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)
What are ordinary time earnings (OTE)?
Ordinary time earnings (OTE) is the amount your employees earn for their ordinary hours of work. It generally includes leave (annual, sick or long service), commissions, allowances and shift loadings, but doesn’t include overtime payments.You must use ordinary time earnings (OTE) to calculate the minimum super guarantee contributions for your eligible employees.
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 |
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 |
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 |
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). From 1 July 2022 the SG rate is 10.5%. Legislation states an SG increase of 0.5% a year until it reaches 12% by 2025. For more information on the rise to 12% visit ato.gov.au.
To calculate employee super payments, you use what the ATO calls ordinary time earnings. Working out OTE is a basic calculation for employees who have straightforward terms and conditions of employment. Their super will be 10.5% of their OTE.
If an award or employment agreement specifying a higher super contribution than 10.5% 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.
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
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. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/tmd. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.