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In August 2020 the Fair Work Commission (Commission) determined that the way casual employees are paid for overtime depends on the specifics of the particular, applicable award.  

In rejecting the proposition that a “general rule” approach to calculating the payment of the casual loading and overtime penalty rates across all awards was originally intended, the Commission held that overtime penalty rates for casual employees may be divided into three categories (depending on the wording of the particular award), namely:

  • 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).

 On 30 October 2020, the Commission ruled that overtime for casual employees whose employment is covered by 97 specifically identified awards, must be calculated using the casual ordinary rate inclusive of the 25% casual loading.

Employers must ensure they come up to date with this change because the current system is to calculate overtime on the ordinary rate exclusive of casual loading.

Information for employers:

  • New overtime penalty rates for casuals in 97 modern awards.
  • Changes commence 1 March 2021 for the Aged Care Award and 20 November 2020 for the other affected awards
  • The changes WILL NOT apply to your business if you have an enterprise agreement that operates to the exclusion of an underpinning modern award;
  • The changes WILL apply to your business if you have an enterprise agreement that applies in conjunction with the terms of a modern award.
  • The full schedule of affected modern awards and determinations is available here. 

Employers should act now to get payroll systems set up to reflect these changes.  This means that employers should review the award that applies to their business and ensure that they are paying their casual employees the correct rates of pay when they undertake work that attracts overtime.

If you have questions or concerns about this or other workplace matters please contact a member of our Workplace Law Team.