Edited version of administratively binding advice

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Advice

Subject: ABA

Question 1

Does the on-call allowance paid by the employer to its employees on conclusion of their shift in accordance with the Agreement form part of ordinary times earnings (OTE) under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Advice

Based on the information provided the on-call allowance paid by the employer to its employees at the conclusion of a shift does not form part of OTE in subsection 6(1) of the SGAA.

Please see 'Reasons for decision'.

Question 2

Does the on-call allowance paid by the employer to its employees at a 'standard on-call rate per week' to be on call for a number of hours after the conclusion of their shift every day form part of OTE under subsection 6(1) of the SGAA?

Advice

Based on the information provided the on-call allowances paid at a 'standard on-call rate per week' to be on call for a number of hours after the conclusion of a shift every day does not form part of OTE under subsection 6(1) of the SGAA. .

Please see our 'Reasons for Decision'.

This advice applies for the following period:

1 July 2011 to 30 June 2014

The arrangement commences on:

1 July 2011

Relevant facts and circumstances

· The Commissioner received a valid request for administratively binding advice (ABA) from the employer with respect to superannuation guarantee and OTE paid on on-call allowances. The request included the following information:

o Employees shall be paid an on-call allowance of a percentage of the base rate of pay per 12 hour period on call.

o On-call allowances are paid in one of two ways by the employer:

§ The first example involves an employee who has concluded their shift, returned home and has been asked to be on-call for a 12 hour period after the conclusion of their shift. This employee is paid one allowance per 12 hour period and may not be contacted during this time. This allowance is paid either on an ad-hoc basis or as a regular allowance to employees who are on-call most nights. For those who are paid the allowance regularly, they are paid 7 occasions of on-call allowance per week unless they are relieved from this duty.

§ The second example involves the employer's workers who are paid a standard on-call rate per week, for example $50.00 per week, to be on-call for a number of hours after the conclusion of their shift every day.

· The Agreement contains clauses which provide the following:

On call allowances:

a) Employees shall be paid an on-call allowance of a percentage of the base rate per twelve hour period. The base rate applicable is that defined in a Clause of this Agreement.

b) In the event of an employee being recalled to duty during an off-duty period, where the recall work is not continuous with the next succeeding rostered period of duty, that employee shall be paid a minimum of three hours pay at the appropriate overtime.

Hours of work

Hours for an Ordinary Weeks Work

(i) The hours for an ordinary week's work shall be 38, or be an average 38

per week in a fortnight or in a four week period (or by mutual agreement

a five week period in the case of an employee working 10 hour shifts)

Assumptions

No assumptions have been made.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 6(1)

Reasons for decision

Question 1

Summary

The on-call allowance paid to employees to be available after the conclusion of their shift for a period of up to 12 hours is not included in OTE as defined in section 6(1) of the SGAA.

Question 2

Summary

The on-call allowance paid to employees at a 'standard on-call rate per week' to be on call for a number of hours after the conclusion of their shift every day is not included in OTE as defined in section 6(1) of the SGAA.

Detailed reasoning

The 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 (currently 9%) 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 times earnings

OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA. It refers to the lesser of:

§ the total of the employee's earnings in respect of ordinary hours of work (other than lump sum payments made on termination of employment in lieu of unused sick leave, long service leave or annual leave) and earnings consisting of over-award payments, shift-loading or commission, or

§ the maximum contribution base for the contribution period.

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, as defined in the SGAA, including information on the difference between allowances, expense allowances and reimbursements, are contained in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) which is effective from 1 July 2009.

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.

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.

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 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 or 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.

Allowances

Certain specific types of payments are OTE and are additional payments paid to employees to recognise or compensate for certain conditions relating to their employment such as site allowance, dirt allowance and casual loading.

These kinds of payment are OTE except in certain circumstances such as where they related solely to hours of work other than ordinary hours of work

On-call allowances

Paragraph 44 of SGR 2009/2 defines an on-call allowance as 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 that 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.

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 worked).

Summary

Employees that are employed under the Agreement work a 38 hour week, or other mutually agreed arrangement up to an amount of 152 hours per four week period.

The on-call allowance is stipulated under the relevant clause of the Agreement. The relevant clause of the Agreement outlines the hours when on-call allowances are paid.

Therefore, generally the on-call allowance will be paid to employees who make themselves available to be on-call as requested for up to a 12 hour period.

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.

Conclusion

As the on-call allowance is not paid to the employees when they are working their ordinary hours, these payments are not included in OTE for the purposes of subsection 6(1) of the SGAA. This applies whether the entitlement to the payment is on a day by day basis or on a weekly basis.