Private ruling: Employee referral fee bonus scheme
Date of advice: 13 December 2022
Published: 13 February 2023

Ruling: Q1: Are employee referral bonus payments considered as Ordinary Time Earnings (OTE) under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? | A1: Yes, employee referral bonus payments are considered as OTE under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Relevant facts and circumstances: You introduced an employee referral scheme in order to attract more staff. Existing employees will receive a $500 "bonus" if they refer a new permanent employee who is still with your company after 3 months, and another $500 "bonus" if the new employee completes the probation period and is still employed as a permanent after 6 months. A number of employees are now eligible to receive a $500 "referral bonus" under this scheme. No payments have been made yet as you want to first clarify whether super is payable on these payments.

Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 subsection 6(1) Other relevant documents | Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' | Reason for Decision | Meaning of 'Ordinary Hours of Work' | Superannuation Guarantee Ruling 2009/2 outlines and explains the meaning of OTE and Salary and Wages under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA). Paragraph 13 defines 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. | Paragraph 17 [1] and paragraph 18 [2] further justifies ordinary hours of work are not necessarily limited to the hours and days specified under the relevant award or agreement and may include hours to be worked at other times such as nights, weekends or public holidays. | Paragraph 25 says 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 | Additional earnings such as bonus payments are considered OTE [3] when not directly related to working overtime hours. | Employee Referral Bonus Program | Employee Referral Bonus Program is a program where current employees of a company refer colleagues, acquaintances, friends and family members to work for the company and if the referred employee satisfies the conditions set out by the company which can vary from one company to another, in this case if the referred employee is still working for the company as a permanent employee after 3 months, a bonus cash payment of $500 is awarded to the referring employee, and if the permanent employee completes the probation period and is still employed after 6 months, another $500 cash bonus payment is awarded to the referring employee. | The program is optional for current employees to participate in, and the $500 cash bonus payment is awarded subject to satisfactorily the referred employee meeting the conditions outlined by the company. | Employee Referral Bonus Programs are optional for current employees to participate in with the $500 bonus payment incentives awarded upon successfully sourcing top talent from their network community, provided the person being referred to the company satisfies the conditions outlined by the company. | The conditions which the referred employee must satisfy for the referring employee to obtain the $500 bonus payment are based on work performance and cultural fit meaning the company is sourcing top talent and who is best fit for the job. Therefore, the referring employee is performing the role of Human Resources to some extent in addition to their current role which may not be in Human Resources | As the program is made available for staff despite optional participation, the aim of the Employee Referral Bonus Program is to assist the company attract top talent with the hope of generating exceptional results and achievements for future growth, without needing to engage with recruitment agencies to achieve the same goal, which can be costly, and the recruitment process can be lengthy. | Conclusion: | The process current employees use to refer someone to the company may vary and are not identified as having to be completed during certain hours. Those hours are however not directly related to working overtime or identified separately from ordinary hours. | Therefore, $500 bonus payment is an incentive to encourage current staff to successfully recruit top talent to work for the company and are considered to be OTE that are directly related to the staff providing employment services to assist the company achieve results and improve performance. | [1] 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. | [2] '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. | [3] Paragraph 28 of SGR 2009/2 states Additional earnings received as a reward for good performance, and other like 'bonus' payments, are OTE in most cases. Exceptionally, a discrete and clearly identifiable bonus payment may relate solely to work performed entirely outside ordinary hours. For example, an employer may pay a bonus specifically to recognise a special project that an employee contributed to entirely in non-ordinary hours.

Reasons for decision: Detailed Reasoning - Meaning of 'Ordinary Hours of Work': Superannuation Guarantee Ruling 2009/2 outlines and explains the meaning of OTE and Salary and Wages under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA). Paragraph 13 defines 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. Paragraph 17 [1] and paragraph 18 [2] further justifies ordinary hours of work are not necessarily limited to the hours and days specified under the relevant award or agreement and may include hours to be worked at other times such as nights, weekends or public holidays. Paragraph 25 says 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 Additional earnings such as bonus payments are considered OTE [3] when not directly related to working overtime hours. | Detailed Reasoning - Employee Referral Bonus Program: Employee Referral Bonus Program is a program where current employees of a company refer colleagues, acquaintances, friends and family members to work for the company and if the referred employee satisfies the conditions set out by the company which can vary from one company to another, in this case if the referred employee is still working for the company as a permanent employee after 3 months, a bonus cash payment of $500 is awarded to the referring employee, and if the permanent employee completes the probation period and is still employed after 6 months, another $500 cash bonus payment is awarded to the referring employee. The program is optional for current employees to participate in, and the $500 cash bonus payment is awarded subject to satisfactorily the referred employee meeting the conditions outlined by the company. Employee Referral Bonus Programs are optional for current employees to participate in with the $500 bonus payment incentives awarded upon successfully sourcing top talent from their network community, provided the person being referred to the company satisfies the conditions outlined by the company. The conditions which the referred employee must satisfy for the referring employee to obtain the $500 bonus payment are based on work performance and cultural fit meaning the company is sourcing top talent and who is best fit for the job. Therefore, the referring employee is performing the role of Human Resources to some extent in addition to their current role which may not be in Human Resources As the program is made available for staff despite optional participation, the aim of the Employee Referral Bonus Program is to assist the company attract top talent with the hope of generating exceptional results and achievements for future growth, without needing to engage with recruitment agencies to achieve the same goal, which can be costly, and the recruitment process can be lengthy. | Detailed Reasoning - Conclusion:: The process current employees use to refer someone to the company may vary and are not identified as having to be completed during certain hours. Those hours are however not directly related to working overtime or identified separately from ordinary hours. Therefore, $500 bonus payment is an incentive to encourage current staff to successfully recruit top talent to work for the company and are considered to be OTE that are directly related to the staff providing employment services to assist the company achieve results and improve performance. [1] 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. [2] '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. [3] Paragraph 28 of SGR 2009/2 states Additional earnings received as a reward for good performance, and other like 'bonus' payments, are OTE in most cases. Exceptionally, a discrete and clearly identifiable bonus payment may relate solely to work performed entirely outside ordinary hours. For example, an employer may pay a bonus specifically to recognise a special project that an employee contributed to entirely in non-ordinary hours.

This advice applies for the following periods: This advice will be applicable from the issue date and for future payments where the circumstances remain the same.