Edited version of your written advice

Authorisation Number: 1051341658843

Ruling

Date of advice: 7 March 2018

Subject: Ordinary time earnings

Question

Are the ordinary hours of work for casual employees engaged to work outside of a metropolitan area the lesser of an average of 38 hours per week or the weekly hours required to be worked to perform duties, for the purposes of calculating Ordinary Time Earnings (OTE) under subsection 6(1) of the Superannuation Guarantee Administration Act 1992 (‘SGAA’) for the period 1 July 2017 to 30 June 2020 inclusive?

Answer

Yes. Please refer to ‘why we have made this decision’.

This advice applies for the following periods:

● Year ended 30 June 2018

● Year ended 30 June 2019

● Year ended 30 June 2020

The arrangement commences on:

1 July 2017

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.

We considered these to be relevant facts

You requested our advice on what is considered OTE for casual employees, engaged as electrical workers for periodic shutdown maintenance or project related work, pursuant to the Contract and the EA.

You provided further information by email including attached pay records consisting of timesheets and payslips for a sample of the casual employees during the period between 1 July 2017 and 31 December 2017.

Based on the information provided, we considered the following to be relevant facts:

● The employer engages casual employees (‘the employees’) as electrical workers for periodic shutdown maintenance or project related work for the employer’s clients in the relevant industry.

● The sample Contract between the employer and the employees provides the following:

● Unless more generous provisions are provided in the Contract, the terms and conditions of your employment are those set out in the EA and applicable legislation, including the National Employment Standards (‘NES’) in the Fair Work Act 2009 (Cth).

● Neither the EA nor any applicable legislation are incorporated into the Contract.

● The “ordinary hours of work” for a casual employee are “the lesser of an average of 38 hours per week or the weekly hours required to be worked for you to perform your duties”.

● The weekly rostered hours and days worked may be varied.

● The client’s operational requirements will dictate the hours to be worked by the employees while on site.

● The employees will be rostered on a ‘fly-in fly-out’ basis.

● Due to the nature of the work, the work performed on site will vary and will depend on the client’s requirements.

● The roster systems are implemented to meet the needs of the site.

● The employees may be required to transfer between ‘day work’ and ‘shift work’ and between ‘day shift’ and ‘night shift’ to meet the client’s requirements.

● The total hourly rate paid to employees is a flat rate which compensates the employees for all work performed during ordinary hours of work and overtime worked.

● The EA provides the following:

● The employer may, at its sole discretion, provide any terms and conditions that may be relevant to a particular site, project or other arrangement.

● The employees may be engaged on a fly-in/fly-out basis and the employer will determine the shift and roster patterns that best meet the operational needs of the employer and its clients.

● Ordinary hours of work shall be worked between 6.00am and 6.00pm, Monday to Friday.

● All hours worked by the relevant employees shall be paid at a flat rate and these employees will not be entitled to overtime rates.

● Employees engaged in non-continuous shift work have weekly ordinary hours of an average of 38 hours per week, to be worked in a shift cycle over the course of seven, 14, 21 or 28 consecutive calendar days.

● An employee engaged in non-continuous shift work may have weekly hours of work consisting of both non-shift work and shift-work.

● Employees engaged in continuous shift work have weekly ordinary hours of an average of 38 hours per week, which will not exceed 152 hours in 28 consecutive calendar days.

● The timesheets and payslips you have supplied for a sample of the casual employees during the period between 1 July 2017 and 31 December 2017 show the following:

● The payslips are prepared in accordance with a weekly pay cycle.

● The payslips identify the number of ‘Site – Ordinary’ hours worked by the employee and the applicable pay rate.

● The document titled ‘Day Sheet’ shows the number of hours worked by each employee for a particular job on a daily basis, and some of the documents identify those hours as being day shift or night shift hours.

● The document titled ‘Office Weekly Time Sheet’ shows the start and finish times worked by an individual employee for each day of the week, the total hours worked each day and the total hours worked for the week.

