Edited version of your written advice

Authorisation Number: 1012668106823

Advice

Subject: Superannuation Guarantee Obligations

Question 1

Do earnings in respect of public holidays occurring on rostered days off paid to employees under a clause of an Enterprise 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'.

Question 2

Do earnings in respect of payments made to employees for on-call availability under a clause of an Enterprise Agreement form part of the employee's OTE for the purposes of subsection 6(1) of the SGAA?

Advice

Yes. Refer to 'Reasons for decision'.

Question 3

Do earnings in respect of the recall allowance paid to employees under a clause of an Enterprise Agreement form part of the employee's OTE for the purposes of subsection 6(1) of the SGAA?

Advice

No. Refer to 'Reasons for decision'.

Question 4

Do earnings in respect of the continuing education allowance paid to employees under a clause of an Enterprise Agreement form part of the employee's OTE for the purposes of subsection 6(1) of the SGAA?

Advice

No. Refer to 'Reasons for decision'.

Question 5

Do earnings in respect of uniform and laundry allowances paid to employees under a clause of an Enterprise Agreement form part of the employee's OTE for the purposes of subsection 6(1) of the SGAA?

Advice

No. Refer to 'Reasons for decision'.

This advice applies for the following period:

After 1 July 2014

Relevant facts and circumstances

Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

• The employer is seeking advice in relation to if the following payments form part of the employees OTE in respect to their superannuation guarantee (SG) obligations:

• Public holiday equitable payments

• On-call payment

• Recall allowance

• Continuing education allowance

• Uniform and laundry allowance

• In relation to the types of payments, the employer provides the following information from the Agreement in their application:

• Employees work on a seven-day week rotating roster basis.

• Where a public holiday falls on a day that an employee is not rostered to work employees shall receive an 'equitable payment'.

• Employees may be recalled to work when off duty. If employees are recalled to the workplace they will be paid a recall allowance.

• Employees are not provided with a work uniform. They are paid a uniform and laundry allowance to compensate for the costs of purchasing and laundering a work uniform.

• Employees are paid for their on-call availability as part of their normal salary and are not paid any separate allowance.

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

Summary

The earnings of employees who are engaged under the Agreement in respect of:

• public holidays occurring on rostered days off

• recall allowance

• continuing education allowance

• laundry and uniform allowances

do not form part of the employees OTE as the earnings paid in respect of these clauses are not in relation to the employees' ordinary hours of work.

The earnings of employees who are engaged under the Agreement in respect of:

• on-call availability payment

do form part of the employees ordinary time earnings as the earnings paid in respect of these clauses are in relation to the employees' ordinary hours of work.

Detailed reasoning

All employers are required to provide a minimum level of superannuation support for their eligible employees by the SG period due date. From 1 July 2008, employers must use 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 and 18 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'.

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 9.am and 5pm. Monday to Friday. They may (depending on the provision in the relevant award or agreement, if any) and include hours to be worked at other times, including at night, on weekends or on public holidays.

In your case, as the ordinary hours of work are not specified under the 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.

Due to the rotating roster basis on which employees operate, it is often not practicable to determine the normal, regular, usual or customary hours of employees' work. Therefore, in accordance with paragraph 17 of SGR 2009/2, the actual hours worked should be taken to be the employee's ordinary hours of work.

Question 1

Public Holidays occurring on rostered days off

The Agreement provides that where a public holiday falls on an employee's rostered day off, he or she shall be entitled to receive an amount equal to one day's ordinary pay.

Paragraph 25 of SGR 2009/2 provides that all amounts of employment earnings are in respect of an employee's of ordinary hours of work, unless they are remuneration for overtime hours or other hours that are not ordinary hours of work.

Paragraph 227 of SGR 2009/2 discusses an example of public holiday payments and ordinary working hours:

For example, during public holidays an employee does not provide services or attend work, and the entitlement to the payment for the holiday has not accrued during ordinary hours actually worked. However, the payment the employee receives is 'in respect of 'ordinary hours of work' because it is salary or wages received at their ordinary rate of pay paid for a period which would normally be their ordinary working hours.

On the facts you have provided, employees receive a payment in lieu for public holidays which occur on their rostered days off. As the employees work on a rotating roster basis and do not have regular or usual working hours, the concept of 'ordinary hours of work' is defined by their actual hours of work. An employee's rostered day off would therefore be excluded from an employee's ordinary hours of work.

Therefore a payment in lieu made to employees for public holidays occurring on their rostered day off is not paid in respect of their ordinary working hours. This is distinguishable from the example detailed in paragraph 227 of SGR 2009/2; where the public holiday payment described is in respect of a period which would normally be the employee's ordinary working hours.

