Paying employees super on overtime and bonuses

If your employees work extra hours or you award them bonuses, it can impact the amount of super you need to pay them. Find out below if you need to pay super on overtime and paid bonuses, such as Christmas or performance bonuses.

 

Paying super on overtime and bonuses

If you employ people under more complex salary arrangements, for example packages that include loadings, allowances or commissions, working out super payments can be more involved. Paying an employee super on overtime or a bonus depends if it’s considered part of their ordinary time earnings (OTE). This is the amount an employee earns for their ordinary hours of work1

DOWNLOAD: YOUR SUPER OBLIGATIONS (PDF)

Super payments on overtime

Overtime is generally excluded from super payment calculations because it falls outside of OTE. But overtime counts as part of OTE in some instances2, including:

  • When an agreement overrides an award (removing the distinction between ordinary hours and other hours). 
  • On piece-rates, where pay is for a piece of work or unit rather than for hours worked, and there are no ordinary hours of work specified. 
  • On shift loadings.

In these cases, you may need to pay super on overtime. Danger and on-call allowances for doctors often count as overtime earnings, too.

See the following checklists to learn which types of awards, agreements and allowances count as OTE:

Awards, agreements and OTE checklist
Awards and agreements
Payment Salary or wages Ordinary time earnings (OTE)
Overtime hours – award stipulates ordinary hours to worked and employee
works additional hours for which they’re paid overtime rates
Yes No
Overtime hours – agreement prevails over award Yes No
Agreement supplanting award removes distinction
between ordinary hours and other hours
Yes – all hours worked Yes – all hours worked
No ordinary hours of work stipulated Yes – all hours worked Yes – all hours worked
Casual employee: shift loadings Yes Yes
Casual employee: overtime payments Yes No
Casual employee paid overtime rates due to a 'bandwidth' clause Yes No
Piece-rates – no ordinary hours of work stipulated Yes Yes
Overtime component of earnings based on
hourly-driving-rate method stipulated in award
Yes No
Source: ato.gov.au


Allowances and OTE checklist

Allowances
Payment Salary or wages Ordinary time earnings (OTE)
Allowance by way of unconditional extra payment   Yes Yes
Expense allowance expected to be fully expended No No
Danger allowance Yes Yes
Retention allowance Yes Yes
Hourly on-call allowance in relation to ordinary hours of work for doctors Yes Yes
Source: ato.gov.au

 

Super payments on bonuses 

If you offer your employees bonuses on top of their regular wage, you may also need to pay super on those bonuses.

The types of bonuses paid to employees vary from business to business. Common bonuses may include performance or target-based bonuses, or seasonal, such as Christmas bonuses.

If a bonus is part of OTE, you’ll need to pay super on it. Here’s a general list of some bonuses that are and aren’t included as OTE. For a more detailed list, refer to the ATO checklist

Bonuses and OTE checklist
Payment Salary or wages Ordinary time earnings (OTE)
Performance bonus Yes Yes
Bonus labelled as ex gratia but in respect of ordinary hours of work Yes Yes
Christmas bonus Yes Yes
Bonus in respect of overtime only Yes No
Source: ato.gov.au


It’s important to note, you don’t need to pay super on all bonuses paid to employees. The following bonuses generally don’t count as OTE:

  • Fully expended expense allowances, such as car allowances
  • Reimbursed expenses
  • Benefits subject to fringe benefits tax 
  • Jury top-up payments
  • Redundancy payments.

DOWNLOAD: YOUR SUPER OBLIGATIONS (PDF)

 

The superannuation guarantee and super on overtime and bonuses

The superannuation guarantee (SG) is the minimum percentage of an employees’ wages paid into their super – and it’s a legal requirement. You have to pay the SG to eligible employees (generally those aged over 18 who earn over $450 a month). The current SG rate is 9.5%. From 1 July 2021, legislation states an increase of 0.5% to 10% (for more information on the rise to 12% visit ato.gov.au).      

To calculate employee super payments, you use what the ATO calls OTE. Working out OTE is a basic calculation for employees with straightforward terms and conditions of employment, as their super is 9.5% of their OTE.

If an award or employment agreement specifying a higher super contribution than 9.5% covers your employees, then you must pay the higher amount. If you have questions or need more information about paying super based on awards and agreements, call Fair Work Australia on 1300 799 675 or visit fwc.gov.au.

For many businesses, paying super on bonuses and overtime can be complex. The AustralianSuper team is here to help make working out super payments for your employees easier to understand. 

 

GET HELP WITH YOUR SUPER PAYMENTS TODAY

 

Read more:

PAYING EMPLOYEES SUPER – WHAT YOU NEED TO KNOW

PAYING EMPLOYEES SUPER ON LEAVE


Sources:
1. ato.gov.au - Super for employers, How much to pay
2. ato.gov.au - Super for employers, checklist

 


This information may be general financial advice which doesn’t take into account your personal objectives, situation or needs.  Before making a decision about AustralianSuper, you should think about your financial requirements and refer to the relevant Product Disclosure Statement. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898. 


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