The superannuation rules stipulate that an employee’s earnings base must be the amount on which minimum superannuation contributions are payable to avoid the superannuation guarantee charge (SGC). This earnings base is determined as “ordinary time earnings” (OTE).
In general terms, this seems self-explanatory — that is, OTE is what an employee earns for their day-to-day hours of work. However it is the extra elements to remuneration that can trip up an employer. For example, shift loadings and allowances are included in OTE, but not overtime payments.
Just to clarify, here are the remuneration elements that are (and are not) included.
Payments included in ordinary time earnings for each employee
earnings for “ordinary” hours of work In the case of casual workers, use actual hours worked (not minimum hours stipulated in employment contracts)bonuses that relate to good performance (includes Christmas bonuses)piece-rates where no ordinary hours of work stipulatedover-award paymentspayments in lieu of noticeshift loadingcasual loadingannual leave, sick leave or long service leaveallowances (excluding expense allowances and reimbursements and items that are fringe benefits such as a living away from home allowance)commission or bonuses that relate to specific performance criteriagovernment subsidiesdirectors’ feesworkers’ compensation and top-up payments paid in relation to hours workedthe labour portion only of payments to a contractor who is an employee (that is, contract is wholly or principally for labour of that person)payments for performance in, or provision of services relating to entertainment, sport, promotions, films, discs, tapes, TV or radio, andremuneration of people in the service of the Commonwealth, the States or Territories, and local government councillors who are members of eligible local governing bodies (excludes payments to elected local government officials (unless they are effectively full time employees)).
Payments not included in ordinary time earnings
ex gratia paymentsovertime payments for work performed during hours outside an employee’s ordinary hours of worktop up payments when serving on jury duty, or with reserve forces, etcremuneration while on parental leaveannual leave loadingaccrued annual leave on termination of employmentlong service leave and sick leave paid as a lump sum on termination of employmentredundancy and employment termination paymentsfringe benefits subject to fringe benefits taxworkers’ compensation and top up payments paid where no work is performedpensions and social security benefitsdividendspartnership and trust distributionspayments for entering into a restraint of trade agreementpayments for domestic or private work for the employment of a person for less than 30 hours a weekallowances paid to local government councillors, unless they are effectively full time employees, andunused flex leave to non-ongoing employees covered by a certified agreement.
Ordinary time earnings: What’s in, what’s out Ordinary time earnings: What’s in, what’s out Ordinary time earnings: What’s in, what’s out Ordinary time earnings: What’s in, what’s out Ordinary time earnings: What’s in, what’s out Ordinary time earnings: What’s in, what’s out
# [AWOTE], [employement], [OTE], [SG], [superannuation]
Comments