Paying superannuation for employees may seem straightforward, yet it continues to be one of the most common sources of payroll error in Australia. Super must be calculated on an employee’s Ordinary Time Earnings (OTE) and determining what forms part of OTE is not always simple. Payments such as bonuses, commissions, allowances and overtime can often create confusion, leading to incorrect super contributions.
Even experienced payroll teams occasionally pause and ask:
“Does super apply to this payment?”
Below are 12 payments that regularly challenge payroll professionals, along with the key principles that help determine whether they form part of Ordinary Time Earnings (OTE).
1. Overtime Payments
OTE status: Not OTE
Overtime payments do not attract super when they relate to hours worked outside the employee’s ordinary hours of work.
However, problems arise when ordinary hours are poorly defined. If the award, enterprise agreement or employment contract does not clearly specify ordinary hours, payroll may mistakenly treat some payments as overtime when they are actually penalty rates for ordinary hours.
2. Shift Loadings
OTE status: OTE
Shift loadings paid for working particular rostered shifts — such as night shifts or rotating shifts — are generally considered earnings for ordinary hours.
Because they relate to the employee’s normal roster, super contributions must be paid.
3. Penalty Rates
OTE status: OTE
Penalty rates for working weekends, evenings or public holidays are usually paid for ordinary hours worked at less convenient times.
Since they form part of ordinary earnings, super is payable on these amounts.
4. Commissions
OTE status: OTE
Commissions are a common area of payroll confusion.
When commissions are earned through an employee’s performance during employment, they are considered earnings for ordinary hours and therefore form part of OTE.
5. Bonuses
OTE status: Often OTE
Bonuses can be complex because their treatment depends on why the payment is made.
Bonuses are generally OTE when they are:
Truly discretionary bonuses that are not connected to ordinary work may sometimes fall outside OTE.
6. Allowances for Performing Duties
OTE status: OTE
Allowances paid because an employee performs additional duties are usually OTE.
Examples include:
Because these payments compensate employees for work performed, they are treated as earnings for ordinary hours.
7. Expense Allowances
OTE status: Not OTE
Allowances intended to reimburse employees for expected work-related expenses are generally not OTE.
Examples include:
The key test is whether the payment is expected to be fully spent on work-related expenses.
8. Lump Sum Annual Leave on Termination
OTE status: Not OTE
Payments for unused annual leave when employment ends are termination payments, rather than earnings for ordinary hours.
Because of this, super is not payable.
9. Annual Leave Loading paid while employed
OTE status: Usually OTE
Annual leave loading is included in ordinary time earnings (OTE) for superannuation guarantee (SG) purposes unless it can be clearly demonstrated as compensation for lost overtime opportunities during leave.
10. Workers Compensation Payments
OTE status: Usually Not OTE
Workers compensation payments can create uncertainty.
If the payment relates to hours not worked, it is generally not OTE. Payroll teams should always review the structure of workers compensation arrangements to confirm the correct treatment. You should check your award or agreement if they state otherwise.
11. Salary Sacrifice Arrangements
OTE status: OTE (based on pre-sacrifice earnings)
Where an employee sacrifices part of their salary to superannuation, the employer must still calculate super based on the employee’s earnings before the salary sacrifice deduction.
Payroll systems should therefore ensure super is calculated on pre-sacrifice OTE.
However, superannuation, when an employee is salary sacrificing, other benefits, such as Novated leases, will not attract superannuation.
12. Payments in Lieu of Notice
OTE status: OTE
Payments made instead of requiring an employee to work out their notice period are generally treated as earnings that would have been received during ordinary hours.
For this reason, they form part of OTE and attract super contributions.
Why These Payments Matter
Incorrect OTE classification can lead to:
In practice, bonuses, commissions, allowances and overtime classifications are where most payroll errors occur.
A Practical Payroll Reminder
When deciding whether super applies to a payment, a useful starting question is:
“Is this payment earnings for the employee’s ordinary hours of work?”
If the answer is yes, it will usually form part of OTE.
Where uncertainty remains, payroll professionals should refer to:
Review your codes today: https://www.ato.gov.au/businesses-and-organisations/super-for-employers/paying-super-contributions/how-much-super-to-pay/list-of-payments-that-are-ordinary-time-earnings
As the payroll profession prepares for significant reforms such as Payday Super, ensuring the accurate treatment of Ordinary Time Earnings (OTE) is becoming increasingly critical. Getting OTE right goes beyond compliance; it safeguards employees’ superannuation entitlements and reinforces organisational integrity.
Now is the ideal time to review and verify OTE calculations to ensure any discrepancies are identified and resolved before entering the new Payday Super era.