● The document titled ‘Weekly Time Sheet’ shows the number of hours worked by each employee for each day of the week, including whether those hours were day, night or ‘stand down’ hours, and the total hours worked by that employee for the week.

● The screenshots for the ‘Time Registration’ show the number of hours worked for an individual employee for each day of the week, the total hours worked for that week and any ‘remaining hours’.

● You have advised that the employees do not work regular hours, because they are only rostered on to work when required. You have advised that may mean in the absence of shutdown maintenance and/or project related work, an employee may not be rostered on at all.

● You have advised that when an employee is rostered on, he or she is employed on an hourly basis and rostered hours may vary from hour to hour, or day to day, according to the operational requirements of the client.

● You have advised that the employees may be rostered to work non-continuous shift cycles, continuous shift cycles or on a roster as determined and varied by the client’s requirements, being neither non-continuous or continuous shift work.

● You have advised that there are no individual flexibility arrangements (‘IFAs’) between the employees and the employer in addition to the Contract, nor is the Contract considered to be an IFA between the employees and the employer.

Relevant legislative provisions

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

Reasons for decision

Why we have made this decision

Summary

1. Based on the information provided, ordinary hours of work for casual employees engaged to work outside of a metropolitan area are the lesser of an average of 38 hours per week or the weekly hours required to be worked to perform duties, for the purposes of calculating OTE under subsection 6(1) of the SGAA for the period 1 July 2017 to 30 June 2020 inclusive.

Detailed reasoning

Question

Are the ordinary hours of work for casual employees engaged to work outside of a metropolitan area the lesser of an average of 38 hours per week or the weekly hours required to be worked to perform duties, for the purposes of calculating OTE under subsection 6(1) of the SGAA for the period 1 July 2017 to 30 June 2020 inclusive?

Answer

2. 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.

3. The Commissioner explains the meaning of OTE as defined by subsection 6(1) of the SGAA in Superannuation Guarantee Ruling SGR 2009/2 Superannuation Guarantee: Meaning of the terms ‘ordinary time earnings’ and ‘salary or wages’ (‘the Ruling’).

4. Paragraphs 13 to 18 of the Ruling state the following with respect to the meaning of ‘ordinary hours of work’:

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 employee's '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.

5. Paragraph 191 of the Ruling provides the following with respect to the interpretation of ‘ordinary hours of work’ when that term is specified in an award or agreement:

… Parliament consciously chose the expression 'ordinary hours of work' in framing the SGAA in 1992 knowing that it had a specialised and well-established meaning in the particular context of the Australian industrial relations system, and intended that the interpretation of the expression be informed by that context.

6. As per paragraph 192 of the Ruling, the Commissioner accepts the view that ordinary hours of work are as determined by the relevant award or agreement.

7. The Contract states that unless more generous provisions are provided in the Contract, the terms and conditions of the engagement with the employees are those set out in the EA and applicable legislation, including the NES in the Fair Work Act 2009 (Cth).

8. The Contract states that neither the EA nor any applicable legislation are incorporated into the Contract.

9. The EA provides that the employer may, in its sole discretion, elect to provide any terms and conditions that may be relevant to a particular site, project or other arrangement, other than as provided in the EA.

10. You have advised that the Contract provides the terms and conditions for casual employees engaged as electrical workers for periodic shutdown maintenance or project related work for the employer’s clients in the relevant industry, pursuant to the EA.

11. The EA provides that should any site specific conditions be provided by the Company, those conditions will not be less beneficial overall than the conditions provided under the EA.

12. You have advised that there are no IFAs between the employees and the employer in addition to the Contract, nor is the Contract considered to be an IFA between the employees and the employer.

13. The question of whether the terms and conditions provided by the Contract, as specific to this arrangement, are not ‘less beneficial overall’ than the conditions provided under the EA, is an industrial matter and not an issue on which the Commissioner will provide advice.

14. The Contract provides that the “ordinary hours of work” for a casual employee are “the lesser of an average of 38 hours per week or the weekly hours required to be worked for you to perform your duties”.

