Private ruling: Superannuation guarantee obligations
Published: November 2013

Ruling: Q4: Do earnings in respect of public holidays occurring on rostered days off paid to employees under a clause of an Employment Agreement form part of the employee's OTE for the purposes of subsection 6(1) of the SGAA? Advice No. Refer to 'Reasons for decision'

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 significantly 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. · The employer is seeking advice in relation to if the following payments form part of the employees ordinary time earnings in relation to their superannuation guarantee (SG) obligations: · On-call payments · Recall payments · Public holiday equitable payments · In relation to the types of payments, the employer provides the following information from the Agreement: · Many employees are required to be 'on-call' outside their 'ordinary' hours of work. · 'On-call' periods are rostered to ensure that the responsibility for additional shifts is distributed across the employee population. · 'On-call' refers to the employee's making themselves available to attend to a given situation during the 'on-call period', either via telephone assistance or by physical return to work. · Where an employee is required to provide assistance over the telephone during the 'on-call' period, they generally receive a telephone on-call allowance in addition to the on-call allowance. · Where an employee is required to return to work during the 'on-call' period, they generally receive a 'recall' allowance. · An employee who is recalled to duty outside their rostered hours must be paid for the time actually worked, including reasonable travelling time to and from work at the following rates: · One and one half times the ordinary hourly rate for the first two hours; then · Double the ordinary hourly rate for all additional hours. · The minimum payment of three hours per recall applies. · Recall payments do not apply to employees who are on a rotation to a specified training program. · As part of a specified training program, employees may be required to rotate to another department of the employer. In the case of rotation to the other department, the employer may require the employee to undertake work out of hours or after the completion of 38 hours. In the case of out of hours work, or work completed after 38 hours, the employee will receive a percentage of fees generated for this period. · Out of hours is hours outside of 8.00am to 6.00pm Monday to Friday and 8.00am and 12.00 noon Saturday. · The hours of work per week for employees is 38 hours per week unless averaged under a subclause of the hours of work clause of the agreement. · Where an employee is entitled to a day off on a public holiday which is a rostered working day, they are entitled to be paid at their ordinary rate of pay for this public holiday. · Where an employee is requested to and works on a public holiday, they are entitled to be paid at double time and one half. · Where a public holiday falls on an employee's rostered day off, they are entitled to one day's ordinary pay in relation to this public holiday.

Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 Subsection 6(1).

