SUPERANNUATION – BIG DISCONNECT35000.030000.0 Number of Accounts (‘000)25000.020000.0 Persons in labour force (‘000)15000.010000.0 5000.0 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11
COOPER REVIEW• Looked at ways to better safeguard retirement savings and reduce cost.• Designed super around members, not funds • High level of disengagement• Choice of fund had not delivered cost reductions • Fees too high, services not used• Too much tinkering• Insufficient transparency • Cannot compare funds • Cannot see costs
SUPERANNUATION – CHANGING FOR EMPLOYERS • 5 key areas of change affecting employers • Increase to superannuation guarantee levy • Pay slip reporting • MySuper • SuperStream • TFN‟s
INCREASE TO SUPERANNUATION GUARANTEELEVY – BETTER RETIREMENT INCOME FOR THEYOUNG• From 1 July 2013 • 9% OTE superannuation guarantee levy increases to 9.25% • Age limit of 70 removed• Introduced as part of MRRT • Should offset in bargaining (not offset in annual wage review) • Proposed company tax reduction (not tax offset for unincorporated businesses)
PROPOSED SG INCREASESYEAR STARTING INCREASE(%) SG LEVY (%) July 2012 - 9.0 July 2013 0.25 9.25 July 2014 0.25 9.5 July 2015 0.5 10.0 July 2016 0.5 10.5 July 2017 0.5 11.0 July 2018 0.5 11.5 July 2019 0.5 12.0
INCREASES TO SG LEVY Employers should • Be aware of increase • Think about employees whose remuneration inclusive of superannuation • Think about salary sacrifice and employee contributions
PAY SLIP REPORTING – MORE INFORMATION TOEMPLOYEES ABOUT THEIR SUPER • Employers currently report contributions accrued or contributions made on pay slips • From 1 July 2012/January 2013/(?) employers to report • Contributions accrued + (possibly) expected contribution date or • Contributions made • From 1 July 2013, • Employers to report contributions made • Funds to • Report contribution made/not made each quarter, or • Issue member statement each 6 months
PAY SLIP REPORTING – GETTING MOREINFORMATION TO EMPLOYEES ABOUT THEIRSUPER (Cont’d): When the new requirement is determined employers should • Expect information about the new obligation • Be aware of changed reporting requirements • Talk to payroll/software provider/IT to understand impact/upgrade, or advise person issuing manual pay slips.
MYSUPER – THE NEW DEFAULT• Simpler, more member protected superannuation for those employees who don‟t choose a fund• From 1 October 2013 employers‟ default contributions into MySuper fund.• For employers, “default” fund contribution is a contribution where • Employee does not have a “chosen” fund • The fund is not prescribed by an agreement • Contribution not “made” into defined benefit fund• Agreements approved from 1 October 2013 will have to prescribe MySuper fund
MYSUPER – THE NEW DEFAULT (Cont’d)• From 1 July 2013 funds authorised to offer MySuper will be known • Modern awards will be varied to reflect MySuper requirements • Transitional arrangements for some large employer funds • Current agreements continue• Most employers should experience no change (current default will be MySuper compliant)• Some employers will need to change default after 1 July 2013 to meet 1 October requirement • Select new default • Issue new standard choice form • Enroll non-choice employees
MYSUPER – THE NEW DEFAULT (Cont’d) Leading up to 1 July 2013, employers should expect • Further information about this, especially from default fund(s), ATO and NSWBC • Employee questions – send to fund • Fund amalgamations If in doubt from 1 July 2013, employers should confirm that existing defaults are MySuper compliant • Check with current default fund(s) • Check APRA website • Ask NSWBC
SUPERSTREAM – SUPERANNUATION GOES INTOTHE E-COMMERCE WORLD• Compulsory system wide standardised electronic communication and transaction system. All funds will be required accept • Standard electronic information about new members, contributions and transfers • Electronic contributions• From 1 July 2013 funds to use SuperStream for inter-fund transactions (such as rollovers)• From 1 July 2014 funds to use SuperStream for employer - fund transactions (enrolments, contributions data, contributions)• Funds will be testing and building up in 1st half of 2013
SUPERSTREAM – E-COMMERCE SUPER COMESTO EMPLOYERS Employers • From 1 July 2014 • Medium large employers (20+ employees) employer - fund transactions (enrolments, contributions data, contributions) to be SuperStream compliant • From 1 July 2015 • Small employers (<20) (subject to further consultation) to be SuperStream compliant • SuperStream compliant means the fund receives and sends information, money in standard format.
