Contractors for the Foreign Affairs Department have been spared a pay cut despite their employer flagging it would reduce their fees to fund higher superannuation payments.
Global development company Cardno initially told contractors working with the Department of Foreign Affairs and Trade it would withhold funds from their fee to pay the higher 10 per cent superannuation rate from July 1.
In a letter to employees in late June, Cardno said it would make the "minor adjustment" to their net salary to meet its super obligations. The decision would be in line with their contracts and would not change their gross pay, it said.
"The impact of this has been raised with DFAT and we are awaiting an outcome," the letter said.
"If we receive advice of a change in the DFAT position we will backdate this to July 1, 2020."
But Cardno has since said it would not reduce take home pay for contractors, following advice from the department.
The Brisbane-based company gained contracts worth a total $182m with DFAT last financial year, including for work on development and emergency preparedness, health, governance and education support programs in Pacific nations.
A department spokesperson said a number of existing DFAT development assistance contracts had an upper limit on the maximum remuneration payable to advisers employed by contracted companies.
"DFAT wrote to contracting companies on June 30, 2021 advising that the maximum amount payable would be increased in line with the government's superannuation legislation to ensure that there is no change in net salary of advisers," the spokesperson said.
A Cardno spokesperson confirmed there would be "no impact on take home pay for our advisers as a result of the changes in the superannuation guarantee changes".
"As the changes were approaching and understanding that we had various categories of advisers seeking clarification, we had a range of questions to be resolved around the application of the changes to the various categories," the spokesperson said.
"We received initial advice from DFAT on this matter on June 30, 2021 and then subsequent clarification from DFAT on a range of issues of application of the adjusted rates on July 7.
"We are in the process of adjusting personnel fee rates in accordance with DFAT advice to ensure that take home pay is not affected and is in line with the superannuation increase."
Community and Public Sector Union deputy secretary Beth Vincent-Pietsch said the contractors would be relieved at the decision to spare them a pay cut.
"This is good news for contractors to DFAT who were otherwise expecting to see an increase in their superannuation carved out of their weekly pay," she said.
"It is deplorable that Cardno was intending to take the mandated superannuation increase out of people's pay and that it took action from DFAT to change their mind."
Employment law experts warned as July 1 approached that employers could lawfully reduce the take home pay of workers to fund the scheduled superannuation rate increase, if the employment contract said that salary was a total amount including superannuation.
However Ms Vincent-Pietsch said such a decision by employers "doesn't pass the pub test".
"A legislated increase to a person's superannuation contribution shouldn't mean your base pay goes down," she said.
"I commend the Department of Foreign Affairs and Trade for proactively doing the right thing here to ensure these contract workers were not disadvantaged."
Labor MP Stephen Jones said the government had created the uncertainty about superannuation and take home pay for contractors and their employees.
"For seven years they've known the superannuation freeze would end," he said.
"They must immediately give contractors and their employees across government certainty by ruling out further attempts to cut take home pay."
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