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Edited version of administratively binding advice

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Advice

Subject: Superannuation Guarantee: Work on public holidays and ordinary time earnings

Are payments made to an employee for work performed on a public holiday ordinary time earnings (OTE) as defined in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Yes, work performed by an employee on a public holiday within their normal hours of duty forms part of an employee's OTE according to the definition contained within subsection 6(1) of the SGAA. See 'Explanation' for further discussion.

This advice applies for the following period/s:

2009-10 Financial Year.

2010-11 Financial Year

The arrangement commences on:

1 July 2009

Relevant facts and circumstances

This 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 Tax Office advice.

The employer operates a labour hire business.

The employer employs individuals as casuals on an assignment by assignment basis

The employer hires out the services of these casual employees to third party businesses.

The contract that individuals sign with the employer states that they are under the employment, care, control and supervision of the employer.

A clause of the employment contract states that overtime, shift penalties or other allowances will be paid on terms agreed to with the customer.

Employees in certain circumstances are directed to perform work as part of their normal hours on public holidays.

The employees for whom advice is sought are employed under a specific award. The award provides that the National Employment Standards (NES) and the award contain the minimum conditions of employment for employees covered by the award.

The employer advised that the casual employees are engaged as day workers.

The award provides for flexibility.

A clause of the award discusses conditions for casual employment.

A specific part of the award covers hours of work and related matters.

A clause of the award sets out the ordinary hours of work other than for shiftworkers.

A clause of the award sets out the weekly hours of work for day workers.

A clause of the award deals with public holidays.

A clause of the award deals with the rate of pay for work on public holidays.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 Subsection 6(1).

Reasons for decision

The Superannuation Laws Amendment (2004 Measures No 2) Act 2004 simplified the earnings base of an employee for SGAA purposes. These amendments, which were applicable from 1 July 2008 have the effect that all employers need to calculate their SGAA liability against an employee's OTE, as defined in the SGAA.

In effect this means employers can no longer use earnings bases specified in industrial awards, superannuation schemes, occupational superannuation arrangements or a law of the Commonwealth, State or Territory to satisfy their requirements in meeting their obligations under 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 SGAA does not define 'earnings in respect of ordinary hours worked' or any term used in the expression.

The Commissioner's views on OTE generally, including an employee's ordinary hours of work, are contained 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 sets out the Commissioner's view on the meaning of 'ordinary hours of work' and explains that a given employee's 'ordinary hours of work' are those hours specified within the documents that govern their conditions of employment as being ordinary or normal. These documents include the relevant award and/or agreement that an employee agreed to when accepting their position or when reviews of their conditions of employment occur.

Paragraph 14 continues by stating these documents are not required to use the exact expression 'ordinary hours of work' however they are required to draw a genuine distinction between ordinary and other hours. Typically in the Commissioner's view these other hours would be paid at a higher rate (typically described as overtime) than ordinary hours, or be otherwise identifiable as separate component of total pay in respect of a workers non-ordinary hours.

Paragraph 15 of the ruling states that it is the Commissioner's view that the hours which are worked in excess of those specified ordinary hours, or outside the span of specified ordinary hours do not form part of an employee's 'ordinary hours of work'.

Finally, paragraph 18 states in the Commissioner's view 'ordinary hours of work' need not necessarily be limited to hours between 9 am and 5 pm, Monday to Friday. In certain circumstances (depending on the provision in relevant award and/or agreement, if any) they may include hours to be worked at other times, including night, weekends or public holidays.

Paragraph 25 of SGR 2009/2 provides further direction as to whether certain payments to employees are considered earnings 'in respect of ordinary hours of work' or not and explains that all earnings in respect of employment are paid in respect of their ordinary hours of work except where they are remuneration for working overtime hours, or are otherwise referable only to overtime or other hours that are not ordinary hours. It is the Commissioner's view that there is no such thing as earnings that are merely in respect of employment generally and not considered OTE because they are not paid in respect of any particular hours of work.

In the application for advice, the employer advised that on certain occasions casual employees of the employer are directed to perform work on public holidays. It was stated that these employees were entitled to a loading for working on the public holiday on top of their base pay as prescribed by a clause of the award.

In supporting evidence provided in the application it was contended that this work performed on public holidays formed part of the employees normal or 'ordinary hours of work'. Further, it was stated in the application for advice that the employer was contributing to its employees' superannuation funds as if this work was considered to be part of their OTE. The award is silent on whether work performed by an employee on a public holiday would be attributable to their ordinary hours or would be referrable to overtime or other hours that are not ordinary hours.

A paragraph of the award defines the bandwidth of ordinary hours for employees who are not shift workers. This paragraph does not exclude public holidays from the normal operational bandwidth for employees.

A paragraph of the award states that a day worker's average weekly ordinary hours of work are over a four week cycle and the total hours for the full cycle. The combined effect of the paragraphs is that where a casual employee is directed to work on a public holiday and they have not exceeded the hours specified in the paragraph that identifies their normal hours then such work would, in the Commissioner's view, be considered to form part of an employee's 'ordinary hours of work'.

Conclusion

Given the facts provided, it is the Commissioner's view that work performed on a public holiday, where it falls within the bandwidth of ordinary hours and provided the employee has not exceeded their specified ordinary hours of work for the week or four week cycle, would be considered to form part of their OTE for the purposes of the SGAA. This advice applies to those employees both permanent and casual who are employed under the award.

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