Australia: Superannuation And The Award Modernisation Process

The Australian Industrial Relations Commission (AIRC) has the significant task of modernising awards. This process is scheduled for completion by 31 December 2009, to coincide with the implementation of Fair Work Australia. The purpose of the award modernisation process is to provide a simpler system of workplace regulation, primarily achieved by implementing national industry-based awards cobbled together from existing Federal Awards and the host of state awards brought into the Federal industrial regime as Notional Agreements Preserving State Awards (NAPSAs) at commencement of Work Choices in March 2006.

Section 576J of the Workplace Relations Act 1996 (Cth) (the Act) sets out a list of 10 matters that may be dealt with by modern awards. Section 576J(1)(i) states that a modern award may include terms about superannuation. Originally, it was conceived that superannuation terms in awards would cease to be allowable award terms on 1 July 2008, thereby giving all employers the ability to choose the default fund for their employees. However, the provision allowing for the lapse of superannuation terms in awards was repealed on 28 March 2008. At the same time, superannuation terms were included as allowable terms in modernised awards. Accordingly, award superannuation terms are here to stay, and employers bound by modernised Federal Awards will not have the freedom of choosing their own default fund.

The AIRC also has the task of creating a model flexibility clause. The matters included in the flexibility clause will be able to be modified by employers to suit their particular employment relationships. Whilst superannuation is one of the 10 matters that may be dealt with by modern awards, it is not to be included in the model flexibility clause. It was decided by the Commission that the ability to vary or apply flexibility to superannuation obligations would add complexity and unnecessary regulation.

In relation to the issue of superannuation under modern awards, Senator Nick Sherry wrote to the AIRC's President in July requesting that the Commission maintain the practice of nominating default funds when it modernises awards. He further urged the Commission to encourage parties to each award to consider individual fund performance when determining the default fund. Senator Sherry advised that most employees under federal awards and NAPSAs did not exercise choice, so the default fund took on more importance. In his letter to the Commission, Senator Sherry referred to unpublished Australian Prudential Regulation Authority (APRA) data which showed that "two in three member accounts in the best performing quartile [of super funds] are members of industry funds, and by contrast five in six member accounts in the fourth, or worst performing, quartile, are in retail funds."

Senator Sherry voiced concerns over the fact that the default fund for a minority of industries performed relatively poorly. This poor performance had serious implications for retirement lump sums. He further wrote, "...while strongly supporting the continuation of the nomination of default funds in awards, I urge the Commission to ask the parties to awards to consider the performance of the superannuation fund specified in their award when they conduct consultations for the award modernisation process."

Senator Sherry went on to recommend that parties to a particular award form panels of experts "to compile a set of principles to underpin criteria for a list of well performing funds that can be chosen as the default funds for awards." Senator Sherry offered the assistance of APRA and any expert panel "in order to facilitate access to fund return data to aid in the research, analysis, and development of principles."

Industries/occupations currently under investigation by the AIRC for the purposes of award modernisation:

The Commission will ask the parties to awards to consider the performance of the relevant superannuation fund specified when they consult for the award modernisation process.

Deacons can provide superannuation funds advice or employers with advocacy and representation before award modernisation hearings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.