Understanding ordinary time earnings (OTE) is a core part of paying superannuation correctly in Australia. If you’re hiring staff or refining your payroll processes, getting OTE right ensures you meet your Superannuation Guarantee (SG) obligations and avoid costly corrections later.
In this guide, we break down what OTE means in practice, what to include (and exclude), how to calculate super on OTE, common pitfalls to avoid, and the documents that help you stay compliant. With clear steps and a few smart checks, superannuation can be a smooth, reliable part of your payroll routine.
What Are Ordinary Time Earnings (OTE) In Australia?
Ordinary time earnings are the amounts an employee earns for their ordinary hours of work. Ordinary hours are usually defined by the relevant award, enterprise agreement, or the employee’s contract. If none apply, they’re the normal hours worked in your workplace.
Why OTE matters: your minimum super contributions are calculated on OTE, not on total wages. This obligation is set under the Superannuation Guarantee (Administration) Act 1992 and administered by the Australian Taxation Office (ATO).
Does OTE Include Super?
No. Super is paid on top of OTE. As at 1 July 2024, the SG rate is 11.5% of an employee’s OTE, and it is currently legislated to increase to 12% from 1 July 2025. In other words, you calculate OTE for the period, apply the relevant SG rate, and pay that amount into your employee’s chosen super fund.
Note: This article provides general information for employers. It isn’t financial or tax advice-speak with your accountant or tax adviser about your specific situation.
What’s Included (And Excluded) From OTE?
Knowing what sits inside OTE (and what doesn’t) is where most payroll errors happen. Use the lists below as a practical starting point and always consider the underlying award, agreement or contract.
Common Payments Included In OTE
- Base salary or wages for ordinary hours: The regular pay for standard rostered hours.
- Paid leave taken: Annual leave, personal/carer’s leave and long service leave, when the leave is taken (not paid out at termination).
- Casual loading: The casual loading paid for ordinary hours forms part of OTE.
- Allowances connected to ordinary duties: Examples include first aid or leading hand duties that apply during ordinary hours.
- Shift loadings: If a role involves regular shift work, shift loadings relating to ordinary hours are generally OTE.
- Commissions and many bonuses: If earned for work performed in ordinary hours, they are typically OTE. If you pay sales incentives, check how superannuation on bonuses applies in your scenario.
- Public holidays and RDOs taken: Payments for ordinary time where the employee is entitled to be paid.
- Piece rates: Where the piecework relates to ordinary hours.
Common Payments Excluded From OTE
- Overtime payments: Genuine overtime for work outside ordinary hours is not OTE. If in doubt, check the relevant award or agreement and your roster practices against Australian overtime laws.
- Expense reimbursements: Repayments for work-related expenses, such as travel or tools, are not OTE.
- Certain allowances: Overtime meal allowances and payments that strictly relate to overtime or expense recovery are excluded.
- Termination payments: Redundancy pay and most termination-related amounts are not OTE. For specifics, see whether you must pay super on termination payments.
- Unused leave paid at termination: Untaken annual leave or long service leave cashed out when employment ends isn’t OTE.
- Super contributions themselves: Employer SG or any salary sacrifice super contributions are not part of OTE.
What About Leave Loading?
Leave loading can be tricky. In many cases, it forms part of OTE unless it is very clearly linked to overtime or additional work outside ordinary hours. Consider the purpose and wording of your arrangement and review how annual leave loading operates for your staff. If uncertain, get advice to ensure your classification is defensible.
How To Calculate Super On OTE (With Examples)
Follow a consistent, documented process each pay cycle. Here’s a simple approach you can apply (and train your payroll team on):
- Identify ordinary hours and OTE items for the period.
Work out the amounts earned for ordinary time and include any eligible allowances, loadings, commissions or bonuses tied to ordinary hours.
- Exclude non-OTE items.
Remove overtime payments, reimbursements, termination pay, and any other excluded amounts listed above.
- Multiply the OTE total by the current SG rate.
As at 1 July 2024, apply 11.5%. Plan for the next increase to 12% from 1 July 2025.
- Pay super by the quarterly deadlines.
Super must be paid at least quarterly. Late payments can trigger the Superannuation Guarantee Charge (SGC), which is more costly and time-consuming.
