When an employee decides to leave their current job and move on to new opportunities, they are often required to serve a notice period as per their employment contract. During this notice period, the employee is still considered an active member of the organization but is in the process of transitioning out. In the context of superannuation, commonly referred to as “super,” being on notice period can have implications for both the employer and the employee. This article delves into the concept of super on notice period, explaining what it entails and how it impacts the superannuation contributions and benefits of employees.
The Basics of Superannuation
Superannuation is a retirement savings scheme mandated by the Australian government to ensure that every working individual has savings for their retirement. It is a way to accumulate funds over a person’s working life, which can be accessed once they reach the Preservation Age (usually between 55 to 60 years) and retire. Both employers and employees contribute a percentage of the employee’s salary to their super fund, with the goal of building a nest egg for retirement.
Super Contributions During Notice Period
When an employee is on notice period, they are still technically employed by the organization until the end of the notice period. This means that both the employer and the employee are required to continue making super contributions as per the terms of their employment contract and the Superannuation Guarantee (SG) legislation. The SG legislation mandates that employers must contribute a minimum percentage of an employee’s ordinary time earnings to their super fund, currently set at 10%.
Employer Contributions
Employers are obligated to continue making super contributions for employees on notice period based on their ordinary time earnings. This includes any bonuses, commissions, or allowances that would typically attract super contributions. Failure to do so can result in penalties and legal consequences for the employer.
Employee Contributions
Employees are also required to make their share of contributions to their super fund during the notice period. This ensures that their retirement savings continue to grow even as they prepare to leave the organization. It is essential for employees to understand their super obligations during the notice period to avoid any discrepancies or issues with their super fund.
Implications for Super Benefits
Being on notice period can have implications for the super benefits that employees are entitled to. Depending on the terms of the employment contract and the super fund’s rules, employees may experience changes in their super benefits during the notice period.
- If an employee is entitled to employer contributions matching their own contributions, they may see a reduction in their super benefits if the employer stops matching contributions during the notice period.
- Employees may also lose out on additional benefits such as insurance coverage or investment options that were provided through their employer’s super fund once they leave the organization.
Conclusion
Super on notice period is a critical aspect of an employee’s financial planning, especially as they transition from one job to another. Both employers and employees must adhere to the super contribution requirements during the notice period to ensure compliance with the law and safeguard the employee’s retirement savings. Understanding the implications of being on notice period on super benefits can help employees make informed decisions about their financial future and retirement planning.