From 1 July 2008 employers have to ensure that the minimum superannuation benefits (SG) for each employee are based on Ordinary Time Earnings (OTE). The financial impact of this change may be significant for those employers where the current earnings base used for calculating the SG contributions is less than the OTE definition.

OTE in 2008 – Key survey findings

Mercer’s Market Issues Survey, conducted 12 months prior to the legislative change, captured information on OTE issues from over 250 employers to gauge their awareness and understanding of the impact. Here are some of the key findings:

• Although organisations have commenced the move to the OTE definition, 67% of respondents 12 months ago were still using a salary base other than OTE. This means that a significant number of employers have had to make changes from 1 July 2008.

• Over 30% of respondents indicated there would be a cost increase/implication in order to comply with OTE.

• Although the cost could be substantial, nearly one-third of respondents hadn’t established what the cost implications were, and therefore not factored this into budgeting and business planning.

• Are organisations fully aware of the complexity and issues surrounding the use of multiple definitions? Have they thought about this as a broader issue – or only as a super issue?

In summary:

The key issue for employers, despite the deadline now having passed is whether the changes have been properly implemented across the organisation and whether they have been effectively communicated to their employees.

Further information:

Mercer has helped employers manage and prepare for OTE. We worked with clients to address the potential impact on costs, providing specialist advice regarding all changes required for 1 July 2008. If you would like further information please contact Rita Harris or Ken Gilbert.