Edited version of your written advice

Authorisation Number: 1051368491179

Date of advice: 18 May 2018

Ruling

Subject: Ordinary time earnings (‘OTE’) for casual employees

Question

Are earnings for work performed by casual employees, outside the spread of ordinary hours from 7am to 7pm Monday to Friday, and from 7am to 12:30pm on Saturdays considered to be overtime and not OTE for the purposes of subsection 6(1) of the Superannuation Guarantee Administration Act 1992 (‘SGAA’)?

Answer

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

This advice applies for the following period:

1 July 20XX to 30 June 20XX

The arrangement commences on:

1 July 20XX

Relevant facts and circumstances

You applied for Administratively Binding Advice (‘ABA’) asking whether casual employees engaged by you who are consistently rostered to work outside the spread of ordinary hours and paid at penalty or overtime rates, be entitled to be paid superannuation guarantee on these hours worked.

You provided the following further information:

● A letter from your human resource (HR) manager detailing the pattern of work performed by one of your casual workers.

● a copy of an email sent to you by your HR manager containing advice from the Fairwork Ombudsman on how after hours work performed by casual workers are to be remunerated.

You provided the following additional information:

● A copy of one of the employment contracts formed between you and one of its casual employees, and you advised the following:

● You would like the binding advice to apply to all casual employees engaged by you;

● Your question specifically relates to casual employees who are regularly rostered to work after 10pm to 7am the following morning and are paid at overtime or penalty rates after 12am at the rate of time and a half for the first two hours then at double time rate for the remaining five hours.

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

● The employer operates a 24 hour call centre operation and engages casual employees on a rotating shift basis.

● The employment contract specifies in relation to the hours of work for casual employees to be:

● ‘a minimum of 3 hours in any one day and up to a maximum of 38 hours in any one week on mutually agreed days and any such hours. Hours may be changed by mutual agreement between you and the Company or by the Company giving reasonable notice. Any overtime must be authorised in writing by your Manager and will be paid in accordance with the Award. Any overtime not authorised by your Manager will not be paid.’

● The casual employees are engaged under the Clerks Private Sector Award 2010 (‘the Award’).

● Clause 12 of the Award states in relation to casual workers:

‘12. Casual employment

12.1 A casual employee is an employee engaged as such.

12.2 A casual employee must be paid per hour at the rate of 1/38th of the weekly rate prescribed for the class of work performed, plus 25%. This loading is instead of entitlements to leave and other matters from which casuals are excluded by the terms of this award and the NES.

12.3 Casual employees must be paid at the termination of each engagement, or weekly or fortnightly in accordance with usual payment methods for full-time employees.

12.4 Casual employees are entitled to a minimum payment of three hours’ work at the appropriate rate. ‘

● Clause 25.1 of the Award states in relation to ordinary hours of work (other than shiftworkers):

‘25.1 Weekly hours of work—day workers

(a) The ordinary hours of work for day workers are to be an average of 38 per week but not exceeding 152 hours in 28 days, or an average of 38 over the period of an agreed roster cycle.

(b) The ordinary hours of work may be worked from 7.00 am to 7.00 pm Monday to Friday and from 7.00 am to 12.30 pm Saturday. Provided that where an employee works in association with other classes of employees who work ordinary hours outside the spread prescribed by this clause, the hours during which ordinary hours may be worked are as prescribed by the modern award applying to the majority of the employees in the workplace.

(c) Not more than 10 hours exclusive of meal breaks (except if paid for at overtime rates) are to be worked in any one day.’

● Clauses 28.3 and 28.5 of the Award states in relation to shift workers:

‘28.3 Ordinary hours of work

(a) The ordinary hours of work for shiftworkers are to be an average of 38 hours per week and must not exceed 152 hours in 28 consecutive days.

(b) By agreement between the employer and the majority of employees concerned, a roster system may operate on the basis that the weekly average of 38 ordinary hours is allowed over a period which exceeds 28 consecutive days but does not exceed 12 months.

(c) Not more than 10 ordinary hours are to be worked in any one day.

28.4 Hours, shift allowances, special rates, meal interval

(a) Notwithstanding any other provisions of this award an employee may be employed on shifts, in which case the ordinary hours for a week’s work are to be 38, and must be performed in shifts not exceeding six shifts of 10 hours each. A Sunday may be included.

(b) Times of beginning and ending the shift of an employee may in any case be varied by agreement between the employer and the employee or in the absence of agreement may be varied by at least one week’s notice given by the employer to the employee.