As the payment is made in respect of a period which would not form part of the employee's ordinary working hours, due to the employee not being rostered to attend work on that day, the payment does not form part of OTE for the purposes of subsection 6(1) of the SGAA. Therefore, the Employer does not have an obligation to make SG payments in respect of the public holiday equitable payment.

Question 2

On-call payment

Employees are required to provide on-call services by being available to perform duty outside their ordinary hours.

The Agreement states that payment for this on-call availability is included in the rates of pay of employees.

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).

In your case, the payment to employees for making themselves available to perform on-call duties is included in employees' ordinary rates of pay. The payment therefore relates to ordinary hours of work performed. The entitlement is not a separate allowance and is not distinct from the salary or wages an employee will receive if actually called into work. Therefore payment made to employees for on-call availability forms part of OTE.

As the on-call payment under the Agreement relates to the employees' ordinary hours of work, being their rostered duty hours, the payment forms part of OTE for the purposes of subsection 6(1) of the SGAA. Therefore, the Employer has an obligation to make SG payments in respect of salary payments that relate to on-call availability.

Question 3

Recall allowance

The Agreement provides that a full-time employee who is recalled to duty will be paid a recall amount. The employee will be paid for time worked upon recall at an hourly rate of time and a half on weekdays and double time on weekends or public holidays.

Paragraph 25 of SGR 2009/2 provides that all employment earnings are in respect of an employee's of ordinary hours of work unless they are remuneration for overtime hours or other hours that are not ordinary hours of work. Paragraph 41 of SGR 2009/2 states that payments for overtime work performed during hours outside an employee's ordinary hours of work are not OTE.

In your case, the ordinary hours of work of employees are the actual rostered duty hours worked. The recall payment is made in relation solely to instances where the employee is required to attend work outside their rostered duty hours. Therefore, the recall allowance relates solely to overtime hours outside an employee's ordinary hours of work.

Applying paragraph 41 of SGR 2009/2, as the payment relates to overtime work performed, the allowance does not form part of OTE for the purposes of subsection 6(1) of the SGAA. Therefore the Employer does not have an obligation to make SG payments in respect of the recall allowance.

Question 4

Continuing education allowance

The Agreement provides that employees shall receive a continuing education allowance. The Agreement states that funds will be paid to the employee as a reimbursement of costs reasonably and necessarily incurred for continuing education activities or purposes directly relevant to their employment.

Paragraph 72 of SGR 2009/2 states that 'expense allowances' will not form part of an employee's salary and wages. Expense allowances are those which are paid to an employee with a reasonable expectation that the employee will fully expend the money in the course of providing services.

Paragraph 73 of SGR 2009/2 states that a reimbursement that compensates an employee for an expense they have incurred on behalf of the employer will also not form part of an employee's salary or wages.

In your case, the continuing education allowance is paid as a reimbursement of costs necessarily incurred in relation to continuing education activities or purposes directly relevant to employment. There is an expectation that employees will fully expend the amount on professional development and education expenses related to their employment services. Applying paragraph 73 of SGR 2009/2, this payment is a reimbursement of expenses and therefore does not form part of OTE for the purposes of subsection 6(1) of the SGAA. Therefore the Employer does not have an obligation to make SG payments in respect of the continuing education allowance.

Question 5

Uniform and laundry allowances

You have stated that employees are generally not provided with uniforms and bear the cost of both purchasing uniforms and laundering them. They are paid a uniform and laundry allowance to compensate for these costs.

The Agreement provides that an employee will be reimbursed for the cost of uniform clothing, where their duties necessitate a uniform or it is usual custom in the industry to wear a uniform. The Agreement provides that an employee will be reimbursed for the cost of laundering uniform clothing.

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.

Paragraphs 72 of SGR 2009/2 states that certain 'expense allowances' will not form part of an employee's salary and wages. Expense allowances are those which are paid to an employee with a reasonable expectation that the employee will fully expend the money in the course of providing services.

Paragraph 73 of SGR 2009/2 states that a reimbursement that compensates an employee for an expense they have incurred on behalf of the employer will also not form part of an employee's salary or wages.

The uniform and laundry allowances are paid to employees to reimburse the costs of providing and maintaining clean work uniforms. The allowance payment relates to the ordinary hours worked by employees.

Applying paragraph 73 of SGR 2009/2, the uniform and laundry allowances are reimbursements for expenses that employees incur in providing services for the Employer and therefore do not form part of their salary and wages. The allowances do not form part of OTE for the purposes of subsection 6(1) of the SGAA. Therefore the Employer does not have an obligation to make SG payments in respect of the uniform and laundry allowances.

Conclusion

The payments made to employees in respect of the public holiday equitable payments, recall allowance, continuing education allowance and uniform and laundry allowances do not form part of the employees' OTE.

The payments made to employees in relation to their on-call availability, as part of their ordinary salary, does form part of the employees' OTE.