Edited version of administratively binding advice

Authorisation Number: 1012465763860

Advice

Subject: Superannuation guarantee obligations

Question 1

Does the payment made to the employees of the Employer under an employment agreement, who are rostered to work on a public holiday as part of their 26 'days on' component of the 35 day work cycle, form part of their ordinary time earnings (OTE) in respect of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Advice

Yes, in respect of 7.2 hours at double time and a half. See our 'Reasons for decision'

Question 2

Does the payment made to the employees of the Employer under the employment agreement, who are not rostered to work on a public holiday as part of their 26 'days on' component of the 35 day work cycle, form part of their OTE in respect of the SGAA?

Advice

Yes, in respect of 7.2 hours at their ordinary rate of pay. See our 'Reasons for decision'

Question 3

Does overtime (hours in excess of 7.2 hours), worked by employees of the Employer under the employment agreement on a public holiday as part of their '26 days on' component of the 35 day work cycle, form part of their OTE in respect of the SGAA?

Advice

No. See our 'Reasons for decision'

This advice applies for the following period:

The period of operation of the Agreement

Relevant facts and circumstances

Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

The Commissioner received an application for administratively binding advice from the Employer in respect of their superannuation guarantee obligations for public holidays. The application provided the following information:

You have a number of employees working under an employment agreement (the Agreement)

The employees work a 26 days on and 9 days off roster.

The employees work 7.2 normal hours per day and accrue 0.8 hours rostered days off (RDO). Any time worked after 7.2 normal hours each rostered day is paid at penalty rates of time and a half and double time as appropriate.

When a public holiday is worked, all hours are paid at double time and a half without an RDO accrual.

When a public holiday is not worked, the workers receive 7.2 hours paid at normal rates without an RDO accrual.

The Agreement provides the following information:

Hours of Work: specifies the span of ordinary hours and states work performed beyond the ordinary hours is paid at overtime rates.

Overtime: specifies that, in respect of overtime hours on a public holiday, they will be paid at double time and a half.

Public Holidays: specifies that all work performed on a public holiday must be paid for at the rate of double time and a half.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 Subsection 6(1).

Reasons for decision

Question 1

Summary

The payment at a rate of double time and a half, made to the employees of the Employer under the Agreement who are rostered to work on a public holiday as part of their 26 'days on' component of the 35 day work cycle, forms part of the employees OTE in respect of the SGAA.

Detailed reasoning

The SGAA places a requirement on all employers to provide a minimum level of superannuation support for their eligible employees by the quarterly due date, or pay the superannuation guarantee charge. The minimum level of support is calculated by multiplying the charge percentage (currently 9%) by each employee's earnings base.

From 1 July 2008, an employer must use OTE as defined in subsection 6(1) of the SGAA as the earnings base to calculate the minimum superannuation contributions for their employees. This ensures that all employees are treated the same for superannuation purposes.

Definition of ordinary time earnings

OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and is the lesser of:

the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over award payments, shift loading or commission, but does not include lump sum payments made on termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or

the maximum contribution base for the quarter - the maximum contribution base, which is the maximum limit on the amount of superannuation support that an employer is expected to provide for the benefit of an employee. The maximum contribution base for the 2011/12 year of income is $43,820 per quarter. This amount is indexed annually according to the indexation factor.

The Commissioner's views on OTE generally, including an employee's ordinary hours of work, are included in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'(SGR 2009/2).

Paragraphs 13 to 18 of SGR 2009/2 address the meaning of 'ordinary hours of work' and state:

13. An employee's ordinary hours of work' are the hours specified as his or her ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment.

14. The document need not use the exact expression 'ordinary hours of work', but it needs to draw a genuine distinction, for the purposes of the award or agreement, between ordinary hours and other hours. In particular, it would be expected that the other hours are remunerated at a higher rate (typically described as overtime) than the ordinary hours, or otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours.

