Edited version of private advice

Authorisation Number: 1051747191392

Date of advice: 31 August 2020

Ruling

Subject: Ordinary time earnings - ordinary hours of work

Question 1

Are earnings for work performed by full-time employment contract employees, relating to hours that are outside of the ordinary hours of work stipulated in the relevant Awards, considered ordinary time earnings (OTE) for the purpose of subsection 6(1) of the Superannuation Guarantee Administration Act 1992 (SGAA)?

Answer

No.

Question 2

Are earnings for work performed by casual employment contract employees considered OTE for the purpose of subsection 6(1) of the SGAA?

Answer

Where the relevant Award and casual employment contract is silent on an Employee's ordinary hours of work for OTE, then the Commissioner will rely on his view in SGR 2009/2. That view is "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."

Relevant facts and circumstances

The Employer engages Employees at their mining sites.

All relevant Employees are covered by four relevant Awards.

Each of the Awards define 'ordinary hours of work' for full-time employees as 38 hours per week on average.

The ordinary hours of work for casual employees are not defined in three of the Awards.

In accordance with one of the Awards a casual employee can be engaged to work up to and including 38 ordinary hours per week.

Employees' are contracted under numerous full-time and casual employment contracts. The contracts have varying terms in relation to working hours. Some clearly identify that superannuation is to be paid on ordinary hours of 38 per week and others where an Employee's ordinary hours are averaged to 38 hours per week over the rostered cycle. Others are silent on defining the Employee's ordinary hours of work.

None of the fulltime contacts contain a clause to specify that the Employer and Employee have agreed that ordinary hours of work will differentiate from the Employee's relevant Award.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 subsection 6(1)

We followed these ATO view documents

Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'

Reasons for decision

Detailed reasoning

The definition of OTE is relevant to employers for the purpose of calculating the minimum level of superannuation support required for individual employees under the SGAA.

OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and includes 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. However, it 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.

OTE earnings do not include remuneration for working overtime hours, or hours that are otherwise referable only to overtime or to other hours that are not ordinary hours of work.

OTE is described in SGR 2009/2: Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'; as the payment for the 'ordinary hours of work'. Paragraphs 13 to 18 explain a meaning of 'ordinary hours of work':

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.

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

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'.

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.

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.

'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.

In this case, all relevant Employees are covered by their specific Awards. Each Employee is also covered by an individual employment contract with the Employer.

Awards cover a whole industry or occupation and provide a safety net of minimum pay rates and employment conditions for an employee.

An employment contract is an agreement between an employer and employee that sets out terms and conditions of employment. An employment contract cannot provide for less than the legal minimum set out in an Award.

As stated above, ordinary hours are an employee's normal and regular hours of work, which do not attract overtime rates.

Full-time employment contracts

In accordance with the Awards, the ordinary hours of work for full-time employees is an average of 38 hours per week spread over an Employee's work cycle. The Awards allow for an Employee's ordinary hours to be worked in rostered cycles/shifts of up to maximum hourly limit per day upon agreement with the Employer.

The individual full-time employment contracts between the Employer and the Employee vary in the content of their terms. Some clearly identify that superannuation is to be paid on ordinary hours of 38 per week and others where an Employee's ordinary hours are averaged to 38 hours per week over the rostered cycle.

Although most contracts refer to 12 hour Ordinary Time Shifts resulting in 84 hours worked over a two week rotation, there is no clause stipulating that 84 hours per fortnight is an Employee's ordinary hours of work for the purposes of OTE. Therefore, none of the individual full-time contracts is specifically providing for ordinary hours to exceed the 38 hour per week average condition in the Awards.

Furthermore, as the Awards provide a safety net of minimum pay rates and employment conditions for an Employee, where an employment contract is silent on an Employee's ordinary hours of work for OTE, the Award will provide the default conditions for the Employee.

Based on the information provided the ordinary hours of work under the Employees' full-time employment contracts is 38 hours per week average.

Casual employment contracts

The individual casual employment contracts between the Employer and the Employee vary in the content of their terms. Some clearly identify that superannuation is to be paid on ordinary hours of 38 per week and others where an Employee's ordinary hours are averaged to 38 hours per week over the rostered cycle.

It is concluded that employment contracts containing these clauses will have ordinary hours of work of 38 hours per week average.

One of the Awards states that a 'casual employee can be engaged to work up to and including 38 ordinary hours per week'. Where a casual employment contract is silent on an Employee's ordinary hours of work for OTE, it is reasonable to conclude that this Award will provide the default condition for the Employee and that their ordinary hours of work will be 38 hours per week average.

The other Awards are silent on defining a casual Employee's ordinary hours of work.

Where the Award and casual employment contract is silent on an Employee's ordinary hours of work for OTE, then the Commissioner will rely on his view in SGR 2009/2. That view is "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." Paragraphs 204-205 of SGR 2009/2 provide the following:

It is not essential for the award or agreement to use the exact expression 'ordinary hours of work', but the instrument must disclose an intention to draw a genuine distinction between ordinary hours and other hours, which in particular would normally entail the other hours being remunerated at substantially higher (that is, overtime) rates. The Commissioner considers that this basic and widely understood distinction, in the industrial climate that prevailed in 1992, between ordinary time earnings and overtime earnings is what Parliament had in mind in enacting the OTE definition.

Thus, a clause merely prescribing a minimum or maximum number hours of work over a given period is not the same as one prescribing ordinary hours of work, particularly if any further hours of work actually performed are to be paid at the same rate as the minimum or maximum hours.

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