At present, the minimum super you must pay your employees is 9.5% of their Ordinary Time Earnings. This is the Super Guarantee. It is important to calculate which part of their salary or wages contribute to their total OTE, as not all of their salary or wages fall under OTE.
What are Ordinary Time Earnings (OTE)?
Ordinary Time Earnings refers to the salary or wages that the employee receives for their ordinary hours of work, including payments such as commission and paid leave. Their employment agreement usually states their ordinary hours of work. Any payments for hours of work other than the agreed number are not included in the employee’s OTE. However, if the employee does not have a regular number of hours of work, such as a casual employee, then their OTE will comprise of the total hours they have worked. Additionally, ordinary hours of work is not limited to hours of work between 9am-5pm on weekdays.
What payments are OTE?
Some OTE payments would include:
- Commission
- Shift loading
- Bonuses
- Annual leave loading
- Holiday loading
Payments not included in OTE payments:
- Overtime payments
- Unused long service leave payments
- Unused sick leave payments
- Redundancy payments
- Reimbursements for business-related expenses
- Unfair dismissal payments
Don’t see the payment type you’re looking for? To see a further list of OTE payment types, check out the Australian Tax office’s checklist.
Example Scenario – Full-time employee, working over-time
Sophia is a bartender who works under an agreement that her maximum ordinary hours a week will be 40 hours. Regularly, her employer asks her to work 5 extra hours a week. This means that her employer pays Sophia for 45 hours of her work. In this case, Sophia’s OTE is 40 hours a week even though she regularly works 45 hours a week. This is because the frequency of Sophia working overtime is irrelevant, as her employment agreement stated that her ordinary hours would not exceed 40 hours a week.
Example Scenario – Casual employee, no regular number of hours
Niall is a retail assistant who works on a casual basis and does not have a set minimum or maximum agreed number of ordinary hours per week. He works whenever he is available to work shifts that his employer offers. In this case, Niall’s OTE is the actual hours he has worked as there is no agreed number of ordinary hours and there is no regular pattern of hours he works per week.
To find more scenarios that may be similar to your situation, check out the Australian Tax Office’s examples.
Summary
Ordinary Time Earnings is the total payments awarded for the employee’s ordinary hours of work. After assessing the employee’s OTE, then can their super amount be calculated. It is important to accurately assess your employee’s OTE so that they receive the correct super.
For more detailed and tailored advice on this issue, get in touch with a business lawyer here.
