Is superannuation paid on overtime?

In the months leading up to Christmas 2021, there was endless talk and media speculation about the supply chain crisis that would see shortages in goods and services across the board. However, by December, most Australians were pandemic-weary, having endured almost two years of lockdowns, mask mandates and closed international borders. It’s no surprise people had little interest in more ‘bad economic news’, choosing to focus instead on preparing for summer holidays after the year that was 2021. 

What nobody expected was the emergence of the Omicron variant. 

With workplaces decimated as staff isolated, quarantined or fell ill with the virus, it was left to the rest to pick up the slack. And this means lots (and lots) of overtime. Which had employers and employees alike asking, ‘is overtime subject to superannuation?’

What is Overtime (OT)?

Overtime, or OT as it’s colloquially known, is any work performed outside the ordinary hours a worker usually undertakes, as per their award or registered agreement. According to the Fair Work Ombudsman:

‘Overtime is when an employee works extra time. It can include work done:

• beyond their ordinary hours of work

• outside the agreed number of hours

• outside the spread of ordinary hours.

The spread of hours is the times of the day ordinary hours can be worked (for example, between 7am - 7pm).’

What's a registered agreement?

Not sure if you’ve signed or are a party to a registered agreement? 

The Fair Work Ombudsman explains a registered agreement is an agreement ‘between an employer and their employees regarding employment conditions’ with the agreement approved by and registered with Fair Work.

Examples include:

• enterprise agreements
• collective agreements
• greenfields agreements
• certified agreements
• Australian workplace agreements (AWA), and;
• individual transitional employment agreements (ITEA).

Time off in lieu of pay

Some employers allow employees to take time off rather than be paid overtime. Known as ‘time off in lieu’ or ‘time in lieu’ (TOIL), this option can be attractive to employees for many reasons. Check with your employer or award for more details. 

Reasonable overtime

With so many people unable to work at the moment and remaining employees being asked to work overtime more than ever, it’s worth mentioning what Fair Work considers reasonable overtime.

An employer must consider the following:

• any risk to health and safety from working the extra hours

• the employee’s personal situation, including their family responsibilities

• the workplace's needs

• if the employee is entitled to receive overtime payments or penalty rates for working the extra hours

• if they are paid at a higher rate on the understanding that they work some overtime

• if the employee was given enough notice that they may have to work overtime

• if the employee has already stated they can’t ever work overtime

• the usual patterns of work in the industry

• the employee's role and their level of responsibility 

• if the overtime hours are in accordance with what an applicable award or agreement says about hours of work being averaged over a specified time

• any other relevant factors.

Employees always retain the right to refuse overtime, but especially if the request is unreasonable. 

Visit Safe Work Australia for more information regarding the proper management of worker fatigue. 

Is superannuation calculated on overtime?

Generally speaking, super isn’t paid on overtime. This is regardless of how much OT is worked as the work being done is outside the employee’s Ordinary Time Earnings (OTE).

Every employer is required to pay 10 percent of your OTE into your super account. Known as the Superannuation Guarantee (SG), it’s the minimum amount an employer must pay. The Superannuation Guarantee is governed by the Superannuation Guarantee (Administration) Act 1992 and by 2025, will be 12 percent.

What payments are counted as Ordinary Time Earnings?

When it comes to earnings and the Superannuation Guarantee, the Australian Taxation Office (ATO) clearly defines what’s considered ordinary time earnings (OTE) and what’s counted as salary and wages. OTE includes:

• some leave – such as annual, annual leave loading, sick and long service.
• casual employee shift loadings
• commissions
• some allowances - danger or site allowance or on-call allowance. Doesn’t include an expense allowance that’s expected to be used in full.
• workers compensation – returned to work
• termination payments – in lieu of notice
• bonuses – for example, performance or Christmas bonuses.

Are there any exceptions?

There’s a few exceptions when overtime counts as OTE:

• where the ordinary hours of work aren’t stated in an award or agreement, or not separated from other hours
• when you’re paid piece rates, jobs such as a fruit picker
• when a business’s own registered agreement overrides an Industry Award and states superannuation will be paid on overtime. 

Should I put my overtime earnings into my Super?

If you’re not doing overtime because you need the extra money, why not start planning for your retirement and put your OT into your Super. 

In fact, looking after ‘future you’ by contributing extra funds into your superannuation account is not only a great way to plan for retirement but you may also be eligible for tax concessions. Chat with your financial planner to look at your options.

Whether you’re an employer or an employee, the Kelly+Partners team are always happy to discuss the best ways to make your money work harder for you (whether you do overtime or not). To book in a discovery call with our expert team, please click here.