Edited version of administratively binding advice

Authorisation Number: 1012565371522

Advice

Subject: Superannuation guarantee obligations

Question 1

Do earnings in respect of the on-call allowance paid to employees under clauses of an Employment Agreement and individual employment contracts (Contracts), form part of the employees' ordinary time earnings (OTE) for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Advice

No. Refer to 'Reasons for decision'

Question 2

Do earnings in respect of the recall payment paid to employees under clauses of an Employment Agreement and Contracts, form part of the employees' OTE for the purposes of subsection 6(1) of the SGAA?

Advice

No. Refer to 'Reasons for decision'

Question 3

Do earnings in respect of the out of hours work paid to employees via a fee-for-service scheme under clauses of an Employment Agreement and Contracts, form part of the employees' OTE for the purposes of subsection 6(1) of the SGAA?

Advice

No. Refer to 'Reasons for decision'

Question 4

Do earnings in respect extra duties payments paid to employees under clauses of the Agreement and Contracts in relation to work outside their ordinary hours of duty form part of the employees' OTE for the purposes of subsection 6(1) of the SGAA?

Advice

No. Refer to 'Reasons for decision'

This advice applies for the following period:

After 1 July 2013

Relevant facts and circumstances

The Employer is seeking advice in relation to if the following payments form part of the employees OTE in relation to their SG obligations:

· On-call payments

· Recall payments

· Fee-for-service payments

· Extra duties payments

The employees are engaged under the Agreement and employment Contracts.

In relation to the types of payments, the employer provides the following information in relation to the Agreement and Contracts:

· Many employees are required to be 'on-call' outside their 'ordinary' hours of work.

· 'On-call' periods are rostered to ensure that the responsibility for additional shifts is distributed across the employee population.

· 'On-call' refers to the employee's making themselves available to attend to a given situation during the 'on-call period', either via telephone assistance or by physical return to work.

· Where an employee is required to return to work during the 'on-call' period, they generally receive a 'recall' payment.

· In some situations an employee may be required return to work even when not rostered to be 'on-call'. In this situation the employee may be paid at a 'fee-for-service' rate'. This rate is paid per unit of output.

· The employees' duties /services to be completed during their ordinary hours of work are listed in their Contracts.

· On occasion, an employee may be required to perform extra duties / services outside their listed duties as detailed in their Contract.

· Where, outside an employees ordinary hours of work, they are recalled to perform duties /services not listed in their Contract, employees will received a fixed amount of pay in relation to these duties. The amount of pay in respect of extra duties is specified in the employees' Contracts.

Relevant legislative provisions

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

Reasons for decision

Summary

The earnings of employees who are engaged under the Agreement and Contracts in respect of:

· On-call payments,

· Recall payments,

· Fee-for-service payments, and

· Extra payments in respect of non-ordinary hours of work

do not form part of the employees OTE as the earnings paid in respect of these clauses are not in relation to the ordinary hours of work.

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 SG charge.

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

Ordinary time earnings

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

(a) 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

(b) 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 2013-14 year of income is $48,040 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 15 and 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 in his or her ordinary hours of work under the relevant award or agreement, or under a 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 employee's 'ordinary hours of work'.

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

Paragraphs 25 and 26 of SGR 2009/2 provide that earnings 'in respect of ordinary hours of work' means all earnings other than overtime. Paragraphs 25 and 26 state:

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 referable 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.

26. ….the central question posed by the definition of OTE in the SGAA is what amounts are 'earnings in respect of ordinary hours of work'….

Paragraph 27 of SGR 2009/2 relates to allowances and loadings and if these specific kinds of payments form part of an employee's OTE. Paragraph 27 states:

27. 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. Examples:

· a 'site allowance' paid fortnightly at a flat rate in acknowledgement of the displacement an employee undergoes when a job requires him or her to work in a remote location;

· a 'casual loading' of 20% of the basic ordinary time rate of pay paid to a casual worker in lieu of any fixed, regular minimum hours of work and of paid leave entitlements;

· a 'dirt allowance' paid as a flat rate in acknowledgement of the conditions in which the work is undertaken; and

· a 'freezer allowance' paid at the rate of an extra $2.50 per hour to employees, such as some supermarket employees, who perform most of their duties in cold storage facilities.

These kinds of payment 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 (see paragraph 72 of this Ruling); or

· relate solely to hours of work other than ordinary hours of work (see paragraphs 41 to 43 of this Ruling).

Paragraphs 41 to 45 of SGR 2009/2 relate to certain specific kinds of payments that are not OTE. Paragraphs 41 to 43 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.

43. However, some employees, particularly some managers and professionals, receive single undissected annual salary within a remuneration package that recognises in a non-specific way that the employee may often be expected to work more than the ordinary hours of work prescribed. The whole amount of salary payable under such a package is OTE, unless overtime amounts are distinctly identifiable as mentioned in paragraph 42 of this Ruling.

