Edited version of private advice

Authorisation Number: 1052293788466

Date of advice: 3 December 2024

Ruling

Subject: Are additional hours worked by part-time employees considered to be OTE?

Question 1

Is 'bus work' performed by part-time Student Support Officers (SSOs) ordinary time earnings (OTE) within the meaning of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

No.

Question 2

Are extra hours worked by part-time SSOs over and above the time they are contracted to work considered OTE within the meaning of the SGAA?

Answer

No.

Question 3

Are the extra hours worked by part-time teachers over and above the time they are contracted to work considered OTE within the meaning of the SGAA?

Answer

Yes.

This advice applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The arrangement commenced on:

1 July 20XX

Relevant facts and circumstances

The SSOs and part-time teachers are employed by a school for students with intellectual disabilities.

The School operates buses, collecting students from their homes, taking them to school and returning them home each school day. On each trip, the bus driver is accompanied by a "bus assistant".

The School has several categories of employees, including teachers, non-teaching staff which includes student support officers (SSOs), and bus drivers.

An Enterprise Agreement (the Agreement) took effect in 20XX, which covers the conditions for employees, which includes staff employed as teachers and non-teaching staff.

SSOs mainly perform work in the classroom and assist teachers as required, however they may work extra hours as "bus assistants" - this is referred to as "bus work". This additional duty is remunerated at casual rates.

Teachers who are employed on a permanent part-time basis can also work extra hours, which are paid at casual rates. as per the Agreement.

Although requested, you were unable to supply a sample of a teacher's contract for casual work nor a "second" contract as referred to in the Agreement.

Relevant legislative provisions

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

Reasons for Decision

These reasons for decision accompany the Notice of advice for the Principal.

Question 1

Is "bus work" performed by part-time Student Support Officers (SSOs) ordinary time earnings (OTE) within the meaning of the SGAA?

Answer

No.

Question 2

Are extra hours worked by part-time SSOs over and above the time they are contracted to work considered OTE within the meaning of the SGAA?

Answer

No.

Question 3

Are the extra hours worked by part-time teachers over and above the time they are contracted to work for considered OTE within the meaning of the SGAA?

Answer

Yes.

Summary for Questions 1, 2 and 3

Questions 1 and 2 - the "bus work" and the additional hours of work for the part-time SSOs are considered overtime and will not form part of OTE.

Question 3 - agreements for additional hours of work for part-time teachers are considered a separate contract to their original contract for normal hours. Any extra ad hoc hours that are undertaken by these teachers and paid at the casual rate under a second contract are considered normal hours under that contract and will form part of OTE.

Detailed reasoning

Applicable law

The Superannuation Guarantee Administration Act 1992 (SGAA) states that an employer must provide the prescribed minimum level of superannuation support for its eligible employees by the quarterly due date or pay the superannuation guarantee charge (SGC). The minimum level of support is calculated by multiplying the charge percentage 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

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 SGAA does not define the expression 'earnings in respect of ordinary hours of work' or any of the terms in that expression.

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 2009/2 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. 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 summary, OTE is generally what employees earn for their ordinary hours of work, including commissions, allowances (excluding expense allowances) and paid leave and do not include reimbursements or overtime payments.

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

Paragraphs 41 to 43 of SGR 2009/2 addresses certain specific kinds of payments that are not 'ordinary time earnings' and state:

Overtime payments

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 referable to overtime hours as remuneration for overtime hours worked.

43. However, some employees, particularly some managers and professionals, receive a 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.

Appendix 2 of SGR 2009/2 provides an explanation of the legislative context applied to assist taxpayers to understand how the Commissioner's view has been reached.

Paragraphs 225 to 228 specify that earnings 'in respect of ordinary hours of work' means all earnings other than overtime.

Relevantly, paragraphs 225 and 226 state:

225. 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.

226. The Commissioner does not consider that the services or attendance of an employee specifically during certain hours of work is necessary for the earnings to be 'in respect of ordinary hours' and therefore OTE. The Commissioner's view is that the expression 'in respect of ordinary hours of work' was intended to ensure that overtime payments, and cognate amounts, were excluded from the earnings base. It was not intended to exclude amounts paid at a worker's ordinary time rate solely on the ground that they were not earned as a direct result of actually working particular hours in ordinary time.

Ordinary hours of work

The meaning of 'ordinary hours of work' is discussed in SGR 2009/2 to be an employee's 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.

An employee's ordinary hours of work are distinct from 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 those standard hours set out in an award or agreement, are not generally 'ordinary hours of work'. However, if it is evident from an objective assessment of the employee's regular work pattern, that the hours actually worked are consistently different to those prescribed as 'standard', the 'ordinary hours of work' for that employee may be determined based on that regular work pattern.

'Ordinary hours of work' are not limited to hours to be worked between 9am and 5pm, Monday to Friday as 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.

