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Edited version of your written advice
Authorisation Number: 1012663772245
Advice
Subject: Superannuation guarantee obligations
Question 1
Do earnings in respect of the on-call/standby allowance paid to employees of the Employer under the Agreement form part of the employee's ordinary time earnings (OTE) for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?
Advice
No. Refer to 'Reasons for decision'.
This advice applies for the following period:
After 1 July 2012
Relevant facts and circumstances
The Employer is seeking advice as to whether standby/on call allowance payments made under the Agreement form part of an employee's OTE.
The written request by the Employer provided the following information:
• The Employer requires employees to be available to respond to calls for assistance outside their ordinary hours of work.
• The ordinary hours of work of employees is stipulated under the Agreement.
• Employees are paid their ordinary wage plus a standby allowance when they are required to be on call, usually in accordance with an on call or standby roster.
• When an employee is called out, they are paid overtime as set out by the Agreement.
• The standby allowance and call out overtime are identified separately on an employee's payslip.
• The requirement to be on standby is limited to when an employee is rostered on standby. This may be as often as one week in two or as little as one week in 26, depending on the organisational needs of the workplace.
• An employee may also be asked to vary their spot in the roster due to absenteeism or other staff related issues.
Relevant legislative provisions and ATO view documents
Superannuation Guarantee (Administration) Act 1992 Subsection 6(1)
Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'.
Reasons for decision
Detailed reasoning
All employers are required to provide a minimum level of superannuation support for their eligible employees by the superannuation guarantee (SG) period due date. From 1 July 2008, employers must use ordinary time earnings (OTE) as the earning base to calculate the minimum SG contributions required for employees.
Ordinary time earnings
OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and is the lesser of:
(a) the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over award payments, shift loading or commission, but does not include lump sum payments made on termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or
(b) the maximum contribution base for the quarter - the maximum contribution base, which is the maximum limit on the amount of superannuation support that an employer is expected to provide for the benefit of an employee. The maximum contribution base for the 2013-14 year of income is $48,040 per quarter. This amount is indexed annually according to the indexation factor.
Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) sets out the Commissioner's views on the meaning of OTE.
Paragraphs 13 to 15 of SGR 2009/2 address the meaning of 'ordinary hours of work' and state:
Meaning of 'ordinary hours of work'
13. An employee's 'ordinary hours of work' are the hours specified in his or her ordinary hours of work under the relevant award or agreement, or under a 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'.
On-call allowances
Paragraph 27 of SGR 2009/2 provides that additional payments made to employees to recognise or compensate employees for certain conditions relating to their employment are OTE, except to the extent that they relate solely to hours of work other than ordinary hours of work.
Paragraph 41 of SGR 2009/2 specifies that payments for work undertaken during hours outside an employee's ordinary hours of work are not OTE.
Paragraph 44 of SGR 2009/2 explains the general relationship between on-call allowances and OTE:
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.
Paragraph 45 of SGR 2009/2 explains that in some cases an on-call allowance may be paid as a loading on the salary of an employee received for ordinary hours of work. For example, doctors may be 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 would be considered OTE because they relate to ordinary hours of work (except to the extent that they are paid in respect of overtime hours).
Application to the circumstances
In this case, the Agreement stipulates the ordinary hours of work.
Employees are required to be available to respond to calls for assistance outside their ordinary hours of work in accordance with an on call or standby roster. Employees are paid a standby allowance in addition to their ordinary wage when required to be on call. The standby allowance and call out overtime are identified separately on an employee's payslip.
The on-call allowance is not paid as a loading on ordinary salary and wages and is therefore distinguishable from the example provided in paragraph 45 of SGR 2009/2. The allowance is separate from any salary or wages paid if an employee is actually called in to work. Therefore the principles explained in paragraph 44 of SGR 2009/2 apply and payment of the on-call allowance is not considered OTE. Therefore, the Employer does not have an obligation to make SG payments in respect of the on-call/standby allowance.