Not such a super result for casuals

by Jamie Wells

Calculating contributions

Compulsory superannuation contributions are made on the employee's notional earnings base. If an industrial award sets the formula for calculating the notional earnings base, that is the appropriate formula to apply. If an award provision is absent, the notional earning base is set by reference to ordinary time earnings. For permanent employees, the scope of ordinary time earnings is relatively clear. Superannuation Guarantee Ruling 94/4 assists by setting out express inclusions and exclusions.

Usually, hours remunerated at an overtime rate are excluded. For casuals, the distinction between ordinary time earnings and overtime earnings is less clear. Although many awards entitle casuals to overtime rates of pay, the inherent flexibility of casual employment leaves room for the possibility that wages paid at overtime rates should still be taken as ordinary time earnings.

The High Court reviewed the casual superannuation issue in the context of the Clerical Employees Award – State (Qld).1 The award had a clause dealing with superannuation contributions, and required contributions to be made on ordinary time earnings. Ordinary time earnings was specifically defined to exclude overtime, consistent with the meaning given under SGR 94/4.

Different views

The court considered three possible outcomes for casuals. Superannuation contributions might be due in relation to:

  • only those hours worked at the base rate of pay; or

  • all hours worked by casuals, regardless of the actual rate of pay for each hour. Ordinary time earnings would include all earnings for those hours, whether at the base rate or at the overtime rate; or

  • all hours worked by casuals, regardless of the actual rate of pay for each hour. However, for superannuation purposes, the base rate is applied for all hours.

  • The third option, taking into account all of the hours worked but only at the base rate was favoured on appeal to the Federal Court2. It adopted a middle ground in between the two options put forward by the parties. The right option was far from clear, because of the inherently poor fit between the superannuation legislation and the award classification. As a result, each option received its share of support as the dispute proceeded through the appeals process.

    High Court decision

    Ultimately, the first option was accepted by a majority of the High Court. This means that, in the context of that particular award, casuals might have a lower notional earnings base by excluding some of the hours actually worked. For a casual working only hours paid at overtime rates, the possibility remained that all hours might be excluded.

    The scope of the High Court's decision is uncertain, other than for casuals employed under the Clerical Employees Award – State (Qld). However, many awards permit overtime rates to be paid to casuals and there is no reason to believe a similar approach should not be taken to casual superannuation under those awards.

    Because of uncertainty in this area, the approach of employers to casual superannuation contributions has not been uniform. This decision now offers a rationale for preferring one option over another, giving the employer confidence that it has been considered at the highest level. There is enough in the decision to suggest it might be followed where there is no award provision in play and SGR 94/4 applies. Whether it assists in the context of other awards will depend on the precise formula set out in those awards.

    1. Australian Communication Exchange v DCT [2003] HCA 55

    2. DCT v Australian Communication Exchange [2001] FCA 1664


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