Edited version of your written advice

Authorisation Number: 1013029681393

Advice

Subject: Superannuation guarantee - Ordinary time earnings

Question

Do earnings in respect of total hours worked by casual employees under the standard casual employment agreement form part of their ordinary time earnings (OTE) for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Advice

No. Please see 'Reasons for decision' below.

Relevant facts and circumstances

1. You have casual employees.

2. Your casual employees can work various hours a week.

3. You have a standard agreement which sets out the terms and conditions of employment for your casual employees, and includes reference to the applicable Modern Award and the National Employment Standards.

4. The Award states that a casual employee is one engaged and paid as such. A casual employee's ordinary hours of work under the Award are the lesser of an average of 38 hours per week or the hours required to be worked by the employer.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 Subsection 6(1)

Reasons for decision

Summary

Earnings of your casual employees engaged by you under the standard agreement and the Award in respect of 38 or less hours worked per week form part of the employees' OTE as these earnings 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. 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 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 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.

The Commissioner's view is that "ordinary hours of work" for OTE purposes should be interpreted in the context of the Australian industrial relations system. In your case, your casual employees' "ordinary hours of work" are the hours specified as ordinary hours of work in the documents governing their employment. These documents do not have to use the exact expression "ordinary hours of work"; a genuine distinction between ordinary hours and non-ordinary hours is sufficient.

In your case, the standard agreement which sets out the terms and conditions of employment for your casual employees includes reference to the applicable Modern Award and the National Employment Standards.

The National Employment Standards (NES) are 10 minimum employment entitlements that have to be provided to all employees under the Fair Work Act 2009. The NES are incorporated in the Award.

Therefore, in your case, the documents governing your employees' employment are the standard agreement, the NES, and the Award.

The standard agreement is silent on the number of ordinary hours per week that a casual employee may be engaged to work. However, the Award states that a casual employee is one engaged and paid as such. A casual employee's ordinary hours of work under the Award are the lesser of an average of 38 hours per week or the hours required to be worked by the employer.

You engage your employees on a casual basis, as required; and they are paid a casual loading accordingly. The Award draws a distinction between ordinary hours and other hours in excess of, or outside the span of specified ordinary hours of work, being the lesser of an average of 38 hours per week or the hours required to be worked by you, the employer.

According to paragraph 15 of SGR 2009/2, 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'. Therefore, your casual employees' ordinary hours of work for OTE purposes is 38 hours per week, and not necessarily their total hours unless they work less than 38 hours in any particular week.

Conclusion

Hours worked by your casual employees up to 38 hours per week will form part of the employees' ordinary hours of work. Payments made in respect of a period which forms part of the employee's ordinary working hours are payments which form part of OTE for the purposes of subsection 6(1) of the SGAA. Therefore, you have an obligation to make SG payments in respect of hours worked by your employees up to 38 hours per week.