Compound Confusion: 4 yearly review of modern awards – Overtime for casuals

A Full Bench of the Fair Work Commission recently issued its final determination in the 4 yearly review of modern awards – overtime for casuals.

While historically it may have been considered antithetical that overtime loadings could be payable to casual employees who, by their definition, perform ad hoc and flexible hours of work, an ambiguity around whether casual employees were entitled to overtime loadings, and if so, how those overtime loadings should be calculated, was identified during the Commission’s first and final four-yearly modern award review.

As a consequence, the Commission determined to consider the question of overtime for casual employees as a common matter. In July 2020, the Commission issued its proposed determinations for resolving ambiguities around overtime for casual employees, and at the end of October, it issued its final determinations for the variation of 96 modern awards to clarify casual employee entitlements to overtime loadings.

Following this decision, as of 20 November 2020, overtime for casual employees under these 96 modern awards will need to be calculated either:

  • in substitution for casual loading;
  • in addition to casual loading (cumulative approach); or
  • in addition to the sum of an employee’s minimum hourly rate plus casual loading (compounding approach).

The result under a number of these modern awards that casual employees’ overtime loadings should be calculated inclusive of casual loading (the compounding approach), has left some employers scratching their heads.

The Full Bench pointed to two previous decisions, to conclude that the meaning of the award expressions “time and a half”, “double time” and “double time and a half” referred to an employee’s ordinary time rate of pay. Applying the “compounding approach”, the Full Bench found that casual loading forms part of a casual employee’s ordinary rate of pay, unless the definition in that modern award of “hourly ordinary time rate” explicitly excludes casual loading.

Kingston Reid is currently discussing with impacted clients the possibility of seeking judicial review of the Commission’s decision to the Federal Court but for now the decision stands, as the Full Bench has made clear that no further submissions will be accepted in respect to any of the determinations. Modern award covered employers should consider the determination that will operate in respect to the modern award that covers them and ensure that it is well understood when casual employees may become entitled to overtime, and how that overtime loading is to be calculated.

The terms of each modern award do vary, however the entitlement to an overtime loading typically arises where:

  • an employee works in excess of 38 hours per week; or
  • an employee performs work outside the spread of hours prescribed under the applicable modern award.

Employers who engage casual employees under an enterprise agreement do not need to make any immediate change to overtime payments for those casuals, while the current enterprise agreement continues to apply. However, on entering into bargaining for any future enterprise agreements, employers will need to review their overtime calculation methods, to ensure that their casual employees are still Better Off Overall where the cumulative or compounding calculation methods of overtime calculation would otherwise apply under the applicable modern award.

If you are in any doubt as to how this decision may affect your business, contact us at Kingston Reid to discuss.

Katie Sweatman
Partner
+61 3 9958 9605
katie.sweatman@kingstonreid.com

Aimee Ford
Lawyer
+61 3 9958 9610
aimee.ford@kingstonreid.com