Private ruling: Superannuation guarantee and ordinary time earnings
Published: June 2012

Ruling: Q1: What are the ordinary hours of work for the weekly employees of the employer under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? Advice The ordinary hours of work for the weekly employees of the employer under subsection 6(1) of the SGAA are 38 hours per week.

Relevant facts and circumstances: The employer employs staff on a permanent full time, part time and on a casual basis. The employer engages the employees under an Enterprise Agreement. There is an Award that relates to the Enterprise Agreement. The Enterprise Agreement supplants the Award. Clauses in the Enterprise Agreement define Categories of employment, Ordinary hours of work, Public holidays and Rates of pay. The weekly pay cycle commences on a Monday.

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

Reasons for decision: Summary: The ordinary hours of work of the employees of the employer are 38 hours per week as specified in the Enterprise Agreement. | Detailed Reasoning - Public holidays: For those employees who are rostered to attend work on a public holiday within the first 38 hours of the pay cycle, these hours form part of the employees ordinary hours of work and the employer is required to make superannuation guarantee contributions on the earnings in respect of the ordinary hours rate of pay and the additional hours rate of pay for the hours worked, up to 7.6 hours. For those employees who are rostered to attend work on a public holiday after they have worked their 38 hours in the pay cycle, these hours do not form part of the employees ordinary hours of work and the employer is not required to make superannuation guarantee contributions on the earnings. For those employees who are not rostered to attend work on a public holiday and receive a payment under a clause of the Enterprise Agreement, these hours do not form part of the employees ordinary hours of work and the employer is not required to make superannuation guarantee contributions in respect to this payment. | Detailed Reasoning - Detailed reasoning: From 1 July 2008 all employers need to calculate their SGAA liability against an employee's OTE, as defined in the SGAA. From 1 July 2008, employers may still be required to use notional earnings bases specified in legislation or industrial agreements as the basis of their superannuation support in cases where these are above an employee's OTE, but SGAA obligations will only be assessed against OTE. OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and is the lesser of: · 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 · 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 2011/12 year of income is $43,820 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 '. Paragraphs 13 to 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 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 employees '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. Paragraphs 20 and 21 and paragraphs 217 to 219 of SGR 2009/2 relate to payments specifically included in the definition of 'ordinary time earnings' in subsection 6(1). Paragraphs 20 and 21 state: 20. Earnings consisting of over-award payments, shift-loadings or commission are specifically included in the definition of OTE by subparagraph (a)(ii) in subsection 6(1). | Detailed Reasoning - Over-award payments: 21. An over-award payment is the component of a payment in excess of an award entitlement. The Commissioner's view is that the specific inclusion of these payments does not apply to over-award payments that are specifically referrable to hours worked that are not ordinary time hours……. 217. The term 'over-award payments' is not defined in the SGAA. The Macquarie Dictionary defines 'over-award payments as: · Of or relating to a rate of pay which is higher than that awarded by an industrial tribunal for a particular work classification. 218. An over-award payment is a payment made above the minimum rate specified in the relevant award as part of a worker's remuneration. This type of payment is specifically included in the definition of OTE in subsection 6(1). 219. However, the Commissioner's view is that the specific inclusion of these payments does not apply to over-award payments that are specifically referrable to hours worked that are not ordinary time hours….. Paragraph's 225 to 228 of SGR 2009/2 relate to earnings 'in respect of ordinary hours of work' means all hours other than overtime. Paragraphs 225 to 228 of SGR 2009/2 state: 225. 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. 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. In your case you employ staff under an Enterprise Agreement. Your staff are employed on either a weekly employment basis or a casual basis. The ordinary hours of work are defined in the Enterprise Agreement as The ordinary hours of work rate of pay will apply to the first 10 hours of work for each day up to a maximum of 38 ordinary hours of work in each weekly pay period. The ordinary hours of work rate will apply to both rostered and un-rostered work unless an employee has already worked 38 hours in a weekly period. The Enterprise Agreement addresses payment for public holidays at a clause which provides that weekly employees will be paid at additional hours of work rate for all work performed on a Public Holiday and be entitled to an additional 7.6 ordinary hours of work pay. Full-time employees who are not required to attend work will be paid 7.6 hours at the