15. Any hours worked in excess of, or outside the span (if any) of, those specified ordinary hours of work are not part of the employees 'ordinary hours of work'.

16. If the ordinary hours of work are not specified in a relevant award or agreement, the 'ordinary hours of work' are the normal, regular, usual or customary hours worked by the employee, as determined in all the circumstances of the case. This is not necessarily the minimum or maximum number of hours worked or required to be worked.

17. In such cases, it may often not be possible or practicable to determine the normal, regular, usual or customary hours of an employee's work. If so, the actual hours worked should be taken to be the ordinary hours of work.

18. 'Ordinary hours of work' are not necessarily limited to hours to be worked between 9am and 5pm, Monday to Friday. They may (depending on the provision in the relevant award or agreement, if any) include hours to be worked at other times, including at night, on weekends or on public holidays.

Paragraph 20 of SGR 2009/2 provides that earnings consisting of over-award payments, shift loading or commission are specifically included in the definition of OTE by subparagraph (a)(ii) of that definition in subsection 6(1).

Paragraphs 22 and paragraphs 220 to 222 of SGR 2009/2 relate to shift-loadings and state:

22. A shift-loading is an amount paid to a worker in addition to his or her basic hourly rate for having to work outside the usual span of time for day workers. Shift-loadings payable on ordinary hours of work must be distinguished from overtime payments under awards and agreements. Often these are mutually exclusive under awards and agreements, but if an employee is entitled to a shift loading in respect of hours other than ordinary hours of work, the Commissioner's view is that the specific inclusion of shift-loadings does not apply in that circumstance.

220. The Macquarie Dictionary defines 'shift loading' as:

An allowance paid to employees on shiftwork to compensate them for having to work outside the usual span of hours fixed for day workers.

221. A payment in addition to the ordinary rate of pay made to a shift worker by reason of compensation for working outside the span of hours which is designated for day workers, for example, early morning, late night, weekends or public holidays is a shift-loading, Such payments are therefore included in the definition of OTE in subsection 6(1).

222. Shift-loadings payable on ordinary hours of work must be distinguished from overtime payments under awards and agreements. Often these are mutually exclusive under awards and agreements, but if an employee is entitled to a shift loading in respect of hours other than ordinary hours of work, the Commissioner's view is that the specific inclusion of shift-loadings does not apply in that circumstance.

Paragraph 25 and paragraphs 225 to 228 of SGR 2009/2 relate to earnings in respect of ordinary hours of work and provide that this means all earnings other than overtime. Paragraph 25 of SGR 2009/2 states:

25. All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referrable only to overtime or to other hours that are not ordinary hours of work. There is no such thing as earnings that are merely in respect of employment generally and are not OTE because they are not in respect of any particular hours of work.

Paragraphs 225 to 228 of SGR 2009/2 state:

225. All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referable only to overtime or to other hours that are not ordinary hours of work.

226. The Commissioner does not consider that the services or attendance of an employee specifically during certain hours of work is necessary for the earnings to be 'in respect of ordinary hours of work' was intended to ensure that overtime payments, and cognate amounts, were excluded from the earnings base. It was not intended to exclude amounts paid at a worker's ordinary time rate solely on the grounds that they were not earned as a direct result of actually working particular hours in ordinary time.

227. For example, during public holidays an employee does not provide services or attend work, and the entitlement to the payment for the holiday has not accrued during ordinary hours actually worked. However, the payment the employee is 'in respect of 'ordinary hours of work' because it is salary or wages received at their ordinary rate of pay paid for a period which would normally be their ordinary working hours.

228. Given this view, the Commissioner considers that there is no such thing as earnings that are merely in respect of employment generally and are not OTE because they are not in respect of any particular hours of work. However payments that are not considered 'salary or wages' for the purposes of the SGAA cannot be OTE.

