The Fair Work Commission (FWC) has amended the overtime provisions concerning casual employees in several modern awards, which take effect in the first full pay period on or after 20 November 2020.
Previously, there was confusion surrounding whether casuals received overtime rates at all, or if they did, the rate they should be paid. The confusion usually arose because of the interplay between an overtime penalty rate and casual loading. For example, did employees get both entitlements when working overtime, or should the casual loading be disregarded? If they get both, is the overtime penalty rate applied once the casually loading has been applied, or are they applied separately?
The methods of calculating overtime;
Rather than provide for a uniform way that casual overtime should be calculated, the FWC has instead made variations to a number of awards to provide that casual overtime is calculated by one of three methods (which varies from award to award):
- “The Substitution Method”
Using this method, overtime is calculated on the permanent base rate and does not include any casual loading. e.g. where the overtime rate is x150% then:
$20 (base rate) x 150% (overtime penalty) = $30
- “The Cumulative Method”
Here, the overtime entitlement and the casual loading are applied to the permanent base rate:
$20 (base rate) x 150% (overtime penalty ) + (25% of casual loading on base rate) = $35
- “The Compounding Method”
In this method the overtime entitlement is calculated once the casual loading has already been applied to the base rate of pay:
$25 (base rate + 25% casual loading) x 150% (overtime rate) = $37.50
Which awards are affected?
This is a link to a list of the awards that are affected.
Given one rule has not been applied to each award, it is important you check any award that affects your business to see if the change affects the casual overtime rates you are currently paying.
Given some of the amendments merely clarify what was already in place, it may well be that you do not need to make any changes. Please contact Employment Innovations if you need any assistance working out how the changes apply to your business.
About Employment Innovations
Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium sized employer needs – including workplace advice, legal services, payroll solutions, migration, human resource management and HR software.
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.
This article was originally published on 23 November 2020; updates have been made following the advice of State & Federal government authorities. Last updated 7 May 2021.