Casual employee overtime changes

Casual employee overtime changes in 97 Awards will take effect from 20 November 2020.

On 30 October 2020, the Fair Work Commission announced updates to the casual and overtime clauses in 97 awards. The updated clauses started from the first full pay period on or after 20 November 2020.

The updates are different for each award, but some common examples of how some awards have been updated include clarifying:

• how casual and overtime loadings interact
• whether casuals are entitled to overtime
• the hours when overtime applies.

We’ve written previously on the topic of casual employees and overtime. Casual employees are paid for the hours of work they perform and receive a casual loading (often 25%) in addition to their base rate of pay. This loading is designed to compensate the casual employee for not receiving some of the benefits of full-time and part-time workers, for example, paid sick and annual leave.

Casual workers may also be entitled to penalty rates, allowances, and other loadings, depending on the Award. Such entitlements may come into play if the employee works:

• on weekends
• on public holidays
• outside the “spread of ordinary hours”. The spread of hours is the times of the day ordinary hours can be worked (e.g. between 7am – 7pm).

While casual employees welcome these loadings, employers often struggle with how to calculate wages for casual employees who are entitled both a casual loading and an overtime rate.

The recent Commission decision has defined the way casual employees are paid for overtime under each award. In doing so, it has split up the way awards deal with paying overtime to casuals into three different methods, namely awards where:

• overtime penalty rates are payable in substitution for the casual loading
• the casual loading and the overtime penalty rate are added separately to the minimum hourly rate (the cumulative approach)
• the overtime penalty rate is applied to an ordinary hourly rate consisting of the minimum hourly rate and the casual loading (the compounding approach).

Here’s how these alternative methods produce different results:

Rudy is a casual employee, with base rate of $20 per hour, plus a casual loading of 25% ($5 per hour). Rudy is paid $25 for each ordinary hour worked.

Rudy performs work on a Sunday which, under his Award, prescribes an overtime rate of 200%. Each of the methods above produces a different result as follows:

Method 1: overtime penalty rates are payable in substitution for the casual loading

$20 x 200% = $40 per hour

Method 2: the casual loading and the overtime penalty rate are added separately to the minimum hourly rate (cumulative approach)

$20 x 200% = $40
$40 + $5 = $45 per hour

Method 3: the overtime penalty rate is applied to an ordinary hourly rate consisting of the minimum hourly rate and the casual loading (compounding approach).

$20 + $5 = $25
$25 x 200% = $50 per hour

Payment for overtime depends on employees’ entitlements as defined under the applicable Award, Enterprise Agreement or Contract of Employment. Employers should check which overtime payment category applies to their Award/s and ensure their payment of casual employee overtime is calculated correctly to avoid any discrepancies that may result in a claim for underpayment. We’d encourage employers to use the Fair Work Ombudsman Pay Calculator for assistance with the new casual employee overtime changes.

No time to stay up to date with your employment obligations? Bare Bones Consulting is on top of changes to Awards and T&C’s of employment so you don’t have to be. Call us today to find out how we make all things HR easy for you.