A business I work with recently asked whether they are required to pay superannuation on pre-paid overtime even "if" an employee does not actually work the overtime?
To give some additional information:
1. The business' employment contract states that employees are paid a base salary component plus a pre-paid overtime component (totaling 52 hours of overtime a year).
2. The base salary component (which is at or above award) is treated as ordinary time earnings, and super is paid on those earnings.
3. The overtime component (which is paid at or above award rates) is not treated as ordinary time earnings, and super is not paid on those earnings.
4. The overtime component comprises of 52 hours per year of "pre-paid" overtime (in practice, the businesses employees are expected to be available to work 2 hours of overtime for 26 weeks of the year (totally 52 hours overtime per year), due to seasonality, and if they work more than 2 hours per week at any time, or more than 52 hours overtime hours in a year, they are paid normal overtime per the Award).
5. All of this is outlined in their employment contracts, which separately identifies the yearly base OTE salary component, and the 52 hours of overtime component, the combination of which is the employee's total remuneration for the year.
I have looked at the Super Guarantee Ruling 2009/2 (SGR 2009/2) and paragraphs 42 & 43 in particular, and have also come across the decision in Bluescope Steel (AIS) Pty Ltd v Australian Workers' Union [2019] FCAFC 84 (and in particular paragraphs 106-116).
Does the business need to pay superannuation on the pre-paid overtime component in this case (even where some weeks the employees won't actually work the overtime because of the seasonality of work)?
I haven't come across this type of arrangement before so want to be sure this is correct before proceeding!
Thank you in advance.
442 views
3 replies