Edited version of your private ruling

Authorisation Number: 1012542544672

Subject: SG ABA - ordinary time earnings

Question 1

Are the earnings from hours worked under an Agreement considered to be ordinary hours and therefore OTE for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

No, Please refer to 'Reasons for decision'.

The scheme commenced on

1 July 2013

Relevant facts

The Agreement with the workers is for a particular type of work.

Work done under the Agreement is always outside of the employees' ordinary hours.

The Agreement stipulates a special rate of pay for employees working outside their ordinary hours.

Reasons for decision

Detailed reasoning

From 1 July 2008, all employers must use OTE as the earnings base to calculate the minimum super guarantee contributions required for your employees.

From 1 July 2008, employers may still be required to use notional earnings bases specified in legislation or industrial agreements as the basis of their superannuation support in cases where these are above an employee's OTE, but SGAA obligations will only be assessed against OTE.

The phrase 'ordinary time earnings' is defined in subsection 6(1) of the SGAA as follows:

ordinary time earnings, in relation to an employee, 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 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 contribution base for the quarter - the maximum contribution base.

In broad terms (and subject to some exceptions), OTE of an employee means earnings in respect of ordinary hours of work. Payments for work performed outside the ordinary hours of work, such as overtime payments, are not OTE.

OTE is usually the amount an employee earns for their ordinary hours of work. It includes commissions, shift-loadings and some allowances, but does not include overtime payments. Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) provides further guidance on what constitutes OTE.

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 the following paragraphs of SGR 2009/2 as follows:

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 employee's '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.

Paragraphs 41 of SGR 2009/2 state:

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

Application to your circumstances:

Work done under the Agreement is always outside of the employees' ordinary hours.

The Agreement stipulates that the agreement is only for hours outside of normal or rostered hours of work. The Agreement also stipulates what the remuneration is for employees working outside their ordinary hours. As there is no provision under this Agreement for hours worked inside ordinary hours all the hours worked under this Agreement is for hours worked outside of ordinary hours.

As per paragraph 14 of SGR 2009/2 the Agreement draws a genuine distinction between ordinary hours and hours worked outside of ordinary hours by identifying a separate component of pay for the workers.

Paragraph 41 of SGR 2009/2 stipulates that payment for hours of work done outside an employee's ordinary hours are not OTE.

Therefore payments for hours of work done under the Agreement are not OTE.