Edited version of private advice

Authorisation Number: 7915167615544

Date of advice: 11 December 2024

Ruling

Subject: Superannuation guarantee - ordinary time earnings

Question 1

Are the ordinary hours of work eight hours a day for your employees for the purposes of calculating ordinary times earnings (OTE) under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer 1

Yes, OTE is calculated on the first 8 hours of each day from Monday to Friday.

This advice applies for the following periods:

Quarter ending September 20XX

Quarter ending December 20XX

Quarter ending March 20XX

Quarter ending June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Your advice is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

•                Company A is the employer (Employer) of its employees.

•                Superannuation is currently being paid to the employees at the higher rate of $XX per week or XX% of work from XX am to XX pm, Monday to Friday.

•                You have stated Day workers are paid $XX per hour. Night workers are paid $XX per hour.

•                You provided an example of XX employees' working patterns over a XXweek period. The data showed the XX employees:

o        completed night shifts from XX to XX days per month, which equates to XX to XX times per week.

o        worked over XX hours most days

o        frequently worked within XX am to XX pm, Monday to Friday.

•                The terms of employees' employment are covered by the Company A.

Enterprise bargaining agreement

The hours of work and related matters are contained in the EBA Part 5 in the following paragraphs and subsections:

33.1 Ordinary hours of work will be eight (8) hours per day, Monday to Friday with the notional weekly hours based on a 36-hour week in accordance with clause 35.

33.2 Starting/Finishing times

(a) Ordinary daily hours may be worked between the hours of 5:00 am and 5:00 pm.

33.3 Subject to clause 33.4, the Employer has the right to otherwise alter start and finish times within the spread of ordinary daily hours.

33.4 Without limiting the Employer's rights expressed in clauses 33.2 and clause 33.3, where the Employer has identified that a set starting times creates problems with the efficient movement of the workforce to their workplaces, the Parties agree to consult jointly with affected Employees to establish an efficient start time regime.

Shiftworkers

34.1 Shiftworker for the purposes of this clause is defined as an Employee who performs Shiftwork and who starts or finishes a shift outside of the ordinary hours set out at clause 33.2. above.

34.2 A Shiftworker shall be paid at the rate of double time for all hours worked.

34.3 An Employee who has to work Shiftwork shall be given at least 48 hours of

notice of the requirements to work shift work.

Rostered days off

35.1-Rostered Days off-The ordinary working hours shall be worked in a 10 day/2-week cycle, Monday to Friday inclusive with eight hours worked on each day on nine days within the cycle and with 0.8 of an hour on each of those days accruing towards the tenth day, which shall be taken off as a paid day off.

16. Ordinary hours of work and rostering arrangements

16.1 Except as provided in clause 17-Shiftwork, the ordinary working hours will be 38 per week (averaged over a 20-day 4-week cycle to allow for the accrual and taking of rostered days off (RDO)), worked between 7.00 am and 6.00 pm Monday to Friday in accordance with the procedures in clauses 16.2 to 16.7.

16.2 Hours of work and accrual towards RDOs Ordinary working hours will be 8 hours in duration each day, of which 0.4 of one hour of each day worked will accrue towards an RDO and 7.6 hours will be paid. An employee will therefore accrue 7.6 hours towards an RDO each 19 days of ordinary hours worked.

Relevant legislative provisions

Superannuation guarantee (Administration) Act 1992, subsection 6(1).

Reasons for decision

Summary

The OTE is calculated on the first 8 hours of each day from Monday to Friday due to what is stipulated in both the Enterprise Bargaining Agreement and the Building and Construction General On-Site Award 2020 regarding ordinary hours of work.

Detailed reasoning

The SGAA states that an employer must provide the prescribed minimum level of superannuation support for its eligible employees by the quarterly due date or pay the superannuation guarantee charge (SGC). 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 times earnings

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

•                the total of the employee's earnings in respect of ordinary hours of work (other than lump sum payments made on termination of employment in lieu of unused sick leave, long service leave or annual leave) and earnings consisting of over-award payments, shift-loading or commission, or

•                the maximum contribution base for the contribution period.

The SGAA does not define the expression 'earnings in respect of ordinary hours of work' or any of the terms in that expression.

The Commissioner's views on OTE, as defined in the SGAA, including information on the difference between allowances, expense allowances and reimbursements, are contained in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) which is effective from 1 July 2009.

OTE is generally what employees earn for their ordinary hours of work, including commissions, allowances (excluding expense allowances) and paid leave and do not include reimbursements or overtime payments.

'Ordinary hours of work' are not limited to hours to be worked between 9am and 5pm, Monday to Friday as 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.

To constitute OTE, a payment must be made with respect to an employee's ordinary hours of work. That is, it must be paid for attendance or work done by the employee in those hours, or to satisfy an entitlement that accrued as a result of them attending or working in those hours.

The Commissioner's view on the meaning of 'ordinary hours of work' 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.

191. ... 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.

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.

Application to your circumstances:

Where an employee is covered by an award but has also entered into an individual agreement with the employer, the employee's ordinary hours of work for the purposes of subsection 6(1) of the SGAA are determined by reference to the relevant award or agreement or combination of both. Where there is an inconsistency between the two, the agreement will prevail over the award.

In your case you have an agreement which stipulates what the ordinary hours are for your employees. The Agreement states that ordinary hours are 8 hours a day, Monday to Friday, and the start and finishing times are between 5:00am and 5:00pm. Both the Award and Agreement clearly state the ordinary hours of work will be 8 hours per day, Monday to Friday. The award states the start and finish times are of working are between 7:00am and 6:00 pm.

However, the section on shiftworkers does not define ordinary hours in the Agreement. It just defines shiftworkers as an employee who starts or finishes a shift outside of the ordinary hours. Therefore, when the 'day' workers do a night shift, they become shiftworkers under the Agreement since they will finish a shift outside of the span of ordinary hours. The agreement doesn't outline ordinary hours for shiftworkers, but the Award states it is 8 hours per day. Therefore, 8 hours a day are the ordinary hours of work, no matter when they start or finish. Rostered days off don't form part of the ordinary hours as they are accrued each 8-hour working day at 0.4 hour for each day worked.