Edited version of your written advice

Authorisation Number: 1051327142271

Date of advice: 19 January 2018

Ruling

Subject: Ordinary time earnings

Question

Are earnings for work performed by casual employees, outside of a bandwidth of 0600 to 1700 Monday to Friday, considered to be overtime and not OTE for the purposes of subsection 6(1) of the Superannuation Guarantee Administration Act 1992 (‘SGAA’) for the period?

Answer

No. Please refer to ‘why we have made this decision’.

This advice applies for the following periods:

● Year ended 30 June 20XX

● Year ended 30 June 20XX

● Year ended 30 June 20XX

● Year ended 30 June 20XX

● Year ended 30 June 20XX

● Year ended 30 June 20XX

● Quarter ended 30 September 20XX

● Quarter ended 31 December 20XX

The arrangement commences on:

1 July 20XX

Relevant facts and circumstances

You lodged a private ruling application requesting our advice on what is considered OTE for casual employees who are engaged under the Operations classification of the Relevant Industry Award 20XX.

You spoke to an ATO officer and discussed the nature of the arrangement between the employer, the end-user and the casual employees.

You provided further information by email including attached weekly timesheets and payslips for casual employees during the period.

You provided further information by email including attached copies of a Deed of Agreement and Amendment, and a contract for the ‘Provision of Services’ (‘original contract’) between the employer and the end-user.

Based on the information provided, we considered the following to be relevant facts:

● The employer operates as a labour-hire service provider and are contracted to supply casual employees to the end-user.

● You have advised that there is no contract between the employer and the casual employees, but you do not dispute that you are the employer of the casual employees for the purposes of the SGAA.

● The tripartite arrangement between the employer, the end-user and the casual employees is in accordance with two agreements between the employer and the end-user:

● The ‘original contract’ for the ‘Provision of Services’ between the employer and the end-user.

● A Deed of Agreement and Amendment between the end-user and the employer amending the contract.

● The ‘original contract’ provides that the rate of pay for the casual employees on weekdays from 5.00pm onwards is at 1.5 times the ordinary hourly rate. The contract also provides that the rate of pay for weekends and public holidays is at 2 times the ordinary hourly rate.

● There is no reference to ‘ordinary hours’ in either the ‘original contract’ or the Deed of Agreement and Amendment.

● The casual employees complete weekly timesheets which are authorised by the employer but filled out by the casual employees on instruction from a supervisor employed by the end-user.

● The employer supplies the casual employees with weekly payslips which detail the calculation of wages and overtime rates paid in accordance with the corresponding timesheet.

The sample of timesheets and payslips supplied by the employer indicate the following:

● Hours worked between 0600 and 1700 are renumerated at the ordinary rate, referred to as ‘ORD’ in the timesheet.

● Hours worked outside of this bandwidth on weekdays are renumerated at 1.5 times the ordinary rate for the first three hours, then at 2 times the ordinary rate for any hours thereafter.

● Hours worked on a weekend are renumerated at 2 times the ordinary rate in accordance with the original contract.

● You have advised that the ‘ordinary rate’ is inclusive of casual loading of 25% and that overtime is calculated on the ordinary rate plus casual loading.

● The casual employees are engaged under the Operations classification of the Relevant Industry Award 2010 (‘the Award’).

Subclause 10.3(a) of the Award states:

(a) A casual employee is one engaged and paid as such. A casual employee’s ordinary hours of work are the lesser of 38 hours per week or the hours required to be worked by the employer.

Clause 23.2 of the Award states that, except as provided otherwise in this clause, employees will be entitled to be paid:

(a) A loading of 50% of the ordinary hourly base rate of pay for the first three hours, and 100% of the ordinary hourly base rate of pay thereafter for any time worked outside of ordinary hours on a Monday to Friday, except for public holidays.

(b) For all ordinary hours and overtime worked between midnight Friday and midnight Saturday a loading of 50% of the ordinary hourly base rate of pay.

(c) For a minimum of four hours if recalled to work overtime after leaving the employer’s premises.