Reasons for decision: Summary: The earnings of employees who are engaged under the Agreement in respect to clauses relating to the: · on-call allowance, · recall allowance, · out of hours work, and · public holidays occurring on rostered days off do not form part of the employees OTE as the earnings paid in respect of these clauses are not in relation to their ordinary hours of work. | Detailed Reasoning - 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 percentage (currently 9.25% and increasing to 9.5% for the period 1 July 2014 to 30 June 2015. After this period, the rate will increase by 0.5% on 1 July each year until it reaches 12% on 1 July 2019). From 1 July 2008, employers must use OTE as defined in subsection 6(1) of the SGAA as the earnings base to calculate the minimum superannuation guarantee contributions for their employees. This ensures that all employees are treated the same for superannuation purposes. | Detailed Reasoning - Ordinary time earnings: 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 - the maximum contribution base, which is the maximum limit on the amount of superannuation support that an employer is expected to provide for the benefit of an employee. The maximum contribution base for the 2013-14 year of income is $48,040 per quarter. This amount is indexed annually according to the indexation factor. The Commissioner's views on OTE generally, 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). Paragraphs 13 to 15 and 18 of SGR 2009/2 address the meaning of 'ordinary hours of work' and state: 13. An employee's 'ordinary hours of work' are the hours specified in his or her ordinary hours of work under the relevant award or agreement, or under a 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'. 18. 'Ordinary hours of work' are not necessarily limited to hours to be worked between 9.am and 5pm. Monday to Friday. They may (depending on the provision in the relevant award or agreement, if any) and include hours to be worked at other times, including at night, on weekends or on public holidays. Paragraph 27 of SGR 2009/2 relates to allowances and loadings and if these specific kinds of payments form part of an employee's OTE. Paragraph 27 states: 27. Many employees receive various additional payments that are described as allowances or loadings and 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 payment 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 (see paragraph 72 of this Ruling); or · relate solely to hours of work other than ordinary hours of work (see paragraphs 41 to 43 of this Ruling). Paragraphs 41 to 45 of SGR 2009/2 relate to certain specific kinds of payments that are not OTE. Paragraphs 41 to 43 relate to overtime payments and state: 41. Payments for work performed during hours outside an employee's ordinary hours of work are not OTE. 42. This is so whether the payments are calculated at an hourly rate or the employee gets a specific loading, or an annualised or lump sum component of a total salary package, that is expressly referrable to overtime hours as remuneration for overtime hours worked. 43. However, some employees, particularly some managers and professionals, receive single undissected annual salary within a remuneration package that recognises in a non-specific way that the employee may often be expected to work more than the ordinary hours of work prescribed. The whole amount of salary payable under such a package is OTE, unless overtime amounts are distinctly identifiable as mentioned in paragraph 42 of this Ruling. Paragraphs 44 and 45 of SGR 2009/2 relate to on-call allowances and state: 44. An on-call or availability allowance is a payment to an employee for making himself or herself available at certain times to be called into work if needed. This entitlement is separate from the salary or wages he or she will receive if actually called in. If paid in respect of hours that the employee is not otherwise working, these payments are not OTE. 45. In some cases on-call allowances are paid as a loading on the salary of an employee received for ordinary hours of work. For example, some doctors employed by hospitals are paid an extra hourly allowance, while carrying out routine duties in ordinary hours of work, to make themselves available to perform urgent surgery if required. Payments of that kind are OTE (except of course to the extent that they are paid in respect of overtime hours). Paragraphs 25 and 26 and 226 to 228 of SGR 2009/2 provide that earnings 'in respect of ordinary hours of work' means all earnings other than overtime. Paragraphs 25 and 26 state: 25. All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referable only to overtime or to other hours that are not ordinary hours of work. There is no such thing as earnings that are merely in respect of employment generally and are not OTE because they are not in respect of any particular hours of work. 26. ….the central question posed by the definition of OTE in the SGAA is what amounts are 'earnings in respect of ordinary hours of work'…. 226. The Commissioner does not consider that the services or attendance of an employee specifically during certain hours of work is necessary for the earnings to be 'in respect of ordinary hours of work' was intended to ensure that overtime payments, and cognate amounts, were excluded from the earnings base. It was not intended to exclude amounts paid at a worker' ordinary time rate solely on the grounds that they were not earned as a direct result of actually working particular hours in ordinary time. 227. For example, during public holidays an employee does not provide services or attend work, and the entitlement to the payment for the holiday has not accrued during ordinary hours actually worked. However, the payment the employee receives is 'in respect of 'ordinary hours of work' because it is salary or wages received at their ordinary rate of pay paid for a period which would normally be their ordinary working hours. 228. Given this view, the Commissioner considers that there is no such thing as earnings that are merely in respect of employment generally and are not OTE because they are not in respect of any particular hours of work. However payments that are not considered 'salary or wages' for the purposes of the SGAA cannot be OTE. | Detailed Reasoning - Application of the law to your circumstances: In your circumstances you employ workers under the Agreement. You have advised that many workers are also engaged under individual employment contracts which supplement the Agreement. | Detailed Reasoning - Question 1 - On-call allowance: Under the Agreement, an employee's ordinary hours of work are their rostered hours of work. A condition of their employment requires employees to provide on-call services to make themselves available to provide advice over the telephone or to make themselves available to return to their usual place of work outside of their duty hours. When a employee provides on-call services, they are paid an on-call allowance under a clause of the Agreement. They are also paid a telephone on-call allowance when they have been required to provide advice over the telephone. 