Private ruling: superannuation guarantee obligations
Published: December 2013

Ruling: Q3: Do earnings in respect of public holidays occurring on rostered days off paid to employees under clause 24 of the 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: The employer is seeking advice in relation to if the following payments form part of the employees OTE in relation to their 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 as specified in the Agreement · Where an employee is required to provide assistance over the telephone during the 'on-call' period, they receive one hour's overtime in addition to the on-call allowance. · Where an employee is required to return to their workplace during the 'on-call' period, they receive three hours at the appropriate overtime rate. · Employees are entitled to paid time off in respect of public holidays. · Employees who attend work on a public holiday receive penalty rates for time worked. · For employees who are not rostered to work on a public holiday, a relevant public holiday equitable payment, equal to one day's ordinary pay, is made to these employees despite not working on that day. · This equitable payment is essentially compensation for not being rostered to work on that day and therefore, not being able to receive the shift loading payable to employees who do work on that day.

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 the: · On Call Allowance, · Recall - Telephone Allowance, · Recall - Overtime, 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 the 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 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'.... 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 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 the circumstances: In your circumstances you employ workers under the Agreement. | Detailed Reasoning - Question 1 - On Call/Recall: Under the Agreement, an employee's ordinary hours of work are their duty hours which are set out in a roster. 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 employees ordinary hours of work are not OTE. As the on-call allowance and the recall - telephone allowance paid to employees under clauses of the Agreement relate to hours that are outside of the employees' ordinary hours of work, being outside their rostered duty hours, these allowances do 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 allowance or the recall - telephone allowance. | Detailed Reasoning - Question 2 - Recall - Overtime: Under paragraph 41 of SGR 2009/2 payments for work performed during hours outside and employs ordinary hours of work are not OTE. As the recall - overtime payment is paid to employees under a clause of the Agreement relates to hours that are outside of the employees ordinary hours of work, being outside their rostered duty hours, this payment does not form part of OTE for the purposes of subsection 6(1) of the SGAA. The employer does not have an obligation to make SG payments in respect of the recall overtime. | Detailed Reasoning - Question 3 - Public holiday equitable payments: The ordinary hours of work (duty hours) for employees engaged under the Agreement are worked on a roster basis as specified in a clause of the Agreement. Employees are entitled to paid time off in respect of public holidays specified in the agreement. 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 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 employee's ordinary hours of work due to the employee not being rostered to attend work on this day, the payment does not form part of OTE for the purpose of subsection 6(1) of the SGAA. 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 the employees in respect of the: · On Call Allowance, · Recall - Telephone Allowance, · Recall - Overtime, and · Public holidays occurring on rostered days off 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 their rostered duty hours in the Agreement.

Disclaimer: You cannot rely on the written binding advice in the Register of private binding rulings in your tax affairs. You can only rely on advice that we have given to you or to someone acting on your behalf. | The Register of private binding rulings is a public record of written binding advice issued by the ATO. The register is an historical record and we do not update it to reflect changes in the law or our policies. | The written binding advice in the register has been edited and may not contain all the factual details relevant to each decision. Do not use it to predict ATO policy or decisions. | Do earnings in respect of an on call allowance and a recall - telephone allowance 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 the overtime - recall payment, paid to employees under a clause of the Agreement form part of the employee's OTE for the purposes of subsection 6(1) of the SGAA?