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Advice

Subject: Ordinary Time Earnings and payments made during an incident

Question 1

What are the ordinary hours of work for the purposes of the definition of 'ordinary time earnings' contained in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) in relation to declared incidents for full-time employees of the employer?

Advice

Enterprise Agreement

The ordinary hours of work for employees engaged under the Enterprise Agreement are any hours up to 40 hours per week, inclusive of hours worked during an incident.

Salaries and Conditions Award

The ordinary hours of work for employees engaged under the Salaries and Conditions Award are 35 hours per week inclusive of hours worked during an incident.

Conditions of Employment Award

The ordinary hours of work for employees engaged under the Conditions of Employment Award are 35 hours per week inclusive of hours worked during an incident.

Question 2

What are ordinary time earnings (OTE) for the purposes of subsection 6(1) of the SGAA in relation to hours worked during declared incidents for full-time employees of the employer?

Advice

Enterprise Agreement

Earnings on the 40 ordinary hours per week are considered OTE for employees of this Agreement, for the purposes of subsection 6(1) of the SGAA.

Salaries and Conditions Award

Earnings on 35 ordinary hours of work per week are considered OTE for employees engaged under this Award, for the purposes of subsection 6(1) of the SGAA.

Conditions of Employment Award

Earnings on 35 ordinary hours per week are considered OTE for employees engaged under this Award, for the purposes of subsection 6(1) of the SGAA.

Relevant facts and circumstances

The employer engages employees under either an Enterprise Agreement, a Salaries and Conditions Award or a Conditions of Employment Award.

The relevant clauses from the Enterprise Agreement have been outlined to you.

Other relevant information provided by the Employer:

· Employees are rostered to work in accordance with the 'ordinary hours' and 'hours of work' clauses of the respective Agreements for each settlement period and are paid in accordance with the ordinary hours as stated in the Agreements.

· Rosters are completed in advance for employees and can be set up to 12 months in advance. The rostered hours are set and agreed to in writing with the relevant manager at least two weeks before the settlement period starts in line with the Agreement specifications. In some settlement periods, due to an incident being declared, employees may be required to work in excess of or outside their rostered hours.

· Any hours worked in addition to the rostered hours are overtime hours and paid at overtime rates.

· In the event that an incident is declared and approved, the employees involved in the incident are required to work the hours as dictated by the incident conditions and as per the incident conditions clauses. The scheduled incident hours are expected to and generally exceed the rostered hours.

· Where an employee is away from their own area for the purposes of attending an incident, and is not required to perform duties in relation to the incident and it is not possible to return to their home, seven hours normal pay is paid per day until they return home or their usual place of work, whichever is sooner.

· The actual scheduled incident hours worked during an incident are paid at double time.

· The actual scheduled incident hours worked during an incident may be:

o In line with rostered hours;

o In addition to rostered hours and within the description of ordinary hours per the Agreement; and

o In addition to rostered hours and outside of the description of ordinary hours per the Agreement.

· At the time the declaration of the incident is lifted, the suspension of the roster ceases.

· Currently superannuation contributions are paid in respect of:

o Salary transactions for standard hours paid

o Leave taken payments that are determined to be superable

o Allowance payments that are determined to be superable.

o Worker's compensation payments

· Earnings during incidents are differentiated on employees' payslips.

Relevant legislative provisions

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

Superannuation Guarantee Administration Act 1992 Section 12

Superannuation Guarantee Administration Act 1992 Subsection 23(2)

Reasons for decision

The SGAA states that an employer must provide the prescribed minimum level of superannuation support for its employees (unless the employees are exempt employees) or they must pay the superannuation guarantee charge (SGC).

Subsection 23(2) of the SGAA states if an employer contributes for the benefit of an employee to a complying superannuation fund, then the charge percentage for the employer in respect of the employee is reduced by the amount of contributions made in relation to ordinary time earnings for the period.

Ordinary time earnings (OTE) in relation to an employee, is defined in subsection 6(1) of the SGAA as:

(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 kinds made 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 payment or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and

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

SGR 2009/2 at paragraph 12 states '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'.

Paragraph 13 of SGR 2009/2 states:

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.

SGR 2009/2 goes on to state at paragraph 14 that the relevant award or agreement need not use the exact expression 'ordinary hours of work', but needs to draw a distinction between ordinary hours and other hours. It would be expected that other hours are remunerated at a higher rate than the ordinary hours or are otherwise identified as a separate component of the employee's pay.

There have been arguments that 'ordinary' in the definition of 'ordinary hours of work' should take its normal meaning as meaning regular, customary or usual. In the Kezich case, the High Court found that 'ordinary hours of work' related to the worker's regular, usual, customary or normal hours. In that case, the employee was regularly working more than the ordinary hours in his Award so it was determined the 'ordinary hours of work' were the actual hours worked.

However, it is the Commissioner's view, as outlined in SGR 2009/2, that parliament intended for 'ordinary hours of work' to be defined by the relevant award or agreement and that is what should be used to determine 'ordinary hours of work' and therefore OTE. There has been another High Court case since Kezich regarding a worker's normal hours per week, Catlow v Accident Compensation Commission (1989) 167 CLR 543; [1989] HCA 43. The Court found the relevant industrial agreement determined the worker's normal hours and not the actual number of hours worked. Therefore, as the Courts have not clearly defined 'ordinary hours of work' definitively for the purposes of the SGAA the Commissioner accepts that the ordinary hours of work are as determined by the relevant award or agreement, but that does not imply that OTE is necessarily as determined by the award or agreement.

