Edited version of administratively binding advice

Authorisation Number: 1052077466054

Date of advice: 30 January 2023

Advice

Subject: Ordinary time earnings

Question 1

Is the Sleepover Allowance payment made under subclause 25.7 of the X Industry Award (the Award), included in ordinary time earnings (OTE) for superannuation guarantee purposes under subsection 6(1) of the Superannuation Guarantee Act 1992 (SGAA)?

Answer

No, the Sleepover Allowance payment does not constitute OTE as defined in subsection 6(1) of the SGAA and therefore the employer does not have an obligation to make superannuation guarantee payments in respect of this allowance.

This advice applies for the following periods:

Income year ending 30 June 20XX

Income year ending 30 June 20XX

The arrangement commences on:

1 July 20XX

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 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.

Employees of the employer are employed under the Award.

The Award includes the following relevant clauses:

10. Types of employment

...

25. Ordinary hours of work and rostering

25.1 Ordinary hours of work

(a) The ordinary hours of work will be 38 hours per week or an average of 38 hours per week...

25.2 Span of hours

(a) Day worker

The ordinary hours of work for a day worker will be worked between 6.00 am and 8.00 pm Monday to Sunday.

(b) Shiftworker

A shiftworker is an employee who works shifts in accordance with clause 29 Shiftwork.

25.7 Sleepovers

...

(d) The employee will be entitled to a sleepover allowance of X% of the standard rate for each night on which they sleep over.

(e) In the event of the employee on sleepover being required to perform work during the sleepover period, the employee will be paid for the time worked at the prescribed overtime rate with a minimum payment as for one hour worked. Where such work exceeds one hour, payment will be made at the prescribed overtime rate for the duration of the work.

...

28 Overtime and penalty rates

28.1 Overtime rates

...

29 Shiftwork

29.1 Engagement in shiftwork

...

29.2 Definitions

(a) Afternoon shift means any shift which finishes after 8.00 pm and at or before 12 midnight Monday to Friday.

(b) Night shift means any shift which finishes after 12 midnight or commences before 6.00 am Monday to Friday.

(c) A public holiday shift means any time worked between midnight on the night prior to the public holiday and midnight of the public holiday.

29.3 Shift allowances and penalty rates

(a) An employee who works an afternoon shift will be paid a loading of 12.5% of their ordinary rate of pay for the whole of such shift.

(b) An employee who works a night shift will be paid a loading of 15% of their ordinary rate of pay for the whole of such shift.

(c) An employee who works a public holiday shift will be paid a loading of 150% of their ordinary rate of pay for that part of such shift which is on the public holiday.

29.4 Shifts are to be worked in one continuous block of hours that may include meal breaks and sleepover.

Relevant legislative provisions

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

Reasons for Decision

Summary

The sleepover allowance under the Award is paid as compensation relating to hours that are outside of the employee's ordinary hours of work. Consequently, the allowance is not included in the employee's ordinary time earnings under subsection 6(1) of the SGAA.

Detailed reasoning

The SGAA places a requirement on all employers to provide a minimum level of superannuation support for their eligible employees by the quarterly due date or pay the superannuation guarantee charge. The minimum level of support is calculated by multiplying the charge percentage by each employee's earnings base.

From 1 July 2008, an employer must use OTE as defined in subsection 6(1) of the SGAA as the earnings base to calculate the minimum superannuation contributions for their employees. This ensures that all employees are treated the same for superannuation purposes.

Definition of ordinary time earnings

Subsection 6(1) of the SGAA defines OTE in relation to an employee to mean:

(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;

(ii) earnings consisting of over-award payment, 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.

An employee's 'earnings', for the purpose of the definition of OTE, is the remuneration paid to the employee as a reward for the employee's services.

The Commissioner's views on OTE, including an employee's ordinary hours of work are included in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2).

SGR 2009/2explains that

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'.

Allowances

An allowance is a payment of a definite predetermined amount to cover an estimated expense. Generally it is paid regardless of whether the employee incurs the expected expense and the employee has the discretion whether or not to expend the allowance. Paragraph 27 of SGR 2009/2 relates to certain specific kinds of payments that are OTE and states:

Many employees receive various additional payments that are described as allowances that are paid to employees to recognise or compensate for certain conditions relating to their employment.

Examples:

•         a 'site allowance' paid fortnightly at a flat rate in acknowledgement of the displacement an employee undergoes when a job requires him or her to work in a remote location;

•         a 'casual loading' of 20% of the basic ordinary time rate of pay paid to a casual worker in lieu of any fixed, regular minimum hours of work and of paid leave entitlements;

•         a 'dirt allowance' paid as a flat rate in acknowledgement of the conditions in which the work is undertaken; and

•         a 'freezer allowance' paid at the rate of an extra $2.50 per hour to employees, such as some supermarket employees, who perform most of their duties in cold storage facilities.

These kinds of payments are OTE except to the extent that they:

•         are not 'salary or wages', for example if they are payments of a predetermined amount to offset or reimburse particular expenses; or

•         relate solely to hours of work other than ordinary hours of work.

The sleepover allowance

Accordingly, in line with the above, all amounts of earnings in respect of employment should be considered to be in respect of the employee's ordinary hours of work unless these are remuneration for overtime or other hours that are not ordinary hours of work.

The sleepover allowance described in clause 25.7 of the Award is not normally paid in recognition of work performed by the employee. However, if work is performed, then paragraphs 25.7(e) and (f) outlines how an employee will be remunerated for actual work performed which can be distinguished from ordinary hours of work.

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.

As the sleepover allowance paid to employees under clause 25.7 of the Award is not reliant on work performed, or distinguished from ordinary hours of work, it 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 superannuation guarantee payments in respect of this allowance.