Clause 23.5 of the Award states:

An employee will be paid a loading of 100% of the ordinary hourly base rate of pay for any hours, ordinary and overtime, worked on a Sunday.

Clause 23.6 of the Award states:

An employee will be paid a loading of 150% of the ordinary hourly base rate of pay, for any hours, ordinary and overtime, worked on a public holiday.

Relevant legislative provisions

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

Reasons for decision

Why we have made this decision

Summary

1. Based on the information provided, earnings for work performed by casual employees for all hours worked up to and including 38 hours per week, regardless of the day they are worked on or the time of day they are worked, will be included in OTE for the purposes of subsection 6(1) of the SGAA for the period.

Detailed reasoning

Question

Are earnings for work performed by casual employees, outside of a bandwidth of 0600 to 1700 Monday to Friday, considered to be overtime and not OTE for the purposes of subsection 6(1) of the SGAA for the period?

Answer

2. 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.

3. The Commissioner explains the meaning of OTE as defined by subsection 6(1) of the SGAA in Superannuation Guarantee Ruling SGR 2009/2 Superannuation Guarantee: Meaning of the terms ‘ordinary time earnings’ and ‘salary or wages’ (‘the Ruling’).

4. Paragraphs 13 and 18 of the Ruling states the following with respect to the 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.

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.

5. Paragraph 191 of the Ruling provides the following with respect to the interpretation of ‘ordinary hours of work’ when that term is specified in an award or agreement:

… Parliament consciously chose the expression 'ordinary hours of work' in framing the SGAA in 1992 knowing that it had a specialised and well-established meaning in the particular context of the Australian industrial relations system, and intended that the interpretation of the expression be informed by that context.

6. As per paragraph 192 of the Ruling, the Commissioner accepts the view that ordinary hours of work are as determined by the relevant award or agreement.

7. You have advised that the casual employees are engaged under the Operations classification of the Relevant Industry Award 2010 (‘the Award’).

8. Subclause 10.3(a) of the Award states:

(a) A casual employee is one engaged and paid as such. A casual employee’s ordinary hours of work are the lesser of 38 hours per week or the hours required to be worked by the employer.

9. Therefore, a casual employee’s ‘ordinary hours of work’ are all hours worked up to and including 38 hours per week, regardless of the day they are worked on or the time of day they are worked at. Therefore, any earnings with respect to these hours are OTE for the purposes of subsection 6(1) of the SGAA.

10. It follows that any hours worked beyond 38 hours (i.e. the 39th hour or part thereof and all hours after that) will not be considered ‘ordinary hours of work’, regardless of the days they are worked on or the time of day they are worked at, and therefore earnings with respect to these hours will not be OTE for the purposes of subsection 6(1) of the SGAA.

11. This is in accordance with paragraph 15 of the Ruling, which states:

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'.

12. Clause 23.2 of the Award states that, except as provided otherwise in this clause, employees will be entitled to be paid:

(a) A loading of 50% of the ordinary hourly base rate of pay for the first three hours, and 100% of the ordinary hourly base rate of pay thereafter for any time worked outside of ordinary hours on a Monday to Friday, except for public holidays.

(b) For all ordinary hours and overtime worked between midnight Friday and midnight Saturday a loading of 50% of the ordinary hourly base rate of pay.

(c) For a minimum of four hours if recalled to work overtime after leaving the employer’s premises.

13. Clause 23.5 of the Award states:

An employee will be paid a loading of 100% of the ordinary hourly base rate of pay for any hours, ordinary and overtime, worked on a Sunday.

14. Clause 23.6 of the Award states:

An employee will be paid a loading of 150% of the ordinary hourly base rate of pay, for any hours, ordinary and overtime, worked on a public holiday.

15. It is noted that the Ruling at paragraphs 14 and 189 provides that a distinction between ordinary hours and other hours of work is that hours worked in excess of ordinary hours will normally be paid at higher rates and typically described as overtime. However, it is considered that such factors are not determinative.

