Super as a Remuneration Benefit
When introduced, super was not a tax but it was to be fully funded by employers. Understandably, employers were not very impressed at the time, the compromise being it was introduced at 3% but is now heading towards 12% of ordinary time earnings (OTE). Employers were slow in understanding the cost and there are still many employers who see super as an obligation and not an opportunity. Many employer super arrangements were put in place based on some existing reciprocal commercial arrangement and some could not be changed without causing damage to this relationship.
After payment of current wages and salaries in each pay period, super is the most significant employer funded employee entitlement, and yet employers do not seek to optimise it. Most simply do not have the skills to hold their product provider accountable for the delivery of value. Note the distinction in calling them product providers, as most would actually promote themselves as service providers but fall well short of delivering a service which will optimise each employee’s balance.
When asked, every platform has said it would not be feasible to deliver value at an individual account level as it would require too much resource.
Most employers make the mistake of only talking to their current product provider about their employee’s super and therefore most managers involved in managing super as a remuneration benefit are under-informed, with only a single source of input.
Product providers do not manage super as an employee benefit. To do so would highlight the shortcomings of their sales and service model and the fact that their value proposition is not being delivered.
Managing Super as a Remuneration Benefit
With the level of regulatory complications around super, it is virtually impossible for any employer to directly manage super as a remuneration benefit. Employer super can be a minefield and that single fact can have the employer conclude it is only about managing their obligations in making contributions and not about optimising the value of each employee’s investment in super.
Other complications then present themselves around plan design, in particular the provision of appropriate insurance for employees.
Unfortunately many people have a “vested” interest in an employee’s super asset, the government included, and all of them will influence any revision of your past decision to go with a particular provider. When selecting the product provider of your employer plan, one realises it is a long term decision and not something you want to do too often.
It would appear to be common sense that every so often any medium to large-sized employer may want to seek confirmation from a suitably qualified product specialist in looking under the veil of their current provider and examining how they compare to other options available from the marketplace.
However, most super consultants are tender consultants with limited ability beyond running a tender to change the platform. In adopting such an approach, you may well realise you have changed the label but still not solved the problem.
In improving anything in business, the first step is always to clearly identify what the problem actually is and then decide the best course of action to improve outcomes. It is exactly the same in managing employer super. Knowledge is required for corrective action to be successful.
Both Knowledge and Capability
One without the other results in a deterioration in performance. Medium to large-sized employers need to find an outsourced service in the financial service sector with the ability to provide deep insight into the various sales and service models in employer super and which one might be the right choice for your organisation.
This outsourced service must possess certain skills to assist every employer in managing super as a remuneration benefit. Such a service will have some consultancy skills but not operate in any way similar to other super consultants. Such a service will also understand the importance of financial advice both for the overall asset and what might be best achieved by personal service at an individual account level. Finally such a service would not be connected to a product but would most certainly be a product specialist in explaining what is good and bad about each platform within employer super.
For more information
Please call 1800 111 299 and ask for Roy or Richard, the Super Consultants at AXIS Financial Group. Alternatively email consulting@axisfg.com.au.
