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Edited version of your written advice
Authorisation Number: 1051484058601
Date of advice: 19 February 2019
Ruling
Subject: Ordinary time earnings
Summary
The sleepover allowance under the Award is paid as compensation relating to hours that are worked outside of the employee’s ordinary hours of work. Consequently, the allowance is not included in the employee’s ordinary time earnings under subsection 6(1) 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 9.5%) 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
Subsection 6(1) of the SGAA defines OTE in relation to an employee to mean:
(a) the total of:
(i) earnings in respect of ordinary hours of work other than earnings consisting of a lump sum payment of any of the following kinds made to the employee on the termination of his or her employment:
(A) a payment in lieu of unused sick leave;
(B) an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997;
(ii) earnings consisting of over-award payment, shift loading or commission; or
(b) If the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the quarter – the maximum contribution base.
An employee's 'earnings', for the purpose of the definition of OTE, is the remuneration paid to the employee as a reward for the employee's services.
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).
SGR 2009/2 explains that an employee's 'ordinary hours of work' are the hours specified as ordinary hours of work under the relevant award or agreement that governs the employee's conditions of employment and highlights that any hours worked in excess of, or outside the span those specified ordinary hours of work are not part of the employee's 'ordinary hours of work'. In particular, the ruling states that:
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 employment and are not OTE because they are not in respect of any particular hours of work.
26. An award or agreement may itself have a definition of 'ordinary time earnings' that purports to apply for superannuation purposes. However, the central question posed by the definition of OTE in the SGAA is what amounts are 'earnings in respect of ordinary hours of work'. This could in some cases be a different amount from any purported amount of 'OTE' in the award or agreement. As mentioned in paragraph 13 of this Ruling, the Commissioner accepts that 'ordinary hours of work' are as determined by the relevant award or agreement, but that does not imply that OTE itself is necessarily as determined by the award or agreement.
Allowances
An allowance is a payment of a definite predetermined amount to cover an estimated expense. Generally it is paid regardless of whether the employee incurs the expected expense and the employee has the discretion whether or not to expend the allowance. Paragraph 27 of SGR 2009/2 relates to certain specific kinds of payments that are OTE and states:
Many employees receive various additional payments that are described as allowances that are paid to employees to recognise or compensate for certain conditions relating to their employment. Examples:
1. 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;
2. 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;
3. a 'dirt allowance' paid as a flat rate in acknowledgement of the conditions in which the work is undertaken; and
4. 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 payments are OTE except to the extent that they:
5. are not ‘salary or wages’, for example if they are payments of a predetermined amount to offset or reimburse particular expenses; or
6. relate solely to hours of work other than ordinary hours of work.
Furthermore paragraph 44 of SGR 2009/2 explains that an on-call allowance is separate from salary paid to an employee who is actually at work and is therefore not OTE. However, paragraph 45 explains that where an on-call allowance is paid during ordinary hours of work, this is considered OTE.
The sleepover allowance
Accordingly, in line with the above, all amounts of earnings in respect of employment should be considered to be in respect of the employee’s ordinary hours of work unless these are remuneration for overtime or other hours that are not ordinary hours of work.
The sleepover allowance described in clause 25.7 of the Award is not paid for hours worked, but rather as a compensation for staying at a client’s premises overnight. As per paragraph (e) of clause 25.7 of the Award, where an employee is required to work during the sleepover, overtime rates will apply to this period. This confirms that the period during which the sleepover occurs is not during the employee’s ordinary hours.
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 sleepover allowance paid to employees under clause 25.7of the Award relates to hours that are outside of the employee’s ordinary hours of work, this allowance does not form part of OTE for the purposes of subsection 6(1) of the SGAA and the employer does not have an obligation to make SG payments in respect of this payment.
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