Superior Remuneration Benefit
For super to be a superior remuneration benefit, it must be prioritised and changes made strategically based on regular assessment of meaningful data.
Most employers have good intentions to manage super as a superior remuneration benefit but often delay any close examination of their current super arrangement, suggesting that it is not an immediate priority.
If employers do not successfully manage super as a superior remuneration benefit, it results in sub-optimal outcomes for their employees.
The question is, who is accountable for the management of super?
Does the responsibility lie with the employer, the super provider, the regulator, the federal government, or the employees themselves?
The answer is that each stakeholder noted above plays an important part.
Employers must make informed decisions about the default super plan they offer employees.
For super to be a valued employee benefit, employers must negotiate with their chosen super provider to deliver a default super plan superior to market alternatives, and it is not a one-off exercise.
To ensure they get the best outcomes for their employees, employers must hold their super provider to account regularly. As such, employers require access to quality information and must understand the significance of various key performance indicators.
For example, a statistic of more than 50% of employees electing not to join the employer default plan would signify a potential deficiency in the value offered.
Financial stress is a known contributor that can negatively affect employee performance, and research suggests that many employees suffer from financial stress, indicating perhaps this is an element of life they find difficult to manage.
Access to quality information improves the probability for identification of problems and application of solutions appropriately.
Both the employer who funds the benefit and the employees who own the asset must be privy to such information, and the formation of a consultation team made up of suitable employer and employee representatives is recommended.
What to Consider
The first step toward improving something to understand what is currently in place. Employers must ask themselves:
- Who is your current super provider?
- Can you identify anything they have improved in the last 3 to 5 years?
- What are the performance measures that define the value being delivered?
- What is your source of information?
- Have you obtained information from an alternative source independent of your super service provider?
Employers who are serious about managing super as a superior remuneration benefit need access to relevant information as framed by asking the following questions:
- How long has your employer default super plan been with your current super provider?
- What percentage of your workforce were members of the employer default plan when you commenced with your current super provider? What has the trend in membership been since then?
- Does your current super provider claim their employer default offering is superior to individual products? If so, what is the proof?
- What differentiates the current super provider from all other employer default offerings?
- Does your current super provider intend to optimise super for every employee at an individual account level? If not, what is their value proposition?
- Can your current super provider analyse the projected impact of their service model in managing every employee’s asset at an individual account level?
- Does your current super provider supply you with meaningful performance measure statistics focused on value-added, or are you merely provided surface-level measures such as their net promoter score statistics?
- What proportion of your workforce has received personal advice to optimise their super from your super provider?
- What proportion of your workforce is invested in the basic MySuper default investment option? How does this option compare against alternative options? What are the reasons for the differences?
- What is the ratio of unlisted or illiquid assets within the basic MySuper default investment option? Are these types of assets less volatile than liquid assets? Does your super provider view such assets as less volatile/risky than listed assets?
There is no disputing that there are many competing pressures within all organisations, and often managing super as a superior remuneration benefit falls by the way-side at the detriment to both the employer who funds the benefit and the employees who own the asset.
Employers can easily influence the value delivered by super providers simply by holding them accountable, which requires specialised knowledge and an in-depth understanding of the industry.
Employers may benefit from partnering with an external resource if they do not have the appropriate skill set internally.