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Edited version of your written advice

Authorisation Number: 1012782901371

Advice

Subject: Ordinary time earnings

Question 1

What are the ordinary time earnings (OTE), as defined in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992, (SGAA) of full-time employees, under an Employment Agreement (EA) underpinned by an Award?

Advice

The OTE of full-time employees, under an EA underpinned by the Award are the earnings in respect of an average of 38 hours per week and may be calculated over a period of not more than 28 days

Question 2

What are the OTE, as defined in subsection 6(1) of the SGAA of casual employees, under the Award?

Advice

The OTE of casual employees under the Award are the earnings in respect of all hours up to an average of 38 hours per week and may be calculated over a period of not more than 28 days.

The arrangement commences on:

After 1 July 2014

Relevant facts and circumstances

You provided a copy of the EA and the Award.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 subsection 6(1)

Reasons for decision

Detailed reasoning

Legislation and Superannuation Guarantee Ruling

All employers must use OTE as the earnings base to calculate the minimum super guarantee contributions required for your employees.

Employers may still be required to use notional earnings bases specified in legislation or industrial agreements as the basis of their superannuation support in cases where these are above an employee's OTE, but SGAA obligations will only be assessed against OTE.

The phrase 'ordinary time earnings' is defined in subsection 6(1) of the SGAA as follows:

In broad terms (and subject to some exceptions), OTE of an employee means earnings in respect of ordinary hours of work. Payments for work performed outside the ordinary hours of work, such as overtime payments, are not OTE.

OTE is usually the amount an employee earns for their ordinary hours of work. It includes commissions, shift-loadings and some allowances, but does not include overtime payments. Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) provides further guidance on what constitutes OTE.

The expression 'earnings in respect of ordinary hours of work' or any of the terms in that expression are not defined in the SGAA. The Commissioner's view on the meaning of these phrases is expressed in the following paragraphs of SGR 2009/2 as follows:

Question 1 - OTE of a full-time employee

OTE for a full-time employee are an average of 38 hours per week and may be calculated over a period of not more than 28 days.

Ordinary hours

The relevant documents in this case are the EA underpinned by the Award.

A clause of the Award defines a full-time employee as being engaged for an average of 38 ordinary hours per week calculated over 28 days.

A clause of the Award provides that an employer and an employee may agree to vary the application of certain terms of the award. A range of requirements must be met to validate any changes made in this area of award flexibility. It is noted that there is no scope to vary the Award terms regarding employees' ordinary hours of work or the base rate of pay.

Consequently, the Award is the source that determines the ordinary hours. The earnings in respect of those hours will form the OTE of full-time employees.

Earnings in respect of ordinary hours

The hourly rates under the Award are calculated on the basis of a applying certain factors to a base rate.

In conclusion, the OTE for full-time employees are the earnings in respect of an average of 38 hours per week and may be calculated over a period of not more than 28 days.

Question 2 - OTE of a casual employee.

Ordinary hours of work

A clause of the Award defines a casual employee. Casual employees are paid an additional 15% and 25% on the hourly rates.

A clause of the Award defines a full-time employee as being engaged for an average of 38 ordinary hours per week calculated over 28 days.

This is an inclusive paragraph and such covers both full-time and casual employees as described under the Award.

In conclusion, under the Award, the ordinary hours for a casual employee shall be an average of 38 hours per week, and may be calculated over a period of not more than 28 days.

Earnings in respect of ordinary hours

The hourly rates under the Award are calculated on the basis of a applying factors to a base rate.

An additional loading on the hourly rates is paid to casual employees.

Under paragraph 22 of SGR 2009/2 the additional loadings are loadings paid in respect of ordinary hours and will be included as part of OTE.

Accordingly, the rates to be used in the determination of earnings will be the above RTA rates and loadings.

OTE

In conclusion, the OTE for casual employees are the earnings in respect of all hours up to an average of 38 hours per week and may be calculated over a period of not more than 28 days.


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