Under paragraph 27 of SGR 2009/2, allowances and loadings are OTE except to the extent that they:

· are not salary or wages

· relate solely to hours of work other than ordinary hours of work.

Paragraph 27 states:

Many employees receive various additional payments that are described as allowances or loadings and that are paid to employees to recognise or compensate for certain conditions relating to their employment.

These kids of payments are OTE except to the extent that they:

· are not 'salary or wages', for example if they are payments of a predetermined amount to offset or reimburse particular expenses; or

· relate solely to hours of work other than ordinary hours of work.

Application of the law to your circumstances

Under paragraph 25 of SGR 2009/2, all amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referrable only to overtime or to other hours that are not ordinary hours.

Paragraph 27 of SGR 2009/2 provides that additional payments, such as loadings are part of OTE when they relate to the employee's ordinary hours of work.

In your case, under a clause of the Agreement, employees ordinary hours of work are 7.2 hours daily. A clause of the Agreement provides that employees who are rostered to attend work on a public holiday are paid at a rate of double time and a half.

The employees are paid at the rate of double time and a half, in respect of the 7.2 ordinary hours of work, as a loading to compensate them for working on a public holiday.

Therefore, the full amount of the of the payment, at the rate of double time and a half in respect of 7.2 ordinary hours of work, forms part of the employee's OTE for the purposes of the SGAA.

Question 2

Summary

The payment for 7.2 hours at the ordinary hours of work rate, made to the employees of the Employer under the Agreement, who are not rostered to work on a public holiday as part of their 26 'days on' component of the 35 day work cycle, forms part of the employees OTE in respect of the SGAA.

Detailed reasoning

Under paragraph 25 of SGR 2009/2, all amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referrable only to overtime or to other hours that are not ordinary hours.

Paragraph 226 of SGR 2009/2 provides that the Commissioner does not consider that the services or attendance of an employee specifically during certain hours of work is necessary for the earnings to be 'in respect of ordinary hours of work' and therefore form part of employees OTE.

Paragraph 227 of SGR 2009/2 specifically relates to public holidays and states:

…during public holidays an employee does not provide services or attend work, and the entitlement to the payment for the holiday has not accrued during ordinary hours actually worked. However, the payment the employee receives is 'in respect of ordinary hours of work' because it is salary or wages received at their ordinary rate of pay paid for a period which would normally be their ordinary working hours.

Application of the law to your circumstances

A clause of the Agreement provides that the employees are entitled to specified days which will be observed as holidays without deduction of pay for ordinary time they would have worked.

You have advised that when a public holiday is not worked, the employees receive 7.2 hours at their normal rate of pay.

When the public holiday falls within employees 26 'days on' of the work cycle, the payment relates to a period which would normally be their ordinary working hours and therefore forms part of the employees OTE for the purposes of the SGAA.

Question 3

Summary

Overtime (hours in excess of 7.2 ordinary hours), worked by employees of the Employer under the Agreement on a public holiday does not form part of the employees OTE in respect of the SGAA.

Detailed reasoning

Paragraph 25 of SGR 2009/2 provides that all amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referrable only to overtime or to other hours that are not ordinary hours.

Paragraphs 41 and 42 of SGR 2009/2 relate to overtime payments and state:

41. Payments for work performed during hours outside an employee's ordinary hours of work are not OTE.

42. This is so whether the payments are calculated at an hourly rate or the employee gets a specific loading, or an annualised or lump sum component of a total salary package, that is expressly referrable to overtime hours as remuneration for overtime hours worked.

Application of the law to your circumstances

A clause of the Agreement provides that the employee's ordinary hours of work are 7.2 hours per day.

Time worked beyond an employee's ordinary hours of work is overtime hours.

When an employee works in excess of 7.2 ordinary hours on a public holiday, they are paid at a rate of double time and a half as an overtime payment.

As the payment for overtime is outside the employee's ordinary hours of work, the payment does not form part of employees OTE for the purposes of the SGAA.

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