Starting July 1, 2025, the federal government intends to pay superannuation guarantee (SG) contributions on government-paid family leave benefits. Subject to enabling legislation (which has not yet been released), the measure is aimed at reducing the gender income gap in retirement, caused in part by the lack of SG (retirement) contributions during family leave. In the government’s view, because women generally take longer periods of family leave to raise children and meet family care responsibilities, women receive fewer SG contributions than men over their careers, leading to lower retirement benefits. The government estimates that on average, superannuation benefits for men are 25% higher than for women.
Note: The SG contribution rate currently is 11.0%, increasing to 11.5% on July 1, 2024, and to 12.0% on July 1, 2025. In addition, starting July 1, 2024, the maximum period of PLP benefits will increase from 20 weeks (100 workdays) to 22 weeks (110 workdays), followed by further increases to 24 weeks on July 1, 2025, and 26 weeks on July 1, 2026.
Although the new measure is intended to reduce gender-based income inequality in retirement, the PLP benefit is quite modest, and so SG contributions on the PLP benefit would also be very modest. Companies surveyed commonly (around 60%) provide parental leave benefits in excess of statutory requirements, offering PLP benefits at 100% of pay for 12 weeks at the median. Of these companies, around 60% make voluntary SG contributions for their employees during some portion of family leave. The announced measure may modestly reduce costs for those employers that currently make SG contributions on parental leave benefits, as the government would start paying at least a portion of these contributions. More important, highlighting the gap in retirement benefits may encourage more employers to review the impact of their family leave policies on their employees’ SG benefits. Employers are encouraged to monitor this development.
