Is your job sabotaging your future?
Financial Planning | 26/10/2017 |
7 min read
You may have heard of the gig economy. It refers to any market where buyers and sellers are matched by a third party web platform. Think Uber, Airtasker, or the countless others competing for your attention.
These casual working arrangements have seen huge growth in recent years and are only going to get more popular. But that has a range of implications for people’s incomes, their superannuation, and their overall quality of life.
ASFA has released a new report discussing some of these issues. We look at some of the key findings below.
100,000 people and counting
ASFA estimates there are currently around 100,000 workers in Australia who use web-based platforms to obtain work on a regular basis. This equates to around 0.8 per cent of the Australian workforce.
According their report, Superannuation and the Changing Nature of Work, gig economy workers will confront trade-offs compared with more conventional work arrangements. On the one hand, these jobs provide individuals with greater flexibility. This is offset by lower security and income, and means people may be operating outside standard work conditions.
But where does that leave you
An employee is afforded certain legal rights in Australia. Most of the protections and obligations in this regard are set out in the Fair Work Act 2009 (the Fair Work Act), including minimum wages, leave entitlements and protections against unfair dismissal. These rights do not extend to contractors, and that can cause various problems down the line.
There’s also the question of superannuation. Australia’s SG system requires employers to make superannuation contributions on behalf of their employees, equivalent to 9.5 per cent of gross ordinary-time earnings. Over the course of your working life this money accrues and grows to provide you with a comfortable retirement.
Research has found that self-employed people and contractors are unlikely to make voluntary super contributions. This can have serious long term implications.
As cited in the report – a woman who starts full-time work at 23 years of age, receives an average salary, and retirees at 67 would have a superannuation balance of around $710,000. If she took a 10-year break from full-time employment to work as a contractor at age 45 (and did not make contributions during this period), her superannuation balance at retirement would instead be $560,000.
For a person on a lower income a 10 year stint in the gig economy could see them end up with $265,000 in super vs $385,000 if they had been receiving super contributions.
These long term implications need to be considered. And the relatively recent rise of the gig economy means that we’re often charting new territory, with the destination still obscured. But it’s worth considering the long term implications.
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