Worked Example (Monthly Payroll)
Suppose an employee on a standard 38-hour week earns:
- Base wages for ordinary hours: $5,000
- Casual loading (if applicable): add to OTE
- Sales commission earned during ordinary hours: $500
- Overtime payment for Saturday work: $300
- Expense reimbursement (mileage): $80
OTE would include the $5,000 base and the $500 commission. It would not include the $300 overtime or the $80 reimbursement. Total OTE = $5,500. SG at 11.5% = $632.50 payable to the employee’s super fund.
If you routinely pay bonuses, document when a bonus counts towards OTE and when it doesn’t, and align your approach with how super on bonuses is treated.
Special Cases And Common Pitfalls To Watch
Every business has unique arrangements. These situations commonly need a closer look.
1) Overtime Versus “Ordinary” Hours
Overtime is generally excluded from OTE, but the line can blur if rosters, regular extra hours, or averaged hours are common. Ensure your rosters and contracts clearly define ordinary hours and how overtime works, and review practices against your award or agreement.
2) Bonuses, Commissions And Incentives
Where bonuses are tied to outcomes achieved in ordinary hours, they usually form part of OTE. One-off “exceptional performance” amounts paid in connection with work beyond ordinary hours may be excluded. Spell out how incentives operate in your contracts or policies and apply your classification consistently.
3) Leave Loading
Many employers treat leave loading as OTE unless the loading is specifically linked to overtime. Review your award or agreement and the purpose of the loading, and keep a brief written rationale on file for audit readiness.
4) Termination And Notice Periods
Most termination payments are not OTE, but there can be nuances. For example, super treatment can differ where an employee works out their notice, is paid out for unused leave, or receives payment in lieu of notice. Confirm the classification before finalising termination pay.
5) Contractors Who Are Employees For SG
Some contractors are entitled to super because they’re considered employees for SG purposes (for example, if they’re paid wholly or principally for their labour). If you engage contractors, assess each arrangement and keep records of your reasoning.
6) Directors’ Fees And High-Income Earners
Directors’ fees can attract SG. Also note that there is a maximum contribution base each quarter-amounts above that cap don’t attract SG. Make sure your payroll software applies the cap correctly.
7) Record-Keeping And Payslips
Employers must provide payslips and maintain accurate employment records under workplace laws. While a payslip doesn’t need to show an “OTE” line, it should correctly show super contributions for the period and required super fund details. Build a habit of reconciling your super reports to your payroll each quarter to catch classification errors early.
Payroll Documents And Processes To Support Compliance
Clear documentation underpins accurate OTE calculations and reduces disputes. These tools help most employers stay on track.
- Employment Contract: Defines the role, pay, and ordinary hours, and sets expectations around allowances, loadings, commissions and bonuses so OTE can be classified consistently.
- Workplace Policies: Outline payroll practices, leave entitlements, and how shift work, overtime and incentives operate. A clear policy supports consistent OTE treatment across your team.
- Payroll setup notes: Configure your payroll categories so OTE and non-OTE items are correctly flagged. Keep a simple register of each pay item’s OTE status and the rationale (award clause, contract clause, or ATO guidance).
- Regular audits: Run quarterly checks comparing super contributions to your OTE totals. Address any anomalies promptly to avoid SG Charge exposure.
- Termination checklists: For exits, confirm what’s OTE and what’s excluded (e.g. redundancy, unused leave, or termination payments) before finalising pay.
If your arrangements include shift work, loadings, allowances or sales incentives, collaboration between HR, finance and legal goes a long way. A short review when you introduce a new pay item can prevent misclassifications down the track.
Key Takeaways
- Ordinary time earnings (OTE) are the amounts an employee earns for ordinary hours, and your minimum super must be calculated on that figure.
- As at 1 July 2024, the Superannuation Guarantee rate is 11.5% of OTE (rising to 12% from 1 July 2025); super is paid on top of OTE, not included within it.
- Include base pay, paid leave taken, casual loading, shift loadings tied to ordinary hours, and commissions/bonuses earned in ordinary hours; exclude genuine overtime, reimbursements, and most termination payments.
- Take care with edge cases like leave loading, incentives, contractors who qualify for SG, and overtime-document your approach and apply it consistently.
- Support compliance with an Employment Contract, clear workplace policies, proper payroll configuration, and quarterly reconciliations.
- When in doubt about bonuses, loading or exits, check the treatment of super on bonuses, annual leave loading and termination payments before you process payroll.
If you’d like a consultation on superannuation and OTE for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