The ordinary hours of work for employees are specified in the Agreement. To constitute OTE, a payment must be made with respect to an employee's ordinary hours of work. That is, it must be paid for attendance or work done by the employee in those hours, or to satisfy an entitlement that accrued as a result of them attending or working in those hours.

Earnings 'in respect of ordinary hours of work' means all earnings other than overtime

For a payment to constitute earnings in respect of ordinary hours of work the payment must be considered earnings of the employee and the earnings must be in respect of the employee's ordinary hours of work.

An employee's earnings for the purposes of the definition of OTE in the SGAA is the remuneration paid to the employee as a reward for the employee's services.

Paragraph 25 of SGR 2009/2 states 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.

Appendix 2 of SGR 2009/2 provides an explanation of the legislative context applied to assist taxpayers to understand how the Commissioner's view has been reached. In particular paragraphs 203 t0 207 state the following regarding ordinary hours not specified in the award or agreement.

Ordinary hours of work not specified in award or agreement

203. Some employees work under arrangements where no provision is made for the ordinary hours of work. Experience suggests that is more likely to occur if there is no relevant award or collectively negotiated industrial agreement.

204. 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.

205. 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.

206. There is Federal Court authority for this proposition. In Quest Personnel Temping Pty Ltd v. Commissioner of Taxation (Quest), the Court considered the question of what were the ordinary hours of work of employees who worked regularly for numbers of hours greater than the minimum hours specified in their contracts of employment. The contracts did not specify the ordinary or standard hours of work. Employees were not paid at a higher hourly rate if they agreed to work hours greater than the minimum.

207. In the Administrative Appeals Tribunal decision at first instance, the Tribunal said:

If it was normal, regular, customary or usual for the employee to work more than that minimum number of shifts, it is difficult to see that those actual hours worked were not "ordinary hours of work". In one sense, the meaning of ordinary can be considered as the opposite of extraordinary. If the additional shifts worked on a normal or regular basis could not be said to be extraordinary, being other than ordinary or usual, it is difficult to see that they are not ordinary hours of work.

Application to your circumstances

Questions 1 and 2:

SSOs performing "bus work" and other additional hours worked:

You have provided relevant clauses of the Agreement which detail the obligations of the parties.

Conclusion:

SSOs are only offered a maximum of 5.75 hours per week for a maximum of 5 days in a week. The maximum hours an SSO can work is 28.75 hours, which is less than full-time week of work being 37.5 hours. An SSO therefore can only be a part-time employee.

In addition to their ordinary hours of up to 28.75 hours per week, SSOs can work additional hours as "bus assistants", where they undertake "bus-work" duties. They are paid for these additional hours at casual rates.

As the "bus work" is considered an additional duty, i.e., performed outside the classroom, and worked in addition to the SSO's ordinary part-time hours, any additional hours worked above the ordinary hours are not part of the employee's ordinary hours of work.

This is also the case where SSOs who are permanent part-time employees work extra hours on an ad-hoc basis to cover the absence of other employees. SSOs can also change shifts with other SSOs if required.

Superannuation Guarantee Ruling (SGR) 2009/2 - meaning of the terms "ordinary times earnings" and "salary and wages" - provides guidance on the interpretation of hours worked in excess of ordinary hours. Paragraphs 79-86 provide an example of an overtime situation where an employee works an amount of ordinary hours (as per an award) but works additional hours as well. The higher payment (overtime) made on the additional hours does not reflect the character of the payments made for ordinary hours and cannot be OTE.

The Agreement states that hours worked in addition to ordinary hours are paid at a different rate. The increased hourly rate for additional hours worked is indicative that the additional hours are a separate and identifiable component of the total payment made to the employee. Such payments for additional hours worked are outside the ordinary hours of work and not considered to be OTE.

As per paragraph 13 of SGR 2009/2 we need to consider the relevant award or agreement or a combination of those documents that governs the employee's conditions when determining OTE.

Based on the terms of the Agreement, any hours worked above those stipulated hours in the contract would be considered excess hours over the ordinary hours.

The Agreement states that any hours over the ordinary hours will be remunerated at a casual rate.

Furthermore, as per paragraph 14 of the SGR 2009/2, this Agreement draws a genuine distinction between these hours and employees' ordinary hours by having these hours remunerated at a higher rate or otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours. Therefore, these hours are considered overtime hours.

Paragraph 25 of SGR 2009/2 supports that ordinary hours of work will not include overtime even if the overtime is performed on a regular basis.

SGR 2009/2 provides guidance on the interpretation of hours worked in excess of ordinary hours. Paragraphs 79-86 provide an example of an overtime situation where an employee works an amount of ordinary hours (as per an award) but works additional hours as well. The higher payment (overtime) made on the additional hours does not reflect the character of the payments made for ordinary hours and cannot be OTE.

This is supported by the Agreement which states that hours worked in addition to ordinary hours are paid at a casual rate. The increased hourly rate for additional hours worked is indicative that the additional hours are a separate and identifiable component of the total payment made to the employee. Such payments for additional hours worked are outside the ordinary hours of work and are not considered to be OTE.