SUPERSTREAM – E-COMMERCE SUPER COMESTO EMPLOYERS (Cont’d): Employers should expect • Further information about SuperStream from payroll/clearing house suppliers, their funds, ATO and NSWBC • Upgrades to payroll/employee records systems • Set-up with fund or clearing house If in doubt (by early-mid 2013) employers should • be seeking information from supplier payroll/clearing house, software provider, or default fund • not overlook unusual funds, such as SMSFs.
TAX FILE NUMBERS – MORE IMPORTANT ANDALLOWING MORE TRACING, POLICING • Employers required to pass employee TFN to fund by the later of • 14 days after the employee gives TFN • The contribution after the employee has given TFN • TFN pass-on employer responsibility, not clearing house/agent responsibility • For employees • No-TFN contributions attract 31.5% additional tax • Members without TFNs cannot make employee contributions, receive co-contributions • Employees will notice non-pass on
TAX FILE NUMBERS – MORE IMPORTANT ANDALLOWING MORE TRACING, POLICING (Cont’d): • TFNs used to • Assess contribution cap compliance • Support finding lost members and account consolidation • 1 Jan 2012 funds can identify member accounts in other funds • 1 July 2012 funds can consolidate members‟ multiple in-fund accounts • 1 July 2013 funds to send no-TFN contributions to ATO after 6 months • 1 Jan 2014 auto-consolidation of amounts < $1,000 • 1 July 2014 ATO TFN validation service for employers • In future TFNs will help identify tax payers not getting superannuation contributions
TAX FILE NUMBERS – MORE IMPORTANT ANDALLOWING MORE TRACING, POLICING (Cont’d): • Employers should • Check they have passed on employee TFN to fund where employee TFN returned declaration form • Expect greater policing of TFN pass-on • Expect greater automation of TFN declaration and pass-on • Growing employee awareness of no-TFN implication • Employees will retain the right to not declare TFN or authorise its pass-on
SUPER TIMING SUMMARY 01/07/ 01/01/ 01/07/ 01/01/ 01/07/ 01/01 01/07/ 01/01/ 01/07/ Time Line 2011 2012 2013 2013 /2014 2014 2015 2015 2012 Possible Contribution "date paid" Superseeker “payment by” date reporting reporting on show new & Payslip on pay slips. pay slips. Funds inactive reporting Super Seeker to advise members account low show active about income accounts, ATO contributions contributions held money. received. From 1 October default My Super contributions to My Super, default funds to be My Super compliant. Information and payment Information transactions and payment (1st half of from transactions 2012) Transactions from employers with Super SuperStream between employers with 20+ employees data funds to be to be Super < 20 employees Stream standards Super Stream Stream to be Super to be compliant compliant Stream compliant released (Late 2014) Funds to possible auto- forward no-TFN consolidation Funds can use Funds can contributions to Funds of balances Funds TFNs to consolidate ATO after 6 can auto- under $10,000.New can use TFNs seek other multiple months and consolidate emp. to consider TFNs as primary accounts accounts report inactive balances consolidation, locator and contact within accounts. TFN under choice on TFN form. other funds. the fund. validation $1,000 TFN validation service for between funds.service available to funds. employers
REVIEWING THE FAIR WORK ACT,MODERN AWARDS AND AWARDWAGES
BACKGROUND TO THE REVIEWS – FAIR WORKACT • No OBPR assessment of fair work legislation • Post-implementation review required after year of operation • Process • Background paper issued 18 January • Submissions by 17 February (200+ submissions) • Responses by 2 March (30+ submissions) • Panel conducted consultations • Report due to the Minister by 31 May with OBPR assessment
BACKGROUND TO THE REVIEWS – MODERNAWARDS• Required by transitional legislation• FWA must consider whether modern awards • Achieve the modern awards objective • Operate without anomalies or technical problems arising from modernisation
BACK GROUND TO THE REVIEWS – MODERNAWARDS (Cont’d)• Process • Applications to vary (280+ applications) • Yet to be listed • Some matters of general application may go to full bench • penalty rates • apprentices, trainees + junior rates • Award flexibility • Annual leave • Public holidays • Remainder of applications likely to be single member
FAIR WORK ACT REVIEWMembers Report • Too much time spent to understand and achieve compliance • Act based on wrong presumptions • departures from Mon-Fri full time undesirable • adversarial relations, does not allow for, foster collaborative relationsKey areas raised in employer submissions were • Dismissals and employee protections • Inflexibility and increased employment costs • Bargaining and agreement making • Aspects of the National Employment Standards • Union rights
