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Advice
Subject: Ordinary time earnings
Question
What are the ordinary time earnings (OTE) as defined under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA), for full-time long distance truck drivers employed by the Company who are paid on a cents per kilometre basis, under the:
· Company Union Collective Agreement (the Agreement)
· Transport Workers (Long Distance Drivers) Award 2000 (the 2000 Award) and
· Road Transport (Long Distance Operations) Award 2010 (the 2010 Award)?
Advice
OTE for the period covered by the Agreement,
· Where the pay received by full-time long distance truck drivers is calculated under the cents per kilometre (CPK) method for the relevant fortnight and is greater than twice the minimum weekly rate prescribed in the relevant awards, the OTE will include:
o The drivers' pay calculated under the CPK method for the relevant fortnight,
o Any allowances that directly relate to the individual's employment and are paid under the Agreement
o Any loading/unloading allowance paid
However, the OTE will exclude:
o Any overtime loading included in the CPK rate
o Any living away from home allowance paid (either as a lump sum or as a component of the CPK rate)
o Any expense allowances.
· Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is less than twice the minimum weekly rate prescribed in the relevant awards, the OTE will be the minimum weekly payment for their appropriate classification, plus certain %, as prescribed in clause x of the Agreement.
OTE for the period solely covered by the 2010 Award,
· Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is greater than twice the minimum weekly rate prescribed in the relevant awards, the OTE will include:
o The drivers' pay calculated under the CPK method for the relevant fortnight,
o Any dangerous goods allowance paid under the specific clause of the 2010 Award
o Any amount paid under the specific clause of the 2010 Award up until the 12 hour maximum for ordinary hours of work in any one day.
o Any loading/unloading allowance paid
However, the OTE will exclude:
o Any overtime loading included in the CPK rate
o Any living away from home allowance paid
o Any expense allowances.
· Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is less than twice the minimum weekly rate prescribed in the 2010 Award, the OTE will be the minimum weekly payment for the driver's appropriate classification exclusive of any overtime loading.
This ruling applies for the following periods:
Period ending 30 June 2009
Period ending 30 June 2010
Period ending 30 June 2011
Period ending 30 June 2012
The scheme commences on:
1 July 2008
Relevant legislative provisions
Superannuation Guarantee (Administration) Act 1992 Subsection 6(1).
Superannuation Guarantee (Administration) Act 1992 Subsection 11(3).
Fringe benefits Tax Assessment Act 1986 Section 30.
Reasons for decision
Summary
OTE for the period covered by the Agreement,
· where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is greater than twice the minimum weekly rate prescribed in the relevant awards, the OTE will include:
o The drivers' pay calculated under the CPK method for the relevant fortnight,
o Any allowances that directly relate to the individual's employment and are paid under the Agreement
o Any loading/unloading allowance paid
However, the OTE will exclude:
o Any overtime loading included in the CPK rate
o Any living away from home allowance paid (either as a lump sum or as a component of the CPK rate)
o Any expense allowances.
· Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is less than twice the minimum weekly rate prescribed in the relevant awards, the OTE will be the minimum weekly payment for their appropriate classification, plus certain%, as prescribed in clause x of the Agreement.
OTE for the period solely covered by the 2010 Award,
· Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is greater than twice the minimum weekly rate prescribed in the relevant awards, the OTE will include:
o The drivers' pay calculated under the CPK method for the relevant fortnight,
o Any dangerous goods allowance paid under the specific clause of the 2010 Award
o Any amount paid under the specific clause of the 2010 Award up until the 12 hour maximum for ordinary hours of work in any one day.
o Any loading/unloading allowance paid
However, the OTE will exclude:
o any overtime loading included in the CPK rate
o any living away from home allowance paid
o any expense allowances.
· where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is less than twice the minimum weekly rate prescribed in the 2010 Award, the OTE will be the minimum weekly payment for the driver's appropriate classification exclusive of any overtime loading.
Ordinary time earnings
The Superannuation Laws Amendment (2004 Measures No 2) Act 2004 simplified the earnings base of an employee for SGAA purposes. The amendments which apply from 1 July 2008 have the effect that all employers now calculate their SGAA liability against an OTE, as defined in the SGAA.
Earnings in respect of ordinary hours of work
OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA. It means:
(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 kind 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, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997;
ii. earnings consisting of over-award payments, 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.
The Commissioner's current view on what represents OTE is contained in Superannuation Guarantee Ruling SGR 2009/2 which replaced Superannuation Guarantee Ruling SGR 94/4.
As SGR 2009/2 more clearly expresses the Commissioner's view of the meaning of OTE than SGR 94/4, this later view will be adopted to determine the OTE of the company drivers.
Commissioner's view on what earnings are taken to be made 'in respect of ordinary hours of work' is provided in paragraphs 25 and 26 of SGR 2009/2. They 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 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.
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 they are remuneration for overtime or other hours that are not ordinary hours of work.
You contend that a specific clause of the 2010 Award (which defines terms of a full-time employment) also defines the ordinary hours of work. This clause states:
A full-time employee is an employee engaged by an employer to perform long distance operations for an average of 38 ordinary hours per week over a four week period.
You further contend that ordinary hours of work are also set out in a specific clause of the 2010 Award, which states:
The minimum hourly driving rate is calculated by dividing the minimum weekly rate prescribed by clause 13.1 by 40, and multiply by 1.3 (industry disability allowance) and 1.2 (overtime allowance).
