The Tax Office stipulates that a business must use “ordinary time earnings” to calculate the minimum compulsory superannuation guarantee contributions for employees. It says that using ordinary time earnings will ensure all eligible workers are treated the same, and will have a fair amount of super guarantee put away.

But what exactly is “ordinary time earnings”? The Tax Office says this is generally what your employees earn for their normal hours of work, and includes:

• over-award payments
• bonuses
• commissions
• allowances.

An employee’s “ordinary hours of work” are the hours specified as his or her employment agreement or under their relevant award (or under a combination of such documents), which governs the employee’s conditions of employment.

If the ordinary hours of work are not specified, the ordinary hours of work can be taken to be the normal, regular, usual or customary hours worked by the employee, “as determined by all the circumstances of the case”, the Tax Office says. This is not necessarily the minimum or maximum number of hours worked or required to be worked.

Payments for work performed in a time outside an employee’s ordinary hours (such as overtime payments) are not ordinary time earnings. This is so whether the payments are calculated at an hourly rate, or the employee gets a specific loading, or an annualised or lump sum component of a total salary package, that is expressly referred to as overtime hours, or as remuneration for overtime hours worked.

But the Tax Office says that where overtime amounts cannot be distinctly identified, the hours actually worked should be included in ordinary hours of work. The Tax Office has provided a checklist to help employers determine what is included in ordinary time earnings (OTE).

Checklist for salary or wages and ordinary time earnings

* These payments are specifically excluded from being “salary or wages” for superannuation guarantee purposes; however, they may be “salary or wages” for income tax purposes.