UNFAIR DISMISSAL – GROWING NUMBERS Unfair dismissal - No of applications and their fate - quarterly 3700 3500 Application for ufd remedy 3300 3100 2900 2700 Number finalised by FWA Number settled without a decision 2500 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
UNFAIR DISMISSAL – PROCESS AND COSTS• Problems • Go away money • Costs and difficulty in disciplining and terminating • Costs and difficulty in defending • Procedural fairness and personal harshness• Proposals • Small business exemption • Greater onus on employee to demonstrate unfairness • Higher fees, penalties for frivolous claims and costs where application dismissed
GENERAL PROTECTIONS – COSTS, CONFUSIONAND MANAGEMENT THREAT • Problems • Difficult to apply with certainty • Costs, cause inhibition in disciplining, terminating • Reverse onus, “a reason”, objective test • 60 days, 6 years to lodge • Proposals • Remove “adverse action” or “workplace rights” • Remove reverse onus, require a substantial reason • Timeframe for application same as unfair dismissal
FLEXIBILITY – DIFFICULT TO STAFF TO NEED • Flexibility – not many avenues • Numbers of individual flexibility agreements (IFAs) unknown • Numbers of flexible working arrangements (FWAs) unknown • Problems - IFAs • Uncertainty – Operation of BOOT • Can‟t be offered as term of employment • Can only alter a narrow range of award terms • Can be unilaterally terminated with 4 weeks‟ notice
FLEXIBILITY – DIFFICULT TO STAFF TO NEED(Cont): • Problems – FWAs • Managing employee expectations • Employee understanding there is a “right” to flexibility • Flexible arrangements set precedents • Proposals • Make IFAs more certain: • Clarify non–monetary benefits for BOOT • Registration • Extend unilateral termination time • Expand award/agreement terms which can be addressed
WHAT CAN EMPLOYERS EXPECT? • Report release: Govt. response to review in June/July • Can expect at best modest proposals for change • Other lobbying might be important • Where might the government move? • Flexibility • General protections • Agreement making • Where is the government most likely to move? • It may rename Fair Work Australia
REVIEW OF MODERN AWARDS• ABI applied to vary 25 different modern awards • P/T additional hours • Annual leave paid in normal cycle • Allow employer to direct excess A/L cash-out • Restaurants - penalties small business wage, caterers coverage• Major application in Restaurants award • Penalties • Small business wage rate • Caterers‟ coverage
REVIEW OF MODERN AWARD (Cont’d)• Several applications with general effect • Use of IFA provisions for cashing out A/L • Training • Payments to trainees when training • Increased apprentice rates • 1st year to 60% • Adult lowest award classification • Federal government application to facilitate competency based-progression • Public holidays: non Monday-Friday (non-casual) employees to get compensation when rostered off on PH
ANNUAL WAGE REVIEW DECISION - JUNE• Awarded 2.9% increase to • National Minimum wage (to $606.40 pw, $15.96ph) • Special NMW for trainees, apprentices • Special NMW for employees with disability ($606.40 pw no disability impact; minimum where there is an impact not yet moved) • Default casual loading from 22% to 23% • Modern award wages
ANNUAL WAGE REVIEW DECISION – JUNE (Cont’d)• For awards from 1st pay period starting on or after 1 July • Classification rate increase • Next phase-in step (wages +/- 40% transitional amounts) • Next penalty, loading phase-in step (MA penalty, loading +/- 40% transitional percentage) • Work-related allowances increase by 2.9% • Reimbursement allowances increase by CPI component• For agreements • Minimum award wage (MA classification rate or transitional rate) is minimum for agreement • Allowances, penalties, loadings as per agreement
WHS HARMONISATION - SORT OF MAYBE SOMEDAY? In - Commonwealth - Queensland - Northern Territory - ACT - NSW ( with changes) Coming – but not until 2013 - Tasmania Trying - South Australia Never were in fully - WA Changed our minds – Vic COAG – Lets take another look in 2014
WORKER’S COMPENSATION• Alignment v Harmonisation• Less ambitious program• 7 working groups • Definitions • Permanent incapacity • Death benefits • Return to work • Self Insurers • Multi state employers • Dust DiseasesDON’T EXPECT TO SEE TOO MUCH BEFORE 2013
WHS HARMONISATION –NSW • WHS Act 2011 came into force 1/1 2012 • Conforms with Model Act except for the retention of union rights to prosecute in very limited circumstances. • Jurisdiction with the most to gain • Best prepared of all jurisdictions • Transition team moving back to BAU • Focus on help not enforcement?
