Businesses in the mining and construction industries often choose paying their workforce a flat rate of pay for all hours worked. This is due to a combination of workers preferring a flat rate of pay as it is more in line with how tradesmen charge for their time, and businesses preferring to pay a flat rate of pay because it’s easier to forecast project costs and process payroll.

Ordinary Time Earnings & Superannuation Guarantee

Most businesses don’t realise that by paying flat rates of pay you can be liable for paying superannuation on all hours worked. The superannuation guarantee states that “Payments for work performed outside an employee’s ordinary hours of work are not ordinary time earnings” but if a worker is constantly working over 38 hours a week and is constantly being paid one flat rate then all of those hours could be considered ordinary if there is no distinct financial difference between the ordinary rate of pay and the overtime rate of pay.

It is a common business misconception that defining ordinary hours in a workers employment contract fixes this, but be careful as this alone may not be adequate.

Solution

The solution can be surprisingly simple. Businesses should ensure that there is a clear difference between the first 38 hours paid and all hours paid thereafter for each pay period and this need to be reflected in the workers employment contracts.

This doesn’t mean you have to pay the workers a higher amount overall, you can simply offset the higher overtime rate with a lower ordinary rate as most workers in the above industries are generally paid well above the applicable minimum award obligation. This allows businesses to enter into individual flexibility arrangements. This solution also means that you are paying superannuation on a lower ordinary rate of pay which further increases savings.

Some businesses may feel they could be disadvantaged when advertising a new position with the above structure but if your workforce is routinely performing overtime we suggest advertising the role as a day rate by bundling the ordinary rate and overtime rate together. It is important to explain the pay structure in detail during the interview process and to provide a letter of offer or employment contract prior to the individual commencing work.