Edited version of administratively binding advice

Authorisation Number: 1051539425014

Date of advice: 2 July 2019

Ruling

Subject: Superannuation - ordinary time earnings

Issue

'Ordinary Hours of Work' Shift Paid at Overtime Rates

Question

Would an employee's earnings in respect of a rostered shift that was paid at double time rates form part of their ordinary time earnings (OTE) for the purposes of section 6 of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

Yes.

This advice applies for the following periods

Year ending 30 June 2019

Year ending 30 June 2020

The arrangement commences on

1 July 2018.

Relevant facts and circumstances

The Employer's workforce is covered by an applicable Enterprise Bargaining Agreement (EBA).

As set out in the EBA, the ordinary hours of work for employees are worked over a number of shifts in a rotating roster pattern.

One of the clauses in the EBA states that, where an employee works so much overtime between the termination of an ordinary shift ('Shift A') and the commencement of their next rostered ordinary shift ('Shift B'), and that employee has not had the required minimum number of hours off-duty before commencing Shift B, the employee will be paid at double time rates for Shift B until they are released from duty.

That is, pursuant to the abovementioned clause in the EBA, one of an employee's rostered shifts can be converted to be paid at 'double time' rates, as per the following scenario ('the Scenario'):

·         Shift A runs longer than expected and does not finish until two hours later.

·         The employee's second shift, Shift B (which is part of the normal rostered pattern), is then paid at double time rates due to the employee not receiving a minimal rest break between the shifts.

Relevant legislative provisions

Subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992

Reasons for decision

Summary

An employee's earnings in respect of a rostered shift that was paid at double time rates would form part of their Ordinary Time Earnings (OTE) for the purposes of section 6 of the Superannuation Guarantee (Administration) Act 1992 (SGAA). As such, the associated superannuation guarantee calculated by the Employer would be based on these double time earnings.

Detailed reasoning

The superannuation guarantee scheme provides extensive superannuation coverage to Australian employees. The effect of the SGAA is that all employers are required to provide a minimum level of superannuation contributions for their eligible employees by the quarterly cut-off dates.

The current minimum level of superannuation support is 9.5% of each employee's ordinary time earnings (OTE) each quarter. The superannuation must be paid to a complying superannuation fund or retirement savings account (RSA).

If an employer does not meet their superannuation guarantee obligations through providing the minimum level of superannuation support by the quarterly due date, the Superannuation Guarantee Charge (SGC) is imposed.

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 amount of superannuation contributions for their employees. This ensures that all employees are treated equally for superannuation purposes.

Definition of ordinary time earnings

OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA as 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 loadings or commissions, but does not include lump sum payments made on the termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or

(b) the maximum contributions base for the quarter - the maximum contributions 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. 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).

Paragraph 12 of SGR 2009/2 provides the following meaning of the term 'earnings':

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 practical effect for superannuation guarantee purposes is that the expression 'earnings' means 'salary or wages'.

Paragraphs 13 to 18 of SGR 2009/2 outline the meaning of 'ordinary hours of work', as provided below:

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.

Therefore, SGR 2009/2explains 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. It highlights that any hours worked in excess of, or outside the span of, those specified ordinary hours of work are not part of the employee's 'ordinary hours of work'.

In particular, paragraphs 25 and 26 of SGR 2009/2 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 of 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.

Application of the law to your circumstances

The EBA states that Shift A and Shift B in the rotating roster are 'ordinary hours of work':

Therefore, pursuant to paragraph 13 of SGR 2009/2, these shifts constitute 'ordinary hours of work'.

However, with specific regard to the Scenario described in the Facts, the Commissioner considers the following:

1.    The employee's second shift, Shift B, constitutes 'ordinary hours of work', as it is a shift that is part of the normal, rotating roster as set out in the EBA. Despite the employee's second shift, Shift B, being paid at double time rates, such earnings are in respect of ordinary hours of work.

2.    Consequently, the employee's earnings (at double time rates) from Shift B in the Scenario constitute OTE pursuant to subsection 6(1) of the SGAA.

3.    With respect to the employee's earnings from Shift B in the Scenario, as the Employer is required to provide a minimum level of superannuation support (of 9.5%) of the employee's OTE, this superannuation guarantee would be calculated on the associated earnings at double time rates.

Further issues for you to consider

With regard to Shift A in the Scenario, the normal shift period constitutes 'ordinary hours of work' and as such, constitutes OTE. However, pursuant to paragraph 15 of SGR 2009/2, as extra two hours worked after Shift A ended is outside the span of specified ordinary hours of work, this period constitutes 'Overtime' and is thus not OTE.

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