Superannuation Guarantee: “ordinary hours of work” are defined by industrial instruments and employment contracts

28 June 2019

The recent appeal decision in Bluescope Steel v Australian Workers Union [2019] FCAFC 84 has held that “ordinary hours of work” for SG are those that are described as such by the industrial instrument or employment contract and paid at an ordinary rate of pay.

To satisfy SG requirements, superannuation contributions at 9.5% need to be made on the pay for those hours.

The decision restores the position advocated for by the ATO in ruling SGR 2009/2. The competing and now rejected interpretation was that “ordinary hours of work” for SG were the hours that the particular worker normally or usually worked.

The norm in Enterprise Agreements is to define full-time “ordinary hours of work” as 38 hours per week, pro-rata for part-time, and all worked within a bandwidth of (say) 8am to 6pm Monday to Friday, with no more than (say) 10 of those hours on any one day. Regularly working extra hours or outside the defined bandwidth does not make those hours into “ordinary hours of work”.

However, absent a definition of “ordinary hours of work”, the hours the particular employee regularly or usually works will still generally be used as the fall back, and where that is not even clear, then all the hours the particular employee works is generally used.

An Enterprise Agreements often allows employees to agree to vary the defined bandwidth of “ordinary hours of work”. For example, an agreed variation might turn a night or Sunday shift into “ordinary hours of work”.

The case involved two full-time employees and proceeded on the basis that “ordinary hours of work” are paid at an ordinary rate of pay, and that “additional hours” are overtime paid at a premium rate. However, that will not always be so. For example, in the Award considered in the High Court case of Australian Communication Exchange v Federal Commissioner of Taxation [2003] HCA 55, ordinary hours for casual employees were defined to include Saturday mornings that were paid at time and a-quarter. There was no suggestion there that SG did not apply to the employees’ pay for those hours.

There can also be circumstances where “additional hours” are only paid at ordinary rates. Part-time employees who sometimes work an extra day can be one example of that. Bluescope does not provide clarity on what might still distinguish those hours from “ordinary hours of work”. Nevertheless, ruling SGR 2009/2 suggests that identifying those hours as a genuinely separate component of total pay is sufficient.

Other key issues that the Bluescope decision did resolve are that:

- underlying pay components that can be identified in the calculation of aggregated or annualised salaries are still recognised separately for SG; and

- references in Enterprise Agreements to statutory SG requirements may be worded as informational and definitional only, or may be worded to create a parallel obligation that gives an industrial right of enforcement independent of the ATO.

 

Share

Authors

Graham Warren

Special Counsel

View

Jacqueline Pavlidis

Associate

View