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Edited version of administratively binding advice
Authorisation Number: 1012572120582
Advice
Subject: Ordinary time earnings
Question 1
Do the terms of the company's Employee Collective Agreement (the Agreement) allow 7.6 hours per day to be considered as the ordinary hours of work, for the purposes of determining an employee's ordinary time earnings (OTE) under the Superannuation Guarantee (Administration) Act 1992 (SGAA)?
Advice:
No, the Commissioner's view is that the Agreement does not allow for a certain number of hours per day to be considered as an employee's ordinary hours of work. The terms of the Agreement specify only that the ordinary hours of work are not less than the specified hours within particular work cycles not exceeding seven consecutive days, or fourteen consecutive days, or twenty-one consecutive days or twenty-eight consecutive days.
It is therefore only the income received by the employees within this bandwidth that is determined as being their OTE for the purposes of the SGAA. Please see below our reasons for this advice.
Question 2
Do the payments made to employees for waiting, breakdown, loading and rest time under the General provision of Schedule A of the Agreement form part of an employee's OTE for the purposes of the SGAA?
Advice:
Yes, the payments made for waiting, breakdown, loading and rest time under the terms of the Agreement do form part of an employee's OTE, if they are paid within the bandwidth of hours as specified in the Agreement. Please see below for our reasons for this advice.
This advice applies for the following period
The period of operation of the Agreement.
Relevant facts
¢ The employer requested guidance in relation to calculating SG and provided examples showing the various components that may comprise a wage for one of their employees.
¢ The employer has a Collective Agreement (the Agreement).
¢ The Agreement covers all employment matters to the exclusion of any other agreement, award or industrial instrument whatsoever. The Agreement contains clauses that provide for the conditions of employment, the rates of pay, the wages composition including hourly rates and piece rates, allowances, superannuation, hours of work and meal breaks, leave arrangements and other matters.
Relevant legislative provisions
Superannuation Guarantee (Administration) Act 1992 subsection 6(1)
Explanation
1. Subsection 6(1) of the SGAA defines OTE in relation to an employee to mean:
(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;
(ii) earnings consisting of over-award payment, 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.
2. The Commissioner's current view on what represents OTE is contained in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2). This ruling explains the meaning of OTE as defined in subsection 6(1) of the SGAA.
3. The meaning of OTE is relevant to employers for the purposes of calculating the minimum level of superannuation support required for individual employees under the SGAA.
4. SGR 2009/2 replaced the previous view held under Superannuation Guarantee Ruling 94/4 Superannuation guarantee: ordinary time earnings which was withdrawn with effect from 1 July 2009.
5. The SGAA was also amended with effect on 1 July 2008 to require employers to make a minimum contribution of 9% of an employee's ordinary time earnings in order to reduce their liability for the superannuation guarantee charge.
Question 1 - What are the ordinary hours of work?
6. 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.
7. 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.
8. 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'.
9. 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.
10. In such cases, it may often not be possible or practicable to determine 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.
11. Paragraphs 25 and 26 of SGR 2009/2 specify that earnings 'in respect of ordinary hours of work' means all earnings other than overtime. Paragraphs 25 and 26 state:
25. All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remunerated for working overtime hours, or are otherwise referrable 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.
12. There is a clause in the Agreement which provides the hours of work for your employees. The Agreement also provides that start and finish times and total hours may vary from week to week depending on workloads and deadlines.
13. In accordance with this, a driver can work any variation of hours per week in a 24 hour cycle from Monday to Sunday, as long as they average the nominated hours in a week, or a fortnight, or a three or four week period.
14. Given this, the Commissioner does not consider the 'ordinary hours of work' of your employees are limited to specific hours in any one day, but rather a total of specified hours in any rolling 7 day period or 14 day period and so on.