15. The Contract is silent on the time period (if any) over which an “average” of 38 hours per week is to be determined. In accordance with paragraph 13 of the Ruling, an employee's 'ordinary hours of work' are the hours specified under the relevant award or agreement, or under the combination of such documents, so we must refer to the EA for further specification.

16. The Contract provides that employees may be required to transfer between ‘day work’ and ‘shift work’ and between ‘day shift’ and ‘night shift’ to meet the client’s requirements.

17. You have advised that the employees may be rostered to work non-continuous shift cycles, continuous shift cycles or on a roster as determined and varied by the client’s requirements, being neither non-continuous nor continuous shift work.

Non-continuous shift work

18. The EA provides that employees engaged in non-continuous shift work have weekly ordinary hours of an average of 38 hours per week, to be worked in a shift cycle over the course of seven, 14, 21 or 28 consecutive calendar days.

19. The EA prescribes the method of determining the “average” of 38 hours per week for employees undertaking non-continuous shift work by reference to the individual employee’s shift cycle.

20. The EA further provides that a ‘shift roster’ must specify the commencing and finishing times of ordinary working hours of the respective shifts. It follows that an individual employee’s shift cycle will be reflected by that employee’s shift roster.

21. For example, an employee who is working in a shift cycle or roster, for a period not exceeding seven consecutive calendar days, will have 38 ordinary hours of work for that week. This equates to an average of 38 hours per week over a period of one week.

22. By contrast, an employee who is working in a shift cycle or roster, for a period not exceeding 21 consecutive calendar days (i.e. ’14 days on, 7 days off’), will have 114 ordinary hours of work for the period. The EA anticipates that these ordinary hours of work may be worked in a variable manner over the course of the period.

23. The EA provides that an employee’s weekly hours of work can consist of a mixture of both non-shift work and shift-work, and that an employee may be required to work both non-shift work and shift work within a 24 hour period.

24. We consider that the ordinary hours of work for an employee, who works a mixture of both non-shift work and shift-work during the course of a week, will be determined by the method prescribed in the EA for non-continuous shift work, regardless of whether a particular hour worked was an hour of shift work or non-shift work.

25. We note that the EA provides for variation to hours of work and/or shift work, where the employer and an individual employee agree to hours and shifts to suit the needs of a particular project, and that this will replace the non-continuous shift work provisions.

26. The Contract may be considered a variation pursuant to the EA. However, the Contract is silent on the time period (if any) over which an “average” of 38 hours per week is to be determined, so does not in effect vary the application of the EA.

Continuous shift work

27. The EA provides that employees engaged in continuous shift work have weekly ordinary hours of an average of 38 hours per week, which will not exceed 152 hours in 28 consecutive calendar days.

28. The EA only prescribes a method for determining the “average” of 38 hours per week for employees undertaking continuous shift work by reference to a maximum of 152 ordinary hours of work in 28 consecutive calendar days. Ordinary hours of work for continuous shift work may be worked Monday to Sunday.

29. We consider that the EA does not preclude an “average” of 38 hours per week from being determined by reference to a period shorter than 28 consecutive calendar days. As for non-continuous shift work, the method of determining the “average” of 38 hours per week for employees undertaking continuous shift work will be in reference to the individual employee’s shift cycle or roster.

30. As per above, the Contract is silent on the time period (if any) over which an “average” of 38 hours per week is to be determined, so does not in effect vary the application of the EA.

Neither non-continuous nor continuous shift work

31. You have advised that the employees may be rostered to work on a roster as determined and varied by the client’s requirements, being neither non-continuous nor continuous shift work. The Contract relevantly provides that roster systems are implemented to meet the needs of the site.

32. The Contract provides that the “ordinary hours of work” for a casual employee are “the lesser of an average of 38 hours per week or the weekly hours required to be worked for you to perform your duties”.

33. The Contract provides that the weekly rostered hours and days worked may be varied, and the client’s operational requirements will dictate the hours to be worked by the employees while on site. Due to the nature of the work, the work performed on site will also vary and will depend on the client’s requirements.