Paragraphs 44 and 45 of SGR 2009/2 relate to on-call allowances and state:

44. An on-call or availability allowance is a payment to an employee for making himself or herself available at certain times to be called into work if needed. This entitlement is separate from the salary or wages he or she will receive if actually called in. If paid in respect of hours that the employee is not otherwise working, these payments are not OTE.

45. In some cases on-call allowances are paid as a loading on the salary of an employee received for ordinary hours of work. For example, some doctors employed by hospitals are paid an extra hourly allowance, while carrying out routine duties in ordinary hours of work, to make themselves available to perform urgent surgery if required. Payments of that kind are OTE (except of course to the extent that they are paid in respect of overtime hours).

Application of the law to your circumstances

Question 1 - on-call payment

Under the Agreement, a full-time employee's ordinary hours of work are 40 hours per week to be worked between the hours of 7.00am and 7.00pm. The ordinary hours of work of each employee is specified in their Contract.

A condition of their employment requires employees be rostered to provide on-call services and to make themselves available to return to duty in a period of time beyond their ordinary hours of work.

Under clauses of the Agreement and Contracts employees who provide on-call services are paid a fixed rate per on-call period.

Paragraph 27 of SGR 2009/2 provides that additional payments made to employees to recognise or compensate employees for certain conditions relating to their employment are OTE except to the extent that they relate solely to hours of work other than ordinary hours of work.

As the on-call payment paid to employees under clauses of the Agreement and Contracts relates solely to hours that are outside the employees' ordinary hours of work, this allowance does not form part of OTE for the purposes of subsection 6(1) of the SGAA.

Therefore, the Employer does not have an obligation to make SG payments in respect of the on-call allowance.

Question 2 - recall payment

Under a clause of the Agreement, an employee who is recalled to work during an on-call period will receive a recall payment. The rate of pay in relation to the recall payment is specified in their Contract.

Under a clause of the Contracts for employees, recalls when rostered on-call are paid at 1.5 times the hourly rate per recall (Mon - Fri) or 2.0 times the hourly rate per recall (weekends).

Paragraph 14 of SGR 2009/2 specifies that there needs to be a genuine distinction between ordinary hours and other hours and it is expected that other hours are remunerated at a higher rate, typically referred to as overtime, or are otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours.

Paragraph 41 of SGR 2009/2 provides that payments for work performed during hours outside an employee's ordinary hours of work are not OTE.

As the recall payment paid to employees under a clause of the Agreement (the rate of which is specified in the Contracts) relates to hours that are outside of the employees ordinary hours of work, this payment does not form part of OTE for the purposes of subsection 6(1) of the SGAA.

The employer does not have an obligation to make SG payments in respect of the recall payment.

Question 3 - Out of hours work - fee-for-service

Under the Agreement, an employee must be available to perform duties outside of their ordinary hours of work.

Where an employee is recalled to duty outside of their ordinary hours of work and outside of an on-call period, they are paid at a fee-for-service rate.

As stated above, paragraph 14 of SGR 2009/2 specifies that there needs to be a genuine distinction between ordinary hours and other hours and it is expected that these other hours are remunerated at a higher rate, or are identifiable as a separate component of total pay in respect of non-ordinary hours. Furthermore, paragraph 41 of SGR 2009/2 provides that payment for work performed outside an employee's ordinary hours are not OTE.

As the payment made under the fee-for-service system is paid in respect of hours outside an employees ordinary hours and the payment is otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours, this payment does not form part of OTE for the purposes of subsection 6(1) of the SGAA.

Question 4 - Extras duties payments

The employees' duties /services to be completed during their ordinary hours of work are listed in their Contracts.

Under the Contracts, employees may be required to perform extra duties outside their usual duties or services as specified in their Contract.

Remuneration for extra duties is specified as a set fee based on the nature of the duties.

In the event that extra duties are carried out outside an employees ordinary hours of work, the earnings would not form part of the employees' ordinary time earnings under paragraph 14 of SGR 2009/2, as the earnings are in respect of non-ordinary hours and are identifiable as a separate component of total pay.

However, in the event that extra duties are carried out during an employee's ordinary hours of work as specified in their Contract, the earnings in respect of the extra duties would form part of the employee's ordinary time earnings as the earnings are in respect of the employee's ordinary hours of work.

Conclusion

The payments made to employees by the employer in respect of:

· On-call payments,

· Recall payments,

· Fee-for-service payments, and

· Extra list payments in respect of non-ordinary hours of work

do not form part of the employees OTE. The earnings in respect of these payments are in respect of hours which do not form part of the employee's ordinary hours of work which are the hours in the individual employment Contract.

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