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Edited version of your written advice
Authorisation Number: 1051311273578
Date of advice: 1 December 2017
Ruling
Subject: Ordinary time earnings
Question
Are hours worked on a Sunday by a particular type of your employees considered to be overtime and therefore excluded from OTE?
Advice
Yes.
Relevant legislative provisions
Superannuation Guarantee (Administration) Act 1992 subsection 6(1)
ATO View documents
Superannuation Guarantee: meaning of the terms ‘ordinary time earnings’ and ‘salary and wages’ SGR 2009/2
Relevant facts and circumstances
You employ certain types of employees under an agency agreement (the Agreement).
The Agreement includes work on Sundays as overtime for this type of employee.
Reasons for decision
From 1 July 2008, all employers must use OTE as the earnings base to calculate the minimum super guarantee contributions required for their employees.
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.
Paragraph 41 of SGR 2009/2 outlines that overtime earnings are specifically excluded from the definition of OTE:
41. Payments for work performed during hours outside an employee's ordinary hours of work are not OTE.
Application to your circumstances:
In your case you have an Agreement which stipulates what the ordinary span of operating hours is for your employees. The Agreement stipulates that any hours worked on a Sunday are overtime.
As per paragraph 13 of SGR 2009/2 the agreement defines these hours to be outside of employees’ ordinary hours. Furthermore, as per paragraph 14 of the SGR 2009/2, this Agreement draws a genuine distinction between these hours and employees’ ordinary hours by having these hours remunerated at a higher rate. Therefore these hours are overtime hours.
Paragraph 41 of SGR 2009/2 specifically excludes earnings in respect of overtime in OTE.
In conclusion, time worked on Sunday is classed as overtime, and payment for this is not OTE.