(c)A shiftworker employed on an afternoon shift or a night shift must, for work done during the ordinary hours of any such shift, be paid ordinary rates plus an additional 15% for afternoon or night shift, or an additional 30% for a permanent night shift.

28.5 Overtime

A shiftworker for all time worked:

(a) in excess of the ordinary weekly hours fixed in this clause must be paid time and a half for the first three hours and double time thereafter; or

(b) in excess of ordinary daily hours on an ordinary shift must be paid time and a half for the first two hours and double time thereafter.

● Advice provided to your HR manager by the Fair Work Commission confirms your casual employees working under the Award are subject to the above clauses regarding shift workers and their entitlement to overtime.

We formed our view on the facts by relying on this information

The private ruling application form and the further information provided.

Assumptions

No assumptions have been made.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 Section 6

ATO view documents

Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee ruling:Superannuation guarantee: meaning of the terms ‘ordinary time earnings’ and ‘salary or wages’

Reasons for decision

Why we have made this decision

Summary

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, the time of day they are worked or the rate at which they are remunerated, will be included in OTE for the purposes of subsection 6(1) of the SGAA for the period 1 July 20XX to 30 June 20XX inclusive.

Detailed reasoning

Question

Are earnings for work performed by casual employees, outside the spread of ordinary hours from 7am to 7pm Monday to Friday, and from 7am to 12:30pm on Saturdays considered to be overtime and not OTE for the purposes of subsection 6(1) of the Superannuation Guarantee Administration Act 1992 (‘SGAA’)?

Answer

1. OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and is the lesser of:

(c) 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

(d) the maximum contribution base for the quarter.

2. 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’).

3. 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.

4. 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.

5. 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.

6. You have advised that the casual employees are engaged under the Clerks – Private Sector Award 2010 (‘the Award’).

7. Advice provided to your HR manager, by the Fair Work Commission confirms your casual employees working under the Award are subject to the clauses relating to shift work in the Award.

8. Clause 28.3 of the Award in relation to shift workers states:

‘28.3 Ordinary hours of work

(a) The ordinary hours of work for shiftworkers are to be an average of 38 hours per week and must not exceed 152 hours in 28 consecutive days.

(b) By agreement between the employer and the majority of employees concerned, a roster system may operate on the basis that the weekly average of 38 ordinary hours is allowed over a period which exceeds 28 consecutive days but does not exceed 12 months.

(c) Not more than 10 ordinary hours are to be worked in any one day.

9. The employment contract specifies in relation to the hours of work for casual employees to be:

10. ‘a minimum of 3 hours in any one day and up to a maximum of 38 hours in any one week on mutually agreed days and any such hours. Hours may be changed by mutual agreement between you and the Company or by the Company giving reasonable notice. Any overtime must be authorised in writing by your Manager and will be paid in accordance with the Award. Any overtime not authorised by your Manager will not be paid.’

11. 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, the time of day they are worked at or the rate at which they are remunerated. Therefore, any earnings with respect to these hours are OTE for the purposes of subsection 6(1) of the SGAA.

12. 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.

13. 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'.

14. Clauses 28.4 of the Award states:

‘28.4 Hours, shift allowances, special rates, meal interval

(a) Notwithstanding any other provisions of this award an employee may be employed on shifts, in which case the ordinary hours for a week’s work are to be 38, and must be performed in shifts not exceeding six shifts of 10 hours each. A Sunday may be included.

(b) Times of beginning and ending the shift of an employee may in any case be varied by agreement between the employer and the employee or in the absence of agreement may be varied by at least one week’s notice given by the employer to the employee.

(c) A shiftworker employed on an afternoon shift or a night shift must, for work done during the ordinary hours of any such shift, be paid ordinary rates plus an additional 15% for afternoon or night shift, or an additional 30% for a permanent night shift.

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 ‘penalty rates’ at clause 28.4, does not displace the operation of subclause 28.3 in defining ‘ordinary hours of work’ as the lesser of 38 hours per week or the hours required to be worked by the employee.

18. This is supported by the wording of subclause 28.4(c) of the Award which state that the loading will apply to ‘for work done during the ordinary hours of any such shift, be paid ordinary rates plus an additional 15% for afternoon or night shift, or an additional 30% for a permanent night shift’ and therefore recognising that the loading may apply to hours otherwise considered to be ‘ordinary hours’.

19. 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.

20. 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.

21. 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

22. 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, the time of day they are worked or the rate at which they are remunerated will be included in OTE for the purposes of subsection 6(1) of the SGAA for the period 1 July 2018 to 30 June 2023 inclusive.

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