As many of us celebrate the convenience of ordering our favourite meal or hiring someone to assemble our flat-pack furniture, all at the touch of a button, gig economy workers are at serious risk of getting to the end of their working life without enough retirement savings or superannuation.
What’s the Gig Economy?
The Australian Super Funds Association (ASFA) in a recent discussion paper described the gig economy as the practice of using an online platform to match and organise people to complete tasks, such as freelancing, car transport and food delivery.
Many of us are probably familiar with Uber, Deliveroo and Airtasker and have used the services provided via these apps or platforms – this is the gig economy in action.
While this has opened the door to previously untapped work opportunities, it has also created a generation of people who work on a task-by-task basis.
According to ASFA around 100,000 workers in Australia, or 0.8 per cent of the workforce, are regularly obtaining work via web-based platforms, and they predict these figures will only rise as the gig economy expands to other industries and occupations.
The vast majority of these gig economy workers rely on the freelance work as their full-time income, which is a significant departure for many them.
In many cases, the worker may previously have had full or part-time employment, or been a temporary employee, enjoying all of the usual benefits, such as paid leave and superannuation guarantee contributions from their employer – but this isn’t the case with the gig economy.
More often than not, gig economy workers, whether they are engaged to complete tasks for one or many clients, are deemed independent contractors or self-employed.
This form of freelancing has serious implications for superannuation and the worker’s long-term financial security.
Freelancing and Super
In Australia, the superannuation guarantee requires employers to make superannuation contributions for employees who have earned at least $450 in that month, and some other basic criteria.
Gig economy workers, are not usually considered ‘employees’, so don’t fall under this requirement.
Self-employed people aren’t required to make superannuation payments, and while there are incentives to make voluntary contributions, many choose not to.
ASFA’s research has found that almost a quarter of self-employed Australians have no superannuation, and that those with some superannuation, would have accumulated it when they were an employee at some stage in their working career.
The same research found that the average superannuation balance for the self-employed is around 30 per cent less than the average employee. The general consensus among industry experts is that this gap will only widen with the growth of the gig economy.
Unfortunately the reality of the gig economy is that many of its workers are too preoccupied with securing and completing the next ‘gig’ to think about superannuation or putting savings away for their retirement.
This will not only have a devastating effect on the individual’s retirement but place considerable pressure on the country’s welfare system, including the Age Pension.
While industry bodies such as ASFA are lobbying for change, such as changing the $450 threshold and extending the superannuation guarantee to independent contractors, it’s important that individuals take control of their super.
What You Can Do About Your Super
The best way that gig economy workers and freelancers can protect their financial future and retirement, is to make regular, voluntary contributions to a superannuation fund.
A small amount put aside regularly in a good super fund, will make a big difference when you get to retirement.
Gig economy workers that contribute to their super may also be eligible for government incentives.
From 1 July 2017, most people will be able to claim a full deduction for contributions they make to their super, and you may be eligible for the super co-contribution payment, where the government will match your contribution up to certain limits.
You may like to make regular contributions, or less frequent lump sums depending on your cash flow.
Choosing a Super Fund
If you’re self-employed it’s important you choose a super fund like Nationwide Super* that specialises in small business super and understands the challenges you have working for yourself.
You should look for funds that keep it simple for you, and provide a personalised service – a good super fund will work with you to help you achieve your retirement goals.
The great news is that, with the right help, it’s incredibly easy to set up a superannuation fund or even change your fund.
Take control of your future and talk to superannuation experts today to make the most out of the gig economy.
*NSF Nominees Pty Limited ABN 29 053 228 667 AFSL 253129
Trustee of Nationwide Superannuation Fund (Nationwide Super) ABN 15 201 768 813
The information in this article is of a general nature only. It does not take into account your objectives, financial situation or needs. You should consider whether it is appropriate to your individual circumstances. Before you make any investment decisions, we suggest you obtain and read the relevant Nationwide Super Product Disclosure Statement, available at nationwidesuper.com.au, and/or seek licensed financial advice.
As at the time of compilation, the information in this article is correct, and any estimates, opinions, conclusions or recommendations are reasonably held or made. Subsequent events may mean that the information becomes out-of-date and so, to the maximum extent permitted by law, we disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through relying on anything contained in or omitted from this article.