Fair Work Update to Casual Overtime Clauses

As a result of their four-yearly review on Modern Awards, the Fair Work Commission has ruled a new approach to calculate overtime for Casual Employees.

This change has affected 97 Modern Awards and it is effective from the first full pay period commencing on or after 20 November 2020
(with the exception of the Aged Care Award which will take effect from the first full pay period commencing on or after 1 Match 2021).

This new ruling will also impact Enterprise Agreements that incorporate or are read in conjunction with the terms of an Award.

New Calculation Methods

Previously most Modern Awards calculated both the Overtime Rate and the Casual Loading on the Permanent Base Rate, adding the two of them together. As a result of this review, Fair Work introduced 3 different methods to calculate Overtime for Casual Employees:

1. The Substitution Method

Overtime is calculated on the Permanent Base Rate and it excludes the Casual Loading.

Base Rate ($20) * Overtime Penalty (2x) > $20 * 2 = $40

Casual employees classified under an Award adopting this new calculation method will now receive a reduced overtime pay rate.

2. The Cumulative Method

Both Overtime and Casual Loading are calculated on the Base Rate, then added together.
This is the current calculation method.

Base Rate ($20) * Overtime Penalty (2x) + 25% Casual Loading ($5)> ($20 * 2 ) + $5 = $45

Casual employees classified under an Award retaining this calculation method will receive the same overtime pay rate as before.

3. The Compounding Method

Overtime is calculated on the Base Rate + the Casual Loading.

Base Rate ($20) + 25% Casual Loading ($5) * Overtime Penalty (2x) > ($20 + $5) * 2 = $50

Casual employees classified under an Award adopting this new calculation method will now receive an increase in overtime pay rate.

List of Awards that have an increased Casual Overtime Rate

• Aged Care Award (from 01 March 2021)
• Black Coal Mining Industry Award
• Broadcasting, Recorded Entertainment and Cinemas Award
• Business Equipment Award
• Concrete Products Award
• Contract Call Centres Award
• Electrical, Electronic and Communications Contracting Award
• Health Professionals and Support Services Award from substitution
• Labour Market Assistance Industry Award
• Marine Tourism and Charter Vessels Award
• Marine Towage Award
• Ports, Harbours and Enclosed Water Vessels Award
• Sugar Industry Award
• Stevedoring Industry Award
• Surveying Award
• Telecommunications Services Award
• Transport (Cash in Transit) Award

List of Awards that have a decreased Casual Overtime Rate

• Aluminium Industry Award
• Ambulance and Patient Transport Industry Award
• Amusement, Events and Recreational Award
• Local Government Industry Award
• Passenger Vehicle Transportation Award
• Salt Industry Award
• Supported Employment Services Award
• Travelling Shows Award
• Water Industry Award

List of Awards that have the same Casual Overtime Rate

• Aboriginal Community Controlled Health Services Award
• Airline Operations – Ground Staff Award
• Animal Care and Veterinary Services Award
• Architects Award
• Asphalt Industry Award
• Banking, Finance and Insurance Award
• Building and Construction General On-site Award
• Car Parking Award
• Cement, Lime and Quarrying Award
• Cemetery Industry Award
• Children’s Services Award 2010
• Cleaning Services Award
• Clerks – Private Sector Award
• Coal Export Terminals Award
• Commercial Sales Award
• Educational Services (Post-Secondary Education) Award
• Educational Services (Schools) General Staff Award
• Educational Services (Teachers) Award
• Electrical Power Industry Award
• Fast Food Industry Award
• Fitness Industry Award
• Food, Beverage and Tobacco Manufacturing Award
• Funeral Industry Award
• Gardening and Landscaping Services Award
• Gas Industry Award
• General Retail Industry Award
• Graphic Arts, Printing and Publishing Award
• Hair and Beauty Industry Award
• Horse and Greyhound Training Award
• Hydrocarbons Industry (Upstream) Award
• Joinery and Building Trades Award
• Legal Services Award
• Live Performance Award
• Mannequins and Models Award
• Manufacturing and Associated Industries and Occupations Award
• Market and Social Research Award
• Meat Industry Award
• Medical Practitioners Award
• Mining Industry Award
• Miscellaneous Award
• Mobile Crane Hiring Award
• Nursery Award
• Nurses Award
• Oil Refining and Manufacturing Award
• Pastoral Award
• Pest Control Industry Award
• Pharmaceutical Industry Award
• Pharmacy Industry Award
• Plumbing and Fire Sprinklers Award
• Port Authorities Award
• Poultry Processing Award
• Premixed Concrete Award
• Professional Diving Industry (Industrial) Award
• Racing Clubs Events Award
• Racing Industry Ground Maintenance Award
• Rail Industry Award
• Real Estate Industry Award
• Seafood Processing Award
• Security Services Award
• Silviculture Award
• Sporting Organisations Award
• State Government Agencies Award
• Storage Services and Wholesale Award
• Textile, Clothing, Footwear and Associated Industry Award
• Vehicle Manufacturing, Repair, Services and Retail Award
• Waste Management Award
• Wine Industry Award
• Wool Storage, Sampling and Testing Award

Tips for Employers

Employers should review their classified Awards and if affected by the above changes, ensure their employees are informed and paid correctly by the effective date. This includes:

1. Check your Awards
   Go through the Award Lists above and check if any of your employees’ Awards have been affected by this new ruling.
2. Communicate with your employees
   Email your casual employees to let them know about the new calculation rate, and how that will affect their pays.
3. Update your Casual Employees’ Pay Rate Calculation in your Accounting Software
   Ensure the casual employee pay rates are updated and that your Payroll Software is set up to calculate the new Overtime rates correctly.

As always we are at your disposal if you require assistance with meeting your Payroll compliance obligations.

References

https://www.fairwork.gov.au/about-us/news-and-media-releases/website-news/updates-to-casual-and-overtime-clauses-in-most-awards

Disclaimer

This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.