IMPROVING SAFETY PERFORMANCE 16 15 Claims per 1,000 workers 14 13 12 11 10 9 8 base 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 period Achieved Reduction required to meet target
10/5/5 – TOP 10 INDUSTRIES• Site Preparation Services – Demolition• Sheep and Beef Cattle Farming• Other Wood Product Manufacturing - Wooden Structural Component Manufacturing• Road Freight Transport• Building Structure Services – Concrete Construction Services• Other Construction Services – Landscaping Services• Non-Building Construction – Road and Bridge Construction• Building Construction – House Construction• Plastic Product Manufacturing• Horticulture and Fruit Growing – Plant nurseries and grape growing.
FOCUSING ON RISK - 10/5/5 – TOP 5 INJURIES &ILLNESSES• Manual handling • Mental disorders (including• Falls on same level stress);• Falls from heights • Nervous system and senses• Struck by falling or diseases (including hearing moving object loss);• Striking moving or • Occupational cancers; stationery objects • Respiratory system diseases; and • Musculoskeletal system diseases.
IT DOESN’T BALANCE Assets $14,719 m Liabilities $18,802 m Deficit -$ 4,083 m Funding ratio 78% Source; WorkCover NSW ; Executive valuation of outstanding claims liability for NSW Workers Compensation Nominal Insurer as at 31 December 2011
WHY DOESN’T IT BALANCE? • Impact and flow on from GFC - reduced yields on investments - 50% • Deteriorating claims management experience – 50%
WHAT THE ACTUARY SAYS ABOUT HOW TO FIXTHE PROBLEM Increase premiums and/or Reduce benefits and/or Improve injury management
PREMIUM INCREASES Within 5 years 28% Within 10 years 10% BUT NSW already lags Victoria and Queensland so premium increases will only exacerbate our competitive disadvantage and lead to jobs losses. Vic premiums down another 3% from 1/7/12 Premium increases might balance the books but do not address the cost drivers
PREMIUM INCREASES – NOT ON28% premium increase – 84% said there will be job reductions - 12,600 jobs10% premium increase - 59% said there will be job reductions - 8,000 jobsReductions will be achieved by termination, natural attrition and not filling vacancies
EXTRA PREMIUM ($M)ILLAWARRA 28.1 SYD NW 136.0 SYD SW 91.9 SYD SE 173.9 SYD NE 104.6 RIVERINA 18.6 NORTH… 99.0 NORTHERN… 17.5 NEW… 15.0 MURRAY 12.1 MID NORTH 19.6 HUNTER 53.2 FAR WEST 27.1 CENTRAL… 15.5 CENTRAL… 18.5SOUTH EAST 13.2
JOBS IMPACT BY REGION ILLAWARRA 610 SYD NW 1922 SYD SW 1570 SYD SE 2924 SYD NE 1906 RIVERINA 359 NORTH WEST 229NORTHERN RIVERS 426 NEW ENGLAND 352 MURRAY 233 MID NORTH 405 HUNTER 902 FAR WEST 31 CENTRAL WEST 308 CENTRAL COAST 461 SOUTH EAST 358
COLLECTION > BREAK EVEN 3.5 3.0 2.5 2.0 Collected Rate 1.5 (% Wages) 1.0 Break Even Rate(% Wages) 0.5 0.0 Source; WorkCover NSW ; Executive valuation of outstanding claims liability for NSW Workers Compensation Nominal Insurer as at 31 December 2011
Claims per Premium Year160,000140,000120,000100,000 80,000 60,000 40,000 20,000 0
WHERE DO THE COSTS LIE? $M Weekly 5912 WID 1771 Legal 433 Permanent injury & pain & suffering 827 Medical 3339 Commutations 290 Investigation 383 Rehabilitation 236 Death 81 Asbestos 155 ULIS 106 Other 144
MAIN CHANGES IN COSTS FROM 2008 1200 Weekly 1000 Workplace Injury 800 Damages Legal 600 $m S66/67 400 Medical 200 Commutations 0 Investigations -200 Asbestos Source; WorkCover NSW ; Executive valuation of outstanding claims liability for NSW Workers Compensation Nominal Insurer as at 31 December 2011
WHAT ARE THE NUMBERS SAYING ABOUT THESYSTEM ?• Re-emergence of a lump sum culture within the system• Injured workers are staying off work longer• Some areas of medical expenses are going up at a hyper- inflated rate• The injury management system isn‟t working as it was intended.