We have reviewed the Agreement and determined that it does not define the ordinary hours of work or limit the normal working period.
Similarly, the 2000 Award and the 2010 Award also do not define the ordinary hours of work but they do limit the normal working period by stating that the employee shall not work more than:
o 12 hours in any one day (specified under relevant clauses of the 2000 Award and the 2010 Award) or
o a total of 120 hours in any fortnight (specified under relevant clauses of the 2000 Award and the 2010 Award).
Paragraph 205 of SGR 2009/2 state that:
…a clause merely prescribing a minimum or maximum number of hours of work over 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.
In conclusion, neither the Agreement nor the Awards define the ordinary hours of work.
Piece-rates:
Paragraphs 230 to 234 of the SGR 2009/2 present Commissioner's views on how to determine an employee's OTE where the employee's wage is calculated on a piece-rate basis. They state:
230. Some employees may receive their wages calculated on a piece-rate basis, that is, on the basis of completion of the number of units or items rather than on the number of hours worked. For example, payments could be on the number of kilometres driven, the number of buckets filled with fruit, or the number of items of clothing completed.
231. In certain circumstances a minimum weekly wage may be set by an award or agreement which also provides for standard hours per week. This allows for the payment of leave entitlements to be based on that minimum weekly wage...
232. The rate of pay may recognise the conditions of the work required and incorporate various components into the one rate, for example the weekly wage, allowances and overtime. The whole amount of salary payable under such a package is OTE, unless overtime amounts are distinctly identifiable.
The relevant clauses of the 2000 Award and the 2010 Award allow the Company's drivers to nominate, at the commencement of their employment, whether they want to be paid pursuant to the CPK method or the hourly rate method. All of the Company's drivers are employed on the CPK basis.
Neither the Agreement nor the Awards indicates the CPK rate is based on, or is referable to, ordinary hours of work. The CPK rate is simply based on the amounts set out in the relevant tables (in the Agreement and the 2010 Award) under the relevant driving grades.
Consequently, the whole amount of the salary paid (excluding distinctly identifiable amounts such as the overtime loading, any living away from home component and/or expense allowances) will form part of the drivers' OTE.
Allowances
Paragraph 27 of the SGR 2009/2 explains that 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. As these payments relate to the individual's employment it is considered that these kinds of payment are OTE unless they
o are expense allowances or
o relate solely to hours of work other than ordinary hours of work
Therefore, as per the explanation provided in paragraph 27 of SGR 2009/2,
o the allowances that specifically relate to the individual's employment and are paid under the Agreement; and
o loading/unloading allowance paid
will form part of the drivers' OTE.
Example 8 of SGR 2009/2 and particularly paragraph 119 of SGR 2009/2 provide guidance on the treatment of the Industry Disability Allowance and the Overtime Allowance for the purpose of the OTE.
As paragraph 119 of SGR 2009/2 explains, the Industry Disability Allowance is referable, albeit on a notional averaged basis, to earnings that would be in respect of ordinary hours and thus is OTE.
Whereas the overtime allowance is not OTE as having regard to the terms of the award as a whole it is genuinely referable, albeit on a notional averaged basis, to overtime hours worked rather than ordinary hours.
Paragraph 72 of SGR 2009/2 defines expense allowances as allowances that are paid to an employee with a reasonable expectation that the employee will fully expend the money in the course of providing services. These allowances are not salary or wages.
Living Away From Home Allowance
Section 30 of the Fringe Benefits Tax Assessment Act 1986 treats living away from home allowance as a fringe benefit. As subsection 11(3) of the SGAA specifically excludes fringe benefits from being salary and wage, the living away from home allowance will not form part of the drivers' OTE.
Conclusion:
OTE for the period covered by the Agreement,
· Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is greater than twice the minimum weekly rate prescribed in the relevant awards, the OTE will include:
o The drivers' pay calculated under the CPK method for the relevant fortnight,
o Any allowances that directly relate to the individual's employment and are paid under the Agreement
o Any loading/unloading allowance paid
However, the OTE will exclude:
o any overtime loading included in the CPK rate
o any living away from home allowance paid (either as a lump sum or as a component of the CPK rate)
o any expense allowances.
Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is less than twice the minimum weekly rate prescribed in the relevant awards, the OTE will be the minimum weekly payment for their appropriate classification, plus certain %, as prescribed in clause x of the Agreement.
OTE for the period solely covered by the 2010 Award,
· Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is greater than twice the minimum weekly rate prescribed in the relevant awards, the OTE will include:
o The drivers' pay calculated under the CPK method for the relevant fortnight,
o Any dangerous goods allowance paid under the specific clause of the 2010 Award
o Any amount paid under the specific clause of the 2010 Award up until the 12 hour maximum for ordinary hours of work in any one day.
o Any loading/unloading allowance paid
However, the OTE will exclude:
o any overtime loading included in the CPK rate
o any living away from home allowance paid
o any expense allowances.
· Where the pay received by full-time long distance truck drivers is calculated under the CPK method for the relevant fortnight and is less than twice the minimum weekly rate prescribed in the 2010 Award, the OTE will be the minimum weekly payment for the driver's appropriate classification exclusive of any overtime loading.