weeks, as more than 90% of teenagers usually work less than 30 hours per week and are therefore not entitled to super. But paid work is a constant for most teen workers, with 75% of the underage workforce employed for 6-12 months a year.
When super was introduced in 1992 excluding under-18s was negotiated into the legislation because it was feared fees and insurance would erode smaller super balances.
But now fees are capped on lower balances and insurance is not automatically offered to super members who are under-25 and have a balance of less than $6,000.
Removing the 30-hour threshold would also promote engagement with the super system at an earlier age.
A UMR survey of 1075 people found that there is near universal support for the payment of super for all workers – with 85% of respondents agreeing with the principle that super should be paid to all workers.
Comments attributable to Industry Super Australia Chief Executive Bernie Dean:
“This is an out-of-date law that discriminates against our youngest workers just as they’re starting out – it’s unfair and the law needs to be modernised.”
“Locking thousands of teen workers out of our world class retirement savings system is not giving them the super start to work they deserve. How can we explain that young workers don’t get super while an older colleague doing the same job does.”
“Removing the 30-hour threshold wouldn’t just be fair for young workers, it would be good for the employers who have to face the administrative nightmare of keeping track of the weekly hours of a highly casual workforce.”
Contact details:
James Dowling: 0429 437 851, [email protected]