15. This interpretation is consistent with the interpretation the Commissioner has applied to other industry awards and enterprise/collective agreements. A current industry award does not specify or define the ordinary hours of work or limit the normal working period. The hours of work are specified in the award as being in accordance with Commonwealth, State or Territory Acts, and states that the employee shall not work:
(i) more than a total of 120 hours in any fortnight
or
(ii) in any one day more than 12 hours in any one day
16. In accordance with this, an employee can work any variation of hours per week in a 24 hour cycle on Monday to Sunday, as long as they don't exceed more than 12 hours in any one day or 120 hours in any fortnight.
17. Your Agreement does not clearly distinguish overtime or other hours from ordinary hours. As stated in paragraph 14 of SGR 2009/2 the Agreement needs to draw a genuine distinction between ordinary hours and other hours. Under the relevant subclause, the Agreement provides that no high rate of pay will be payable for overtime worked and that overtime will be paid at the applicable loaded hourly rate, which is why the overtime hours would not be remunerated at a higher rate. But the Agreement does not provide for what overtime is and, given the periods covering the hours of work and the start and finish times, it is not clearly discernible on a daily basis.
18. You have made references to clauses contained in a similar award relating to how the ordinary hours of work may be worked, which you copied and pasted verbatim into your Agreement because you were required to comply with all aspects of the modern award at that time. You make specific reference to a particular clause to illustrate similarities with your Agreement, where the actual ordinary daily hours are not stated.
19. Although this advice is not required to interpret the provisions of another award as it does not apply to you, we offer the following view for comparison. While the nominated award provides for variations in the way an employee can work their ordinary hours depending on the requirement for a rostered day off, it is another clause that defines the actual hours of work per day. While it appears that you have copied and pasted one clause into your Agreement, you did not include the corresponding clause to place a daily limit which you clearly intended to apply.
20. The effect of this, is that your Agreement does not place a daily limit of hours to be defined as ordinary hours, however much it may have been intended to do so, despite the inclusion of other clauses in your Agreement.
21. While these clauses may be predicated on the intention that the employee's ordinary hours are limited per day, these clauses are not sufficient of themselves to limit the actual ordinary hours per day under the terms of the Agreement, as each clause is a separate governing provision for the matter it relates to.
Question 2 - Which payments would be included in ordinary time earnings?
22. In the examples provided in your letter you have indicated that certain payments are paid as overtime.
23. These payments are provided for in your Agreement.
24. In your subsequent submission, you advised that additional payments were made under the same provision, which included things other than for those which the provision specifies. It is your view that these additional payments do not qualify as OTE, as these payments should be more correctly regarded as overtime.
25. There is evidently a relationship between the SGAA and the legal concepts making up the Australian industrial relations system. As originally enacted, the SGAA made a number of express references to the features of that system at that time, such as the reference to over-award payments.
26. The term 'over-award payments' is not defined in the SGAA. The Macquarie Dictionary 2001, rev. 3rd edition, defines 'over-award' as:
Of or relating to a rate of pay which is higher than that awarded by an industrial tribunal for a particular work classification.
27. An over-award payment is a payment made above the minimum rate specified in the relevant award as part of a worker's remuneration, and is specifically included in the definition of OTE in subsection 6(1) of the SGAA.
28. However, the Commissioner's view is that the specific inclusion of these payments does not apply to over-award payments that are specifically referable to hours worked that are not ordinary time hours.
29. In the absence of a clause or definition identifying overtime and/or these components of the work as overtime, the Commissioner would consider these payments to be OTE if they fell within one of the work cycles outlined in relevant subclause of the Agreement.
30. Furthermore, the payments you have highlighted are not excluded as expense allowances which are paid for reimbursement of particular expenses.
31. Therefore, under your current Agreement, any payments made to an employee in the performance of their ordinary work within the period specified as ordinary hours will be OTE.
32. If the employee has worked additional hours above those required by the relevant work cycle these hours would be considered 'other hours' and any payments made in relation to these hours would not form part of the OTE for the employee.