The Financial Services Council (FSC) has labelled elements of the government’s Fair Work regulatory framework as inconsistent, resulting in less competition, less superannuation security and restrictions on employers.
In response to the Fair Work Act Review Background Paper released last month, the council’s senior policy manager, Andrew Bragg, called on the government department to address superannuation matters within the act.
“We submit that the present regulatory arrangements which require businesses, especially small businesses, to use a mandatory default superannuation fund under a modern award is one such area requiring reform,” Bragg said in the FSC’s submission.
“This unnecessarily restrictive regulatory framework has a negative impact on the ability of employers to administer their compulsory superannuation obligations. It also restricts competition, efficiency and innovation in the financial services industry.”
Competition at the wholesale level was “heavily restricted” as a result of the act, he said.
“In order to address both the regulatory barriers faced by employers and the consumer protection shortcomings of the Fair Work regime, the system must become competitively neutral,” he said.
“An employer should be permitted to select any APRA (Australian Prudential Regulation Authority)-regulated superannuation fund as a default fund.”
If such a move were allowed, a designated Fair Work process would not be required as an employer would be free to select any APRA-regulated fund, he said.
“This approach has the benefit of removing conflicted industrial parties from selecting default superannuation funds which are approved without consideration by Fair Work Australia,” he said.
At present, the act did not provide employers with the flexibility of selecting a default super fund of their choice unless they instituted an enterprise agreement, at their own expense, he said.
He said a lack of choice was “particularly discriminatory” to small and medium-sized businesses, which were less likely to have the capacity to fund an enterprise agreement.
“Such employers are therefore forced to use the default superannuation fund listed in the relevant award regardless of its efficiency, member and employer service capability,” he said.
“The FSC’s engagement with the small business community has revealed that many small employers are frustrated with the poor service quality of compulsory default funds, but the cost of instituting an enterprise agreement is a barrier to selecting a different default fund. This is a significant shortcoming of the regulatory framework.”
He also said the FSC believed each of the current reviews into Australia’s superannuation system, including the Cooper review, Productivity Commission review and Stronger Super reforms, remained relevant to the Fair Work Act review.
“We remain of the view that superannuation funds should not be entangled in the Fair Work system,” he said.
