Advivo explains the ins and outs of paying superannuation to your employees.
First Published: April, 2018
Updated: July, 2023
As a small business owner, you likely have many different roles to fill, and won’t always know the answer to every question involving your finances. Superannuation is one of those anomalies that you need to call in the experts to help with. As experts in business advisory in Brisbane, we explain the considerations you need to make when paying superannuation to your employees. Below are four questions we are commonly asked on this topic.
What is The Super Guarantee?
The minimum super you must pay each quarter for each eligible employee is called the super guarantee (SG). Generally, if you pay an employee $450 or more (before tax) in a calendar month, you must pay a super guarantee (SG) on top of their wages. Currently, the SG is 11% of their ordinary time earnings (OTE).
OTE is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift loadings, allowances, and bonuses, but not overtime payments.
To work out what you must pay, multiply your employee’s OTE for the quarter by the SG rate (or the percentage you use if you’re paying super at a higher rate).
What Payments Are Not Considered as OTE?
Payments for work performed outside an employee’s ordinary hours of work are not OTE.
This applies even if:
• the payments are calculated at an hourly rate
• the employee gets a specific loading
• the payments are calculated as an annualised or lump sum component of a total salary package
But if you can’t distinctly identify overtime amounts, the hours actually worked will be included in ordinary hours of work.
When is Super Not Payable?
Superannuation is generally not payable on overtime. Some of the examples of where super is not payable for overtime (and as such the payments are not classified as OTE) are below:
1. Overtime hours – award stipulates ordinary hours to be worked and the employee works additional hours for which they are paid overtime rates
2. Overtime hours – agreement prevails over award
3. Casual employee: overtime payments
4. A casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clause
5. Overtime component of earnings based on hourly-driving-rate method stipulated in an award.
When is Super Payable?
Some of the examples of where super is payable, when hours can’t be distinctly identified as overtime (and as such the payments are classified as OTE) are below:
1. Agreement supplanting award removes the distinction between ordinary hours and other hours
2. No ordinary hours of work stipulated
ATO has provided a checklist for businesses to help you determine your superannuation obligations.
If you have any queries, please contact our office at Advivo today. We are here to help you.
*Please note, at the time of writing this post, the Superannuation Guarantee was 11%.
Contact us today at 07 3226 1800 or email us at info@advivo.com.au to speak to our team of experts in business advisory in Brisbane CBD to learn more about our services and discuss ways to improve your business goals.
