‘Race-to-the-bottom employer’: Superannuation cut for hundreds of Victorian public servants

Hundreds of public servants stand to lose thousands of dollars in superannuation contributions after controversial state government changes.

The move affects staff at the Department of Transport and Planning and Suburban Rail Loop Authority who salary sacrifice a portion of their pay into employee benefits, such as a car lease.

It had been the government’s long-standing practice to pay superannuation on pre-salary sacrifice earnings, which it did voluntarily.

But last month the department abandoned the practice, costing some affected employees thousands of dollars a year. The change was spearheaded by the Department of Government Services (DGS), which manages the payroll platform for parts of the public service, and pushed on to other departments.

In an email to staff on the eve of the first pay day of the financial year, the Transport and Planning Department wrote that under the federal government’s new Payday Super law – which compels employers to pay super every pay cycle – super contributions “must” be calculated based on earnings after salary sacrificing to employee benefits.

“As a result, the amount of earnings attracting employer superannuation contributions at 12% will be lower than under the current agreement,” the email said.

For an employee earning $100,000 a year and salary sacrificing $500 a fortnight into a novated lease, this would decrease their annual superannuation contributions by $1560.

Employee payslips seen by The Age confirm superannuation was paid at a lower rate after the change.

However, the Australian Taxation Office and independent experts said the Payday Super law did not change how salary sacrificing affected super contributions.

“The treatment of salary sacrifice to other employee benefits (including novated leases) has not changed under Payday Super,” an ATO spokesperson said.

The ATO said it had always been voluntary and at an employer’s discretion.

A Transport and Planning Department source said hundreds of employees had their entitlements cut and felt cheated by the explanation they were given. They added that other departments not paid through the Department of Government Services software were still being paid super at the pre-salary sacrifice level, creating a disparity across the public sector.

“The Victorian government is a large and consequential employer, you would like to think that it is a model employer that it treats its employees across the board in an equitable manner,” said the source, speaking anonymously to protect their job.

“But this conduct is the opposite of that, it’s what you expect to see from a race-to-the-bottom employer.”

The source said the decision had likely been made for administrative convenience and to allow the Department of Government Services to more easily automate reporting payments to the ATO on its software.

Theo Marinis, a financial strategist and Chief Economist of Coveo Partners, said he told clients who worked for government they generally didn’t need to worry about “unscrupulous” behaviour from their employer.

“It’s more the small employer you should be aware of, [but it] sounds like you should be aware of even government departments now,” Marinis said.

“But I guess Victoria is in such a big mess that they’re trying to scrape back some extra revenue.”

A Department of Government Services spokesperson said it wanted to make sure every employee received what they were entitled to.

“We are seeking further legal advice on the effects recent federal law changes may have on VPS [Victorian Public Service] superannuation payments,” they said.

“If we need to make subsequent changes after getting this advice, we will act.”

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