New rules relating to paying casual employees overtime have come into effect from 20 November 2020. If you have a casual employee covered by a Modern Award, please read on.
Casuals have not typically been paid overtime loading. A true ‘casual’ by definition, performs ad-hoc work and has flexible hours. As such, there has been ambiguity around whether casuals were entitled to overtime loadings and if so, how these loading should be calculated.
This issue was identified during the Fair Work Commission’s 4 yearly Modern Award Review and at the end of October, the Commission issued its final determination to vary 96 Modern Awards to clarify casual employee entitlements to overtime loadings.
The commission decided that under these 96 Awards, overtime for casual employees will need to be calculated one of 3 ways, depending on the Award:
- In substitution for casual loading i.e. (base rate of pay) x (overtime penalty rate); or
- In addition to casual loading – the cumulative approach i.e. (base rate of pay) x (overtime penalty rate + casual loading); or
- Accumulative approach or compounding basis – in addition to the employee’s minimum hourly rate plus casual loading i.e. (base rate of pay + casual loading) x (overtime penalty rate)
The terms of each Modern Award vary, however the entitlement to overtime loading typically arises either when the employee works more than 38 hours per week, more than a certain number of hours a day, or the work is performed outside the prescribed span of hours in the applicable Modern Award.
The changes will take effect from the first full pay period, on or after 20 November 2020.
Employers need to check the Award/s that apply to their business in order to understand when casuals will be entitled to overtime and how this should be calculated. Employers also need to communicate any changes to their casual employees.
If employers engage casuals under an Enterprise Agreement, no changes need to be made at this time but will need to be factored in when bargaining in future Enterprise Agreements.
These changes will clearly have an impact on employers who have a high level of casual engagement. For more information and help on this subject, please book a free Discovery session with one of our Employee Experts..