In addition to their ordinary hours of work (being up to 28.75 hours per week), SSOs can work additional hours as "bus assistants undertaking "bus work". They are paid for these additional hours at casual rates.

The Agreement provides that additional hours may be required and the rate of pay for those hours. As the "bus work" is considered an additional duty, i.e., performed outside the classroom, and worked in addition to the ordinary part-time hours, any additional hours worked above the ordinary hours are not part of the employee's ordinary hours of work.

Additional hours worked by SSOs performed on an ad-hoc basis to fill in for other SSO's who are on leave or additional "bus work" which is in excess of their ordinary hours as stipulated in their contract are not OTE and do not have an associated SG obligation.

Question 3:

Teachers working additional hours:

Under the Agreement Teachers can be employed as permanent full-time, permanent part-time, replacement, temporary or casual employees.

The Agreement states that where the School and the employee agree to a temporary increase in the employee's hours of work, the extra proportion of teaching time will be a separate contract of employment for casual work (emphasis added) subject to certain conditions.

4 Working arrangements

The Agreement includes clauses that supplement the National Employment Standards (NES) in respect of maximum weekly hours.

Application to your circumstances

The Commissioner advises that this is advice is for ad hoc arrangements only and not for temporary positions being filled to replace employees on long-term leave.

Superannuation Guarantee Ruling (SGR) 2009/2 - meaning of the terms "ordinary times earnings" and "salary and wages" - provides guidance on the interpretation of hours worked in excess of ordinary hours. Paragraphs 79-86 provide an example of an overtime situation where an employee works an amount of ordinary hours (as per an award) but works additional hours as well. The higher payment (overtime) made on the additional hours does not reflect the character of the payments made for ordinary hours and cannot be OTE.

We do note the Agreement has a requirement) for a second contract to be entered into when additional hours are being worked. However, in the absence of such a contract being made available, the requirement for the second contract is suggestive of a distinction between ordinary hours and additional hours and the reference to a higher rate of remuneration for the latter.

The additional hours could be agreed upon via a verbal agreement.

The expression 'earnings in respect of ordinary hours of work' or any of the terms in that expression are not defined in the SGAA. The Commissioner's view on the meaning of these phrases is expressed in paragraphs 13 -18 of SGR 2009/2, as outlined above.

In summary, the employees' "ordinary hours of work" are the hours specified as ordinary hours of work in the documents governing their employment. These documents do not have to use the exact expression "ordinary hours of work"; a genuine distinction between ordinary hours and non-ordinary hours is sufficient.

Appendix 2 of SGR 2009/2 provides an explanation of the legislative context applied to assist taxpayers to understand how the Commissioner's view has been reached.

Paragraphs 203 to 207 discuss what is OTE in respect of ordinary hours of work which could be different from purported ordinary hours that is written in the agreement.

The Agreement makes the distinction that if teachers are asked to work additional hours they will enter into a separate contract and be paid at the casual rate. The school has acknowledged that they do not create a separate contract for each part-time teacher who temporarily takes on additional hours. The Commissioner considers that part-time teachers who are asked to and agree to do additional hours on an ad hoc basis are entering a verbal contract with their employer. The additional hours are remunerated at a higher casual rate. The hours for part-time teachers will be less than 38 hours per week as stated under the Agreement. Any hours over the part-time teachers contracted hours would usually be considered extra hours.

However, the intent of the Agreement is that extra hours agreed to by the teachers are to be agreed upon in a separate contract. If each contract is to be treated separately then all additional teaching hours would be OTE and not overtime.

The character of the payment could change if the part-time teacher is back filling a full-time teacher while they are on long term leave. Our response is only applicable to those part-time teachers who are doing extra hours on an ad hoc basis.

The Commissioner considers that the extra ad hoc hours that the part-time teachers agree to work and are paid at a higher casual rate of pay under a separate verbal agreement to their ordinary hours is not considered overtime and is considered normal hours under the second contract and will form part of OTE and superannuation guarantee is payable.

Conclusion

The focus of the definition of OTE in subsection 6(1) of the SGAA is upon the hours worked and not upon any special rates of pay received. The payment of overtime or additional hours worked paid at higher rates makes it easier to distinguish between ordinary hours of work and overtime but the fundamental question that still remains is whether the remuneration is in respect of ordinary hours of work.

The Commissioner considers that the extra ad hoc hours that the part-time teachers agree to work and are paid at a higher casual rate of pay under a separate verbal agreement to their ordinary hours are not considered overtime. They are considered normal hours under the second contract and will form part of OTE and superannuation guarantee is payable.

Conclusion summary:

The additional hours of work for the part-time SSOs are considered overtime and will not form part of OTE.

Agreements for additional hours of work for part-time teachers are considered a separate contract to their original contract for normal hours. Any extra ad hoc hours that are undertaken by these teachers and paid at the casual rate under a second contract are considered normal hours under that contract and will form part of OTE.

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).