Private ruling: Superannuation guarantee obligations
Published: December 2013

Ruling: Q2: 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 OTE 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. · When an employee is rostered to be on-call, they receive an allowance which is a percentage of their weekly base rate of pay. · Where an employee is recalled to duty and returns to the workplace, they receive a minimum of three hours payment for each recall at either time and a half or double time. · Where an employee is recalled to duty by telephone, they are paid a minimum of one hour's overtime. · 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 rostered to work on a public holiday, they receive penalty rates of time and a half in addition to the ordinary wage for that day. · 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 the employees who are engaged under the Agreement in respect of: · on-call/recall allowances; 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 SG charge. 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 SG 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'…. Paragraphs 226 to 228 state: 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 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 - Question 1 - On-call/recall 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 and to make themselves available provide advice over the telephone or to make themselves available to return to their usual place of work outside their rostered hours of work. When an employee provides on-call services, they are paid an on-call allowance which is a percentage of the weekly base rate for their classification. In the case that an employee is recalled to duty during any off-duty period, they will be paid a minimum of three hours' payment for each recall at either time and a half or double time. In the case that an employee is recalled to duty by telephone, the employee will be paid a minimum of one hour's overtime for such recall 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. Paragraph 41 of SGR 2009/2 specifies that payments for work undertaken during hours outside an employee's ordinary hours of work are not OTE. As the on-call allowance paid under a of the Agreement relates to hours that are outside of the employees' ordinary hours of work, being outside their rostered hours, this allowance 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 SG payments in respect of the on-call/recall allowance. | Detailed Reasoning - Question 2 - Public holidays occurring on rostered days off: The ordinary hours of work for employees engaged under the Agreement are worked according to a roster. Employees are entitled to paid time off in respect of public holidays specified in the Agreement. Those employees who are not required to attend work on a public holiday that would normally be a rostered working day receive their ordinary pay. Employees who are rostered to and attend work on a public holiday specified in the Agreement are entitled to be paid at penalty rates. Under a clause of the Agreement, an employee is entitled to receive one and a half day's pay in addition to the weekly wage where a public holiday occurs on their rostered day off. Additionally under a subclause of the Agreement, an employee who ordinarily works Monday to Friday and who does not work on the Saturday immediately before Easter Sunday, is entitled to one day's pay in respect of the Saturday. 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 not 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 by employees in respect of a public holiday which occurs on their rostered day off or the Saturday immediately before Easter Sunday 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 or a non-working day. 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, the 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 SG payments in respect of the public holiday equitable payment. | Detailed Reasoning - Conclusion: The payments made to employees in respect of the on-call/recall allowance and the public holiday equitable payment do not form part of the employee's OTE. The earnings in respect of this allowance and payment are in respect of hours which do not form part of the employee's ordinary hours of work which is their rostered hours under the Agreement.

Do earnings in respect of the on-call/recall allowances paid to employees of 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)?