You have stated the hours worked in respect of an incident are outside of the definition of ordinary hours as specified by the Awards and Agreement the employees are employed under. You also stated the incident hours are outside the hours required to be worked by employees in normal circumstances, which are the hours an employee is generally rostered to work.

Application of the law to the facts provided

Enterprise Agreement

The agreement provides that the ordinary hours of work for Officers shall not exceed 40 hours per week, however these hours can be worked between Monday to Sunday 24 hours per day.

Therefore it is considered the ordinary hours of work for an Officer are 40 hours per week subject to the Agreement which requires observance with the limitations imposed by the relevant Authority.

A specific clause relates to incident conditions.

A specific sub-clause states that this provision replaces the overtime provision in relation to overtime worked in respect of an incident. This subclause indicates that there are ordinary hours in respect of incidents as well as overtime in respect of incidents.

Therefore, ordinary hours during an incident for Officers are any hours up to their 40 hours average per week within the 52 week period calculated in accordance with the maximum hours specified in the Agreement. Any hours in addition to the 40 hours or outside of the allowed hours of duty by the relevant Authority are not considered ordinary hours.

The earnings on the 40 hours, with respect to the Civil Aviation Order, are considered OTE for the purposes of subsection 6(1) of the SGAA, regardless of the rate paid.

Salaries and Conditions Award

The statement in a specific clause 'except as otherwise provided' indicates ordinary hours of work can be different to those stated in that clause if another clause in the agreement provides differently. As a specific clause states that all set patterns of hours and bandwidths are suspended at the time of the incident being declared, the ordinary hours outlined in other clauses are irrelevant when an incident is declared.

The definition of 'ordinary working hours' in the Award states it is the average number of hours the officer is required to work each week. In the event of an incident being declared, set patterns of hours and bandwidths are suspended but the average number of hours are not mentioned in this clause as being suspended. Therefore, the definition of ordinary working hours being an average number of hours of 35 per week over a settlement period is still in place during an incident.

Under this Award, ordinary hours of work are an average of 35 per week over a settlement period and this applies during an incident. Any hours worked in addition to these hours are not ordinary hours. OTE is the earnings on the ordinary hours, regardless of what rate they are paid at.

Conditions of Employment Award

A specific clause of this Award refers to ordinary hours of work and provides that the ordinary hours of work will be an average of 35 per week, over a settlement period, to be worked between 6am and 8pm with respect to routine work and except as otherwise provided. A settlement period is defined as the 4 week roster period.

No officer will be required to work more than 10 ordinary hours per shift except that during an incident.

Ordinary hours may be organised into - Monday to Friday workers; Seven day roster workers; twenty four hour bandwidth workers or set pattern of hours workers.

The overtime clause specifies that overtime is payable for all approved work in excess of 7 hours per day or the daily contract hours.

Under the incident conditions clauses, flexible working hours arrangements and bandwidths are suspended at the time of the incident.

The definition of 'ordinary working hours' in the Award states it is the average number of hours the officer is required to work each week. In the event of an incident being declared, Flexible Working Hours Arrangements and bandwidths are suspended but the average number of hours is not mentioned in this clause as being suspended. Therefore, the definition of an average number of hours of 35 per week over a settlement period that would still be in place during an incident but when those hours are worked is not specifically defined.

Under this Award, ordinary hours of work are an average of 35 per week over a settlement period and this applies during an incident. Any hours worked in addition to these hours are not ordinary hours. OTE is the earnings on the ordinary hours, regardless of what rate they are paid at.

Other payments in respect of an incident

Incident call out payment

Each of the Awards/Agreements include a clause which specify that call out to attend an incident will be paid at a minimum of three hours overtime or by mutual agreement, time in lieu at overtime rates.

SGR 2009/2 at paragraph 44 refers to on-call allowances and states that an on-call or availability allowance is a payment to an employee for making himself or herself available at certain times to be called in to 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.

The incident call out has the similar substance to an on-call allowance therefore if the incident call-out payment is made in respect of hours that the employee is not rostered to work the payment would not form part of the employees ordinary time earnings.

Away from home payment

Each Award/Agreement contains a clause which states that is an officer is away from their own Area for the purposes of attending an incident and are not required to work and it is not possible to return to their home, seven hours normal pay will be paid per day until they return home or their usual place of work, whichever is sooner.

This payment is not an expense allowance as all accommodation and meals are provided when the employee is in attendance at an incident.

Although the payments are made while the employee is away from their ordinary place of work it is considered that this payment forms part of the employees remuneration for their services and as such are paid in compensation of their inability to return to the normal workplace and receive their normal payment. While the payment is not calculated by reference to ordinary rostered hours of work the payment is earnings in respect of ordinary hours of work therefore it is considered OTE.

Other references

Rulings and Determinations

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

Relevant Cases

Kezich v. Leighton Contractors Pty Ltd (1974) 131 CLR 362

Catlow v Accident Compensation Commission (1989) 167 CLR 543; [1989] HCA 43

Quest Personnel Temping Pty Ltd v Federal Commissioner of Taxation