WHAT IS THE PURPOSE OF THE WORKERSCOMPENSATION SYSTEM ?– WPIM & WC Act S3a) to assist securing the health, safety and welfare of workers and preventing work- related injury.b) to provide: prompt treatment of injuries, and effective and proactive management of injuries, and necessary medical and vocational rehabilitation following injuries, in order to assist injured workers and to promote their return to work as soon as possible,c) to provide injured workers and their dependants with income support during incapacity, payment for permanent impairment or death, reasonable treatment and other related expenses,d) to be fair, affordable, and financially viable,e) to ensure contributions by employers are commensurate with the risks faced, taking into account strategies and performance in injury prevention, injury management, and return to work, „f) to deliver the above objectives efficiently and effectively.
ISSUES PAPER/COSTINGSWEEKLY BENEFITS TO 130 WEEKSAverage weekly earnings to the basis for calculating weekly benefits ,not award or agreement ratesUp to 13 weeks – 95% AWE13 -130 weeks Total Incapacity – 80% AWE Partial Incapacity & working • make up to 95% AWE if working > 15 hrs pw • make up to 80% AWE if working 15 or less hrs pw Partial Incapacity & not working • 80% AWE less deemed earning capacity Vocational rehabilitation • Total or partial incapacity rules apply
ISSUES PAPER/COSTINGSWEEKLY BENEFITS POST 130 WEEKSWeekly benefits cease at 130 weeks unless >30% WPI or working more than 15 hrs per week – benefit 80% AWEAll weekly benefit claimants benefits to cease at 5,7,9 or 11* years unless > 30% WPIWork Capacity testing at 78 and 130 weeks *Four cut-of options 5,7,9 and 11 years have been costed
ISSUES PAPER/COSTINGSWork Injury Damages (Common Law) • No top up payments • Stronger defences • Stronger statute of limitations ( 3 years)Permanent Impairment & Pain & Suffering • 10% threshold • No top up payment • New higher scale incorporating pain & suffering • Legal representation will not be required except for disputed claims
ISSUES PAPER/COSTINGS • Journey claims- except for work, worker‟s compensation and training related journeys excluded • Heart Attacks/ Strokes excluded • Medical expenses 1 year after weekly benefits cease • Commutations programme
WHAT ELSE?WorkCover performance/structure/management of agentsAgent performanceWorkers Compensation CommissionEffective injury management support for employers and injured workersPremium system design & communications (premium notices that can beunderstood)Data collection/quality & impact on scheme management (a centralisedcomputer system)
WHAT NEXT? • Joint Parliamentary Committee to report by 13 June • Legislation by 30 June? • Non-legislative changes • Expect deficit to get bigger in the immediate term
WHS & WORKERS COMPENSATION SUMMARY NATIONALLY • WHS Harmonisation still some way off • Workers Compensation harmonisation most unlikely but some better alignments possible NSW • WHS Act in and operating • NSW WHS performance is improving • WorkCover refocused • Workers Compensation Scheme in trouble • Premium increases not the solution • Legislative and other changes needed with legislation before 30 June