The Federal Court has held that an employer (BlueScope) should have made contributions under the superannuation guarantee scheme in respect of the “additional hours” and “public holidays” components of employees’ salaries as they constituted ‘ordinary time earnings’.
The agreements required employees to work additional hours and employees were in fact routinely called upon to work additional hours. Employees also regularly worked on public holidays, as required by the agreements.
The Court concluded that given the manner in which work was performed, and required to be performed, there was no real or practical distinction between the standard or ordinary hours of work separate from the total number of hours worked, including “additional hours”. Nor was there any real distinction between work on a public holiday and work on any other day.
Accordingly, in this case, “addtional hours” and hours worked on public holidays were “ordinary hours of work” and thus the relevant amounts were “ordinary time earnings”.
Note: this is an example of a case where the court rules on a tax issue, without the Commissioner being a party. The ‘Catchwords’ from the report, set out below, give some insight into this.
(Australian Workers’ Union v BlueScope Steel (AIS) Pty Ltd  FCA 80 (Fed Ct, Flick J, 14 February 2018.)
[LTN 39, 27/2/18; FJM; Tax Month February 2018]
Definition of ‘ordinary time earnings in the SGC Act
- Section 6 of the Superannuation Guarantee (Administration) Act incorporates this phrase in the following definition:
(1) In this Act, unless the contrary intention appears:
ordinary time earnings, in relation to an employee, means:
(a) the total of:
(i) earnings in respect of ordinary hours of work other than earnings consisting of a lump sum payment of any of the following kinds made to the employee on the termination of his or her employment:
(A) a payment in lieu of unused sick leave;
(B) an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and
(ii) earnings consisting of over-award payments, shift-loading or commission; or
(b) if the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the quarter––the maximum contribution base.
Catchwords from case report
INDUSTRIAL LAW – alleged contravention of s 50 of the Fair Work Act 2009 (Cth) – whether employer contravened a term of enterprise agreement by failing to make superannuation contributions – whether a term of an enterprise agreement must be a source of legal obligation to make out a contravention of s 50 of the Fair Work Act 2009 (Cth) – whether superannuation legislation the sole source of legal obligation to make superannuation contributions – whether clause of enterprise agreement related to superannuation contributions the source of an independent legal obligation to make contributions
SUPERANNUATION – construction and application of the terms “ordinary time earnings” and “ordinary hours of work” in s 6(1) of the Superannuation Guarantee (Administration) Act 1992 (Cth) – where employees paid either an annualised or aggregate salary – where annualised and aggregate salary included components for additional hours and public holidays – where employees required to work additional hours and public holidays – whether additional hours component of an annualised salary were “ordinary time earnings” – whether public holiday component of either an annualised or aggregate salary were “ordinary time earnings” – whether employees in fact worked additional hours and public holidays as “ordinary hours of work”
Study questions (answers below*)
- Did the Court find that BlueScope should have made further superannuation contributions?
- Had BlueScope been making contributions on remuneration for additional hours and work on public holidays?
- Was the SGC imperative, for BlueScope to make superannuation contributions, based on the definition of ‘ordinary time earnings’ in the SGC Act?
- Could “addtional hours” and hours worked on public holidays be excluded from “ordinary hours of work” within the relevant definition?