Loss of choice of super fund not offset by 1 cent an hour pay rise

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The Fair Work Commission has ruled that a pay rise as low as one cent an hour is not enough to offset removing the choice of super fund from employees.

The Fair Work Commission has knocked back an enterprise agreement between a union and Kmart due to issues with the vote, but the Commission also wasn’t convinced that employees were left better off after having their choice of super fund removed.

The relevant award sets out several superannuation funds – including Rest super fund – that employer contributions can go to if the employee doesn’t choose their own fund. But under the proposed agreement employer contributions must go to Rest.

The proposed agreement with Kmart has the support of the Shop, Distributive and Allied Employees Association (SDA). Half of the board of the Rest are nominated by the SDA.

The Retail and Fast Food Workers Union (RAFFWU) argued that removing choice of super fund wasn’t offset by the “literally miniscule” wage rises in the agreement – in some cases as low as one cent an hour.

But Kmart argued this wasn’t a ‘better off overall test’ issue, as the award doesn’t provide for super choice and there was no evidence of a detriment.

However this was rejected by the Commission, saying: “The Award enables a choice to be made under the superannuation legislation and otherwise supplements the legislation by narrowing the applicable funds for Award-covered employees in circumstances where no such choice is made. Under the Agreement there is only one superannuation fund into which employee contributions are paid.”

“The absence of evidence in relation to this issue has not assisted the Commission in reaching the necessary satisfaction as to the better off overall test. Whilst it was Kmart’s view that it is “not appropriate for the Commission to require any evidence about the performance of the superannuation fund, including REST”, the difficulty in assessing this condition as more or less beneficial to employees, in the absence of any evidence, was raised directly at the hearing, with Kmart ultimately choosing not to file any evidence that may have assisted the Commission on this issue.”

The Commission also pointed to the recommendation of the Financial System Inquiry that all employees be able to choose which super fund received their employer contributions.

“On the materials before the Commission regarding the superannuation provision in the Agreement, I am only able to objectively conclude that the Agreement’s restriction on the choice of superannuation fund that would otherwise exist under the Award is a less beneficial term.”

The SDA said it is disappointed by the Fair Work Commission decision, as the agreement “would have delivered pay rises across the board while also protecting, and improving, workers’ hard-won conditions”.

SDA National Secretary Gerard Dwyer said the agreement was “rejected primarily on the basis of voting technicalities”. In regards to superannuation, he said it was an “interesting ruling in light of legislation surrounding superannuation and given that the nominated fund, REST, is one of the country’s best performing funds over the long term”.

According to Rest’s Mysuper Product Dashboard it has returned an average of 8.75% a year over the last 10 years. Sunsuper – another industry fund listed in the award – has returned 8.9% on average per annum over the last 10 years (for members aged under 55). Industry fund AustralianSuper isn’t listed in the award, but its MySuper product has returned 9.59% on average a year over the last 10 years.

“It’s disappointing to see the agreement rejected, but of course we respect the Fair Work Commission’s decision and will work with all the parties involved in an attempt to get an agreement that Kmart workers deserve,” Dwyer said.

It is Government policy that choice of super fund be extended to employees covered by new enterprise agreements or workplace determinations. But this requires the passage of legislation. A Bill to implement this was last debated in November 2017, and lapsed with the election. The Government have yet to reintroduce it – but have reintroduced a separate measure contained in the 2017 Bill, around Salary Sacrifice, in another Bill.

Following the decision by the Fair Work Commission, Liberal Senator Andrew Bragg has been arguing for a change to the law.

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