34. The EA provides that employees may be engaged on a fly-in/fly-out basis and the employer will determine the shift and roster patterns that best meet the operational needs of the employer and its clients.

35. You have advised that the employees do not work regular hours, because they are only rostered on to work when required. You have advised that may mean in the absence of shutdown maintenance and/or project related work, an employee may not be rostered on at all.

36. You have advised that when an employee is rostered on, he or she is employed on an hourly basis and rostered hours may vary from hour to hour, or day to day, according to the operational requirements of the client.

37. As per above, the Contract is silent on the time period (if any) over which an “average” of 38 hours per week is to be determined. The EA does not prescribe a method for determining the “average” of 38 hours per week for employees undertaking work that is neither non-continuous nor continuous shift work.

38. Paragraph 14 of the Ruling provides that the Contract needs to draw a “genuine distinction”, for the purposes of the Contract, between ordinary hours and other hours. The Contract makes the required distinction between ordinary hours and other hours by stating that “ordinary hours of work” for a casual employee are “the lesser of an average of 38 hours per week or the weekly hours required to be worked for you to perform your duties”.

39. Paragraph 25 of the Ruling 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 referable only to overtime or to other hours that are not ordinary hours of work.

40. The reference to “other hours that are not ordinary hours of work” in paragraph 25 of the Ruling acknowledges that not all non-ordinary hours are called “overtime” hours or paid at higher rates. It is therefore irrelevant that hours worked in excess of an average of 38 hours per week are paid at the same flat rate as those worked up to that time.

41. The Contract states that the total hourly rate paid to the employees compensates the employees for all work performed, including their ordinary hours of work and any overtime worked. However, the use of a flat hourly rate does not remove or modify the “genuine distinction” established by the Contract.

42. As the Contract is silent on the time period (if any) over which an “average” of 38 hours per week is to be determined, the relevant time period will be determined by reference to the individual’s roster, as determined and varied by the client’s requirements.

43. The Contract provides that unless more generous provisions are provided in the Contract, the terms and conditions of employment are those set out in the EA and applicable legislation, including the NES in the Fair Work Act 2009 (Cth) (‘FWA’).

44. Part 2-2 of the FWA contains the NES. The NES outlines minimum terms and conditions that apply to all national system employees. The employer is a national system employer, and the casual employees engaged by the employer under the present arrangement are national system employees.

45. Section 62 of the NES/FWA concerns the minimum standards relating to maximum weekly hours of work. Paragraph 62(1)(b) of the NES/FWA provides that the maximum weekly hours of work for an employee, who is not a full-time employee, are the lesser of 38 hours and the employee’s ordinary hours of work in a week.

46. Any hours worked in excess of 38 hours are considered “additional” hours under the NES/FWA. In accordance with the Contract, where an average of 38 hours per week is determined for a period exceeding seven consecutive calendar days, an employee’s ordinary hours of work for a given week may exceed 38 hours for that week.

47. In those circumstances the Contract will provide more generous provisions than those set out in the NES/FWA. The terms and conditions of employment set out in the Contract, with respect to ordinary hours of work, will prevail over those terms set out in the NES/FWA.

48. For completeness, we acknowledge that the weekly rostered hours and days worked by the employees are variable and this is evidenced by the sample of payslips and timesheets supplied. It is not practicable to determine the “normal, regular, usual or customary hours” worked by an employee in these circumstances.

49. In the absence of the “genuine distinction” provided by the Contract, as detailed above, the actual hours worked by an employee would be taken to be their ordinary hours of work in accordance with paragraph 17 of the Ruling.

Conclusion

50. Based on the information provided, the Commissioner is satisfied that ordinary hours of work for casual employees engaged to work outside of a metropolitan area are the lesser of an average of 38 hours per week or the weekly hours required to be worked to perform duties, for the purposes of calculating OTE under subsection 6(1) of the SGAA for the period 1 July 2017 to 30 June 2020 inclusive.

51. Accordingly, the employer has an obligation to pay superannuation guarantee contributions to these employees, based on the employee’s earnings inclusive of all hours defined as ‘ordinary hours of work’.

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