Inside Small Business, 16 April 2019
The employee super libido
When it comes to getting rich, for most Aussie workers, superannuation is hard to love. Super is designed to get a 65-year-old excited but does little for employee “investment libido” today – unlike property auctions, or having cash in a “splurge” account.
Yet the fact remains that super is the most important investment decision of an employee’s life, outside of the family home. But while all employees pick their family home, 10 million don’t pick their super fund. They leave this critical financial decision to employers.
The problem is that not all funds are equal and it is easy for employers to accidentally invest employee money in an under-performing default product. If this happens, it can cost employees the equivalent of 13 years’ salary, or 54 per cent of their retirement savings.
Here are three tips for employers around the management of their employees’ super choices:
#1 Stop dumping employees into your default super fund
Employers are required to have a default fund for employees who can’t or won’t choose their own super fund. A default MySuper product is the safety net that ensures every worker gets paid super.
Unless it is their first job, everyone you hire will have a super fund. There is no upside to you putting them into yet another one, as it just increases admin fees and life insurance premiums. These unintended multiple super accounts and duplicate insurance policies can syphon off a staggering 34 per cent of their employee’s super balance.
It is an easy, zero cost fix for you as an employer. Simply insist all new employees complete the Superannuation Standard Choice Form provided to them within the first month of employment.
#2 Support employee financial wellness
Employers of choice support the mental and physical wellbeing of their staff. Not only does this support demonstrate to your team that you care, but it improves staff retention and productivity.
In Australia, less attention has been placed on financial wellness but more needs to be. 64 per cent of employees experience financial distress. It is the largest cause of marriage failure and employees under financial distress are twice as likely to be in poor physical health.
Employers interested in financial wellness can use a combination of technology, education and advice to support their staff. Emerging technology platforms can help staff take control of their finances and manage their spending, while financial literacy programs and financial counselling can help money struggling individuals and families get out of financial distress.
Your default fund may have aligned financial advisers available to come into the office to present to staff. If done well, these sessions can be very informative and helpful for staff. One risk to be mindful of however is that these can serve as a narrow sales pitch for the financial adviser and a nudge by the default fund to increase members and voluntary staff contributions.
#3 Reward your staff
Traditionally out of reach for all but the largest corporates, technology is increasingly making employee reward and recognition programs more affordable for SMEs.
Beyond a wage, Harvard research identified that it is not just what you pay, but how you pay it, that matters. Harvard experiments found small wage increases were rarely perceived as a gift by employees. Instead they are interpreted as the new “going rate”. It was employees who received benefits unrelated to performance, “gifts”, who reciprocated with productivity increases.
Reward programs that provide discounts on a range of non-discretionary purchases, such as groceries and petrol, are also ‘everyday’ reminders of the value they receive as an employee of your company.
Mark MacLeod, Founder and CEO, Roll-it Super