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 on-call and telephone on-call allowances paid to employees under a clause of the Agreement relates to hours that are outside of the employee's ordinary hours of work, being outside their rostered hours, these allowances do not form part of OTE for the purposes of subsection 6(1) of the SGAA and the employer does not have an obligation to make superannuation guarantee payments in respect of the allowances. | Detailed Reasoning - Question 2 - Recall payments: When an employee is recalled to duty outside their rostered hours, they are paid for the actual time worked, including reasonable travelling to and return from work under a clause of the Agreement. This clause of the Agreement provides that an employee is paid at the rate of: · one and one half times the ordinary rate of pay for the first two hours; and then · double the ordinary rate of pay for all additional hours. Paragraph 41 of SGR 2009/2 provides that payments for work undertaken during hours outside an employees ordinary hours of work are not OTE. The recall payment made to employees under a clause of the Agreement is made in respect of work completed outside of their rostered duty hours and the remuneration for these hours is paid at a higher rate that is identifiable as a separate component of the total pay in respect of non-ordinary hours. Therefore, the recall payment does not form part of OTE for the purposes of subsection 6(1) of the SGAA and the employer does not have an obligation to make superannuation guarantee payments in respect of payments relating to recall to duty. | Detailed Reasoning - Question 3 - Out of hours work - specified training program: When an employee is participating in a specified training program, they are not eligible to receive recall payments under the recall clause of the Agreement. Under the Agreement, employees who are participating in a specified training program are remunerated at a percentage rate of all fees generated for work completed out of hours or after the completion of 38 hours of work. Under the Agreement 'out of hours' means hours outside of 8.00 a.m. to 6.00 p.m. Monday to Friday and 8.00 a.m. to 12.00 noon Saturdays. Paragraph 15 of SGR 2009/2, provides that any hours worked in excess of, or outside the specified ordinary hours are not part of the employee's ordinary hours of work. Hours worked by employees participating in the specified training program in excess of 38 ordinary hours per week or within the bandwidth specified as 'out of hours' under a clause of the Agreement are remunerated at a separate rate, that being a percentage of fees generated. The payment made to employees participating in the specified training program in respect of out of hours work under a subclause of the Agreement does not form part of OTE for the purposes of subsection 6(1) of the SGAA as the payment relates to hours that are in respect of hours outside of their hours of work and are remunerated at a separate rate. Therefore, the employer does not have an obligation to make superannuation guarantee payments in respect of the payments made in respect of out of hours work under subclause 23.12 of the Agreement. | Detailed Reasoning - Question 4 - Public holiday equitable payments: The ordinary hours of work for employees engaged under the Agreement are required to be worked on a roster basis as specified in a clause of the Agreement. Employees who are rostered to and attend work on a public holiday specified in the Agreement are entitled to be paid at the rate of double time and one half. Employees whose rostered day off occurs on a public holiday receive a sum equal to one day's ordinary pay as a payment referred to by the employer as a public holiday equitable payment. In your application you have advised that this payment is essentially to compensate employees for not being rostered to work on the public holiday and therefore, not being able to receive the shift loading that is paid to employees who do attend work on the public holiday. Paragraph 25 of SGR 2009/2 provides that all amounts of earnings are in respect employment are in respect of an employees of ordinary hours of work unless they are remuneration for overtime hours or other hours that are not ordinary hours of work. Paragraph 227 of SGR 2009/2 relates to earnings in respect of ordinary hours meaning all earnings other than overtime and addresses the issue of public holidays. Paragraph 227 states: ….. during public holidays an employee does not provide services or attend work, and the entitlement to the payment for the holiday has not accrued during ordinary hours actually worked. However, the payment the employee receives is 'in respect of 'ordinary hours of work' because it is salary or wages received at their ordinary rate of pay paid for a period which would normally be their ordinary working hours. In this case, the payment received at the employee's ordinary rate of pay is not paid in respect of a period which would normally be their ordinary working hours as the payment is made in respect of a public holiday which falls on the employee's rostered day off. Therefore, this payment is not captured under paragraph 227 of SGR 2009/2. As the payment is made in respect of a period which would not form part of the employees ordinary working hours due to the employee not being rostered to attend work on this day, this payment 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 the public holiday equitable payment. | Detailed Reasoning - Conclusion: The payments made to employees in respect to the on-call allowance, the recall allowance, out of hours work or the public holiday equitable payment do not form part of the employees OTE. The earnings in respect of these allowances and payments are in respect of hours which do not form part of the employee's ordinary hours of work which is referred to as their duty hours in the Agreement.

Do earnings in respect of on-call allowances paid to employees under a clause of an Employment Agreement form part of the employee's ordinary time earnings (OTE) for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? | Do earnings in respect of recall payments paid to employees under a clause of an Employment Agreement form part of the employee's OTE for the purposes of subsection 6(1) of the SGAA? | Do earnings in respect of out of hours work paid under a clause of an Employment Agreement to employees on rotation to a specified training program form part of the employee's OTE for the purposes of subsection 6(1) of the SGAA?