Edited version of private advice

Authorisation Number: 1052177957601

Date of advice: 10 October 2023

Ruling

Subject: Superannuation guarantee obligations

Question 1

Will relevant 'permanent on-call' allowance payments made by the Employer to applicable employees constitute OTE of the Employees as defined in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

No.

Question 2

Will relevant 'ad-hoc on-call' allowance payments made by the Employer to applicable employees constitute OTE of the Employees as defined in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

No.

This advice applies for the following period:

1 July 2023 to 30 June 2028

The arrangement commences on:

1 July 2023

Relevant facts and circumstances

The Employer is seeking advice in relation to if the following payments form part of the employees ordinary time earnings in relation to their SG obligations:

•         on permanent on call allowance

•         on ad-hoc on-call allowance

In relation to these allowances, the employer provides the following information from the Award:

Permanent on call allowance and ad-hoc on-call allowance

•         Employees are required to be 'on-call' outside their 'ordinary' hours of work

•         Employees are permanent full-time staff members and have a standard working week of 35 hours or 38 hours.

•         Employees either receive an on-call allowance permanently or on an ad hoc basis, which is dependent on the occurrence of an on-call event that require the employee to respond. The essential difference between permanent and ad hoc allowances is that permanent allowances are paid because the circumstance for which the employee may be called to duty while on-call could happen at any time whereas for ad hoc on-call payments the circumstance is only likely to arise at a known event or a particular day or time.

•         An ad hoc on-call allowance arises from being put on an on-call roster by the Employer.

•         If called out to deal with emergencies or to deal with the issues for which they were paid the on-call allowance the employees are liable to be paid overtime in addition to the payment of an on-call allowance.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 Subsection 6(1).

Reasons for decision

Summary

The 'permanent on-call and ad-hoc on-call' allowance payments to The Employees who are engaged under The Award do not form part of the employees OTE as the payments paid in respect of those allowances are not in relation to the ordinary hours of work.

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 SG charge.

From 1 July 2008, employers must use OTE as defined in subsection 6(1) of the SGAA as the earnings base to calculate the minimum SG contributions for their employees. This ensures that all employees are treated the same for superannuation purposes.

Ordinary time earnings

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 - the maximum contribution 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. The maximum contribution base for the 2013-14 year of income is $48,040 per quarter. 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).

Paragraphs 13 to 15 and 18 of SGR 2009/2 address the meaning of 'ordinary hours of work' and state:

13. An employee's 'ordinary hours of work' are the hours specified in his or her ordinary hours of work under the relevant award or agreement, or under a 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'.

18. 'Ordinary hours of work' are not necessarily limited to hours to be worked between 9.am and 5pm. Monday to Friday. They may (depending on the provision in the relevant award or agreement, if any) and include hours to be worked at other times, including at night, on weekends or on public holidays.

Paragraphs 25 and 26 of SGR 2009/2 provide that earnings 'in respect of ordinary hours of work' means all earnings other than overtime. Paragraphs 25 and 26 state:

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 generally and are not OTE because they are not in respect of any particular hours of work.

26. ...the central question posed by the definition of OTE in the SGAA is what amounts are 'earnings in respect of ordinary hours of work'....

Paragraph 27 of SGR 2009/2 relates to allowances and loadings and if these specific kinds of payments form part of an employee's OTE. Paragraph 27 states:

27. Many employees receive various additional payments that are described as allowances or loadings and that are paid to employees to recognise or compensate for certain conditions relating to their employment. Examples:

•         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;

•         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;

•         a 'dirt allowance' paid as a flat rate in acknowledgement of the conditions in which the work is undertaken; and

•         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 payment are OTE except to the extent that they:

•         are not 'salary or wages', for example if they are payments of a predetermined amount to offset or reimburse particular expenses (see paragraph 72 of this Ruling); or

•         relate solely to hours of work other than ordinary hours of work (see paragraphs 41 to 43 of this Ruling).

Paragraphs 41 to 45 of SGR 2009/2 relate to certain specific kinds of payments that are not OTE. Paragraphs 41 to 43 relate to overtime payments and state:

41. Payments for work performed during hours outside an employee's ordinary hours of work are not OTE.

42. This is so whether the payments are calculated at an hourly rate or the employee gets a specific loading, or an annualised or lump sum component of a total salary package, that is expressly referrable to overtime hours as remuneration for overtime hours worked.

43. However, some employees, particularly some managers and professionals, receive single undissected annual salary within a remuneration package that recognises in a non-specific way that the employee may often be expected to work more than the ordinary hours of work prescribed. The whole amount of salary payable under such a package is OTE, unless overtime amounts are distinctly identifiable as mentioned in paragraph 42 of this Ruling.

Paragraphs 44 and 45 of SGR 2009/2 relate to on-call allowances and state:

44. An on-call or availability allowance is a payment to an employee for making himself or herself available at certain times to be called into work if needed. This entitlement is separate from the salary or wages he or she will receive if actually called in. If paid in respect of hours that the employee is not otherwise working, these payments are not OTE.

45. In some cases on-call allowances are paid as a loading on the salary of an employee received for ordinary hours of work. For example, some doctors employed by hospitals are paid an extra hourly allowance, while carrying out routine duties in ordinary hours of work, to make themselves available to perform urgent surgery if required. Payments of that kind are OTE (except of course to the extent that they are paid in respect of overtime hours).

Application of the law to your circumstances to the relevant permanent on call and ad-hoc on-call allowance payments

In your circumstances you employ workers under the Award.

Question 1 - permanent on call allowance and

Question 2 - ad-hoc on-call allowance

Under the Award, the Employees are permanent full-time staff members and have a standard working week of 35 hours or 38 hours. Section xxx of the Award provides that the employer is required to pay employees an on-call allowance to be on call if required by the employer for duty outside of ordinary hours in certain circumstances.

The on-call allowance compensates employees for the requirement to be available for duty outside of ordinary hours at all times in order to attend emergency and/or breakdown work and/or supervise the call-out of other employees.

The permanent on call allowance entitlement arises because of events outside of ordinary hours of work (e.g. 'the property manager's role requires that the employee to respond to damage to the XXX property outside the employee's normal hours of work and this damage could occur at any time outside ordinary hours of work on any day of the week').

The ad-hoc on call allowance entitlement arises as a condition of their employment - employees are being put on an-call roster by the employer to provide on-call services and to make themselves available to return to duty in a period of time beyond their ordinary hours of work (e.g. 'a mechanic receives an ad-hoc on call allowance as a public event is soon to happen and there is a chance the mechanic may be called out to attend to machinery break down').

As the permanent on-call allowance and ad-hoc on-call allowance are paid to employees under the Award relate solely to hours that are outside the employees' ordinary hours of work, these allowances do not form part of OTE for the purposes of subsection 6(1) of the SGAA.

Therefore, the Employer does not have an obligation to make SG payments in respect of the permanent on-call allowance and ad-hoc on-call allowance.

Conclusion

The payments made to employees in respect of:

•         permanent on call allowance, and

•         ad-hoc on-call allowance

do not form part of the employees OTE. The earnings in respect of these allowances are in respect of hours which do not form part of the employee's ordinary hours of work which is their rostered duty hours in the Award.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).