16. These factors are intended to assist in determining which hours are ordinary hours of work where the award or agreement does not expressly provide a definition. However, the fact that some of the ordinary hours of work of casual employees are renumerated at a higher rate does not carve those hours out of the award definition of ordinary hours of work.

17. In this case, the fact that the Award provides for loadings referred to as ‘overtime’ and ‘penalty rates’ at clauses 23.2, 23.5 and 23.6, does not displace the operation of subclause 10.3(a) in defining ‘ordinary hours of work’ as the lesser of 38 hours per week or the hours required to be worked by the employer.

18. This is supported by the wording of subclause 23.2(b), and clauses 23.5 and 23.6, which all state that the loading will apply to ‘any hours, ordinary or overtime’ and therefore recognising that the loading may apply to hours otherwise considered to be ‘ordinary hours’.

19. You have advised that there is no contract between the employer and the casual employees, but you do not dispute that you are the employer of the casual employees for the purposes of the SGAA.

20. The ‘original contract’ between the employer and the end-user provides that the rate of pay for the casual employees on weekdays from 5.00pm onwards is at 1.5 times the ordinary hourly rate. The contract also provides that the rate of pay for weekends and public holidays is at 2 times the ordinary hourly rate.

21. There is no reference to ‘ordinary hours’ in either the ‘original contract’ or the Deed of Agreement and Amendment.

22. Based on the information provided, the ‘original contract’ between the employer and the end-user is a contract for the ‘Provision of Services’, and is not an agreement which governs the conditions of employment for the employees of the employer.

23. Furthermore, the ‘original contract’ does not define, either implicitly or expressly, ordinary hours of work for the employees of the employer. While the contract provides a schedule of rates of pay, and this differs according to when the work is performed, this does not impose an obligation on the employer to pay the casual employees in accordance with these rates.

24. The sample of timesheets and payslips supplied by the employer indicate the following:

● Hours worked between 0600 and 1700 are renumerated at the ordinary rate, referred to as ‘ORD’ in the timesheet.

● Hours worked outside of this bandwidth on weekdays are renumerated at 1.5 times the ordinary rate for the first three hours, then at 2 times the ordinary rate for any hours thereafter.

● Hours worked on a weekend are renumerated at 2 times the ordinary rate in accordance with the original contract.

25. The fact that the timesheets and payslips show that some hours were recorded and renumerated at an ‘ordinary’ or ‘ORD’ rate, as distinguished from hours renumerated at 1.5 or 2 times the ordinary rate, does not override the definition of ‘ordinary hours of work’ as per subclause 10.3(a) of the Award.

26. In your application, you have referred to Example 5 at paragraphs 103 to 107 of the Ruling, and Example 6 at paragraphs 108 to 111 of the Ruling, in support of your interpretation of ‘ordinary hours of work’.

27. In Example 5, as per paragraph 104 of the Ruling, the example agreement provides that the ordinary hours of work for all employees, including casuals, are no more than 38 hours in any given week.

28. In Example 5, as per paragraph 107 of the Ruling, all wage payments for ‘ordinary hours of work’ as defined in the agreement are considered OTE. As in your case, all wage payments for hours worked up to and including 38 hours will be considered to be OTE.

29. Example 6 can be distinguished from your case, as in that example an agreement specifies a bandwidth, and the hours outside of this bandwidth are defined by the agreement not to be ‘ordinary hours of work’. In your case, as discussed above, there is no agreement in which a bandwidth could be specified and nor is a bandwidth specified in the Award.

Conclusion

30. Based on the information provided, the Commissioner is satisfied that earnings for work performed by casual employees for all hours worked up to and including 38 hours per week, regardless of the day they are worked on or the time of day they are worked, will be included in OTE for the purposes of subsection 6(1) of the SGAA for the period.

31. Accordingly, the employer has an obligation to pay superannuation guarantee contributions to casual employees engaged under the Operations classification of the Award, based on the employee’s OTE inclusive of all hours defined as ‘ordinary hours of work’.