ordinary hours of work rate, including when the public holiday falls on a non working day. You have advised in your application that the intention of the Enterprise Agreement in relation to public holidays was to eliminate inequitable entitlement by paying all full-time employees 7.6 hours of pay for public holidays regardless of whether the employee worked or not and regardless of whether the day falls on a working or non-working day. Under a clause of the Enterprise Agreement, you pay the weekly employees who are rostered to work on a public holiday the additional hours rate of pay plus an additional 7.6 hours ordinary hours of work rate of pay. Under a clause of the Enterprise Agreement, you pay the weekly employees who are not rostered to attend work on a public holiday 7.6 at the ordinary hours of work rate. | Detailed Reasoning - Employees rostered to work within first 38 hours of the pay cycle: Under paragraph 225 of SGR 2009/2 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. Your employees who are rostered and attend work on a public holiday, within the first 38 hours of the pay cycle, are paid at the additional hours of work rate for the hours worked. They also receive 7.6 hours at the ordinary hours rate of pay. Any hours worked in excess of 7.6 hours on a public holiday are paid at the additional hours rate of pay. Typically employees who are required to work on a public holiday are paid at their ordinary hours rate of pay for 7.6 hours and an additional time and a half for any hours worked. The additional time and a half on the public holiday is regarded to be a loading to compensate the employee for the requirement to attend work on a public holiday. It is our interpretation of your Enterprise Agreement that the employees who are rostered to attend work on a public holiday are paid the additional hours rate of pay (in addition to the ordinary hours rate of pay) for the first 7.6 hours as a loading. Paragraph 27 of SGR 2009/2 states: 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. 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. As the additional hours rate of pay is paid in addition to the ordinary hours rate of pay as a loading and the hours of work relate to the employees ordinary hours of work (within the first 38 hours of the weekly pay cycle), the employer is required to pay superannuation guarantee contributions on the earnings of the employee up to the first 7.6 hours at the ordinary hours rate of pay and the additional hours rate of pay. The hours in excess of the first 7.6 hours are paid at the employees' additional hours rate of pay. The earnings in respect of these hours are more correctly reflected as an overtime earnings as the earnings are in respect to hours which are not part of the employee's ordinary hours of work for the public holiday. The earnings in respect of the hours worked in excess of 7.6 hours do not form part of OTE as the earnings are not in respect of the employees' ordinary hours of work. | Detailed Reasoning - Employees rostered to work outside the first 38 hours of the pay cycle: The Enterprise Agreement defines an employee's ordinary hours of work as: …the first 10 hours of work for each day up to a maximum of 38 ordinary hours of work in each weekly pay period….. If an employee attends work on a public holiday where they have already worked their 38 hours of ordinary hours in a weekly pay period, the hours worked on the public holiday would not form part of the employee's ordinary hours of work. As the earnings in respect of the public holiday do not form of the employee's ordinary hours of work, these earnings do not form part of the employees OTE. | Detailed Reasoning - Employees not rostered to work: Under paragraph 227 of SGR 2009/2, the earnings of employees who do not provide services or attend work on a public holiday but receive a payment because they are paid for a period which would normally be their ordinary working hours would form part of their OTE. Under your Enterprise Agreement you pay the weekly employees who are not rostered to attend work on a public holiday 7.6 hours at the ordinary hours of work rate. You have advised in your application you make this payment to the employees who are not rostered to attend work to provide equitable entitlements to those employees who are rostered and those employees who are not rostered to work. This payment would not be captured under paragraph 227 of SGR 2009/2 as these earnings are not in relation to a period which would normally be their ordinary working hours. Under paragraph 21 of SGR 2009/2 An over-award payment is the component of a payment in excess of an award entitlement. The Commissioner's view is that the specific inclusion of these payments (as OTE) does not apply to over-award payments that are specifically referrable to hours worked that are not ordinary time hours……. The earnings in respect of the 7.6 hours paid at the ordinary hours of work rate to the employees whom are not rostered to work on a public holiday does not form part of their OTE as these earnings are not paid for a period which would normally be their ordinary working hours. Accordingly, the 7.6 hours of pay for a public holiday for which the employee is not rostered to work, at either the beginning of a working week or after the employee has worked 38 hours for that week, does not form part of the employee's ordinary hours of work.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | This advice applies for the following period: 1 July 2011 - 30 June 2012