There has been A LOT of press around the way in which businesses engage casual employees. Many business owners are really confused and annoyed. We get it, it’s complicated, so here’s the low down on what you need to know.

Calculating overtime rates for casual employees

The Full Bench of the Fair Work Commission clarified the application of overtime rates for casual employees. This applies across many modern awards. The decision clarifies:

  • if an employee is entitled to overtime rates
  • how the overtime rate is calculated.

There are now three methods for calculating casual employees overtime:

  • substitution method
  • cumulative method
  • compounding method.

Each award sets out which method it uses for calculating overtime.

Substitution Method

The substitution method is is when overtime rates are paid as a subsitute for the casual loading that the employee is entitled to.

In this instance, the casual overtime rate is the same as it is for permanent employees. The substitution method applies to the following Awards:

✅ Airport Employees Award

✅ Aluminium Industry Award

✅ Ambulance and Patient Transport Industry Award 2020

✅ Amusement, Events and Recreation Award 2020

✅ Architects Award 2020

✅ Corrections and Detention (Private Sector) Award

✅ Cotton Ginning Award 2020

✅ Dredging Industry Award 2020

✅ Electrical Power Industry Award 2020

✅ Fitness Industry Award 2020

✅ Higher Education Industry-General Staff-Award 2020

✅ Local Government Industry Award 2020

✅ Market and Social Research Award 2020

✅ Meat Industry Award 2020

✅ Miscellaneous Award 2020

✅ Pharmaceutical Industry Award 2020

✅ Poultry Processing Award 2020

✅ Security Services Industry Award 2020

✅ Sporting Organisations Award 2020

✅ Travelling Shows Award 2020

Cumulative Method

The cumulative method is when the overtime rate is calculated on the normal base rate. This is paid in addition to casual loading.

The casual employee receives the 25% casual loading on top of the usual 150% or 200% overtime rate. The cumulative method applies to the following awards:

✅ Aboriginal Community Controlled Health Services Award 2020

✅ Airline Operations – Ground Staff Award 2020

✅ Animal Care and Veterinary Services Award 2020

✅ Banking, Finance and Insurance Award 2020

✅ Building and Construction General On-Site Award 2010

✅ Car Parking Award 2020

✅ Cement, Lime and Quarrying Award 2020

✅ Cemetery Industry Award 2020

✅ Children’s Services Award 2010

✅ Cleaning Services Award 2020

✅ Clerks—Private Sector Award 2020

✅ Commercial Sales Award 2020

✅ Educational Services (Post-Secondary Education) Award 2020

✅ Educational Services (Schools) General Staff Award 2020

✅ Fast Food Industry Award 2010

✅ Funeral Industry Award 2020

✅ Gardening and Landscaping Services Award 2020

✅ Gas Industry Award 2020

✅ General Retail Industry Award 2010

✅ Hair and Beauty Industry Award 2010

✅ Hydrocarbons Industry (Upstream) Award 2020

✅ Joinery and Building Trades Award 2010

✅ Legal Services Award 2020

✅ Live Performance Award 2020

✅ Medical Practitioners Award 2020

✅ Mobile Crane Hiring Award 2010

✅ Nursery Award 2020

✅ Oil Refining and Manufacturing Award 2020

✅ Pastoral Award 2020

✅ Plumbing and Fire Sprinklers Award 2010

✅ Ports, Harbours and Enclosed Water Vessels Award 2020

✅ Premixed Concrete Award 2020

✅ Rail Industry Award 2020

✅ Salt Industry Award 2010

✅ Silviculture Award 2020

✅ Storage Services and Wholesale Award 2020

✅ Supported Employment Services Award 2020

✅ Racing Clubs Events Award 2010

✅ Racing Industry Ground Maintenance Award 2020

✅ Real Estate Industry Award 2020

✅ Textile, Clothing, Footwear and Associated Industries Award 2010

✅ Waste Management Award 2020

✅ Wine Industry Award 2020

Compounding Method

The compounding method calculates overtime using the employees’ casual rate of pay.

The 25% casual loading is multiplied with the overtime rates of 150% and 200%. This leads to overtime rates of 187.5% and 250%. The compouding method applies to the following awards:

✅ Aged Care Award 2010

✅ Alpine Resorts Award 2020

✅ Asphalt Industry Award 2020

✅ Black Coal Mining Industry Award 2010

✅ Broadcasting, Recorded Entertainment and Cinemas Award 2020

✅ Business Equipment Award 2020

✅ Coal Export Terminals Award 2020

✅ Concrete Products Award 2020

✅ Contract Call Centres Award 2020

✅ Electrical, Electronic and Communications Contracting Award 2020

✅ Food, Beverage and Tobacco Manufacturing Award 2010

✅ Graphic Arts, Printing and Publishing Award 2010

✅ Health Professionals and Support Services Award 2020

✅ Horse and Greyhound Training Award 2020

✅ Labour Market Assistance Industry Award 2020

✅ Manufacturing and Associated Industries and Occupations Award 2020

✅ Marine Tourism and Charter Vessels Award 2020

✅ Marine Towage Award 2020

✅ Mining Industry Award 2020

✅ Port Authorities Award 2020

✅ Professional Diving Industry (Industrial) Award 2020

✅ Professional Diving Industry (Recreational) Award 2020

✅ Seafood Processing Award 2020

✅ Stevedoring Industry Award 2020

✅ Sugar Industry Award 2020

✅ Surveying Award 2020

✅ Telecommunications Services Award 2020

These changes took place from the first full pay period on or after 20 November 2020. The Aged Care Award change took place from the first full pay period on or after 1 March 2021. If you need help working out if this applies to you then reach out. We got you! 🤘

Converting casual employees to permanent

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 requires:

  • large businesses (employer with 15 employees or more) to offer conversion to permanent employment
  • small business (employer with fewer than 15 employees) to not refuse conversion to permanent employment, unless on reasonable business grounds.

There is also a documented process that the employer needs to follow. If you need help, HR Gurus has all the templates.

Definition of “double dipping” for casual employees

The Fair Work Commission also clarified the issue of ‘double dipping’.

What happends if a casual employee has been incorrectly classified? In that case, the Court must reduce a claim for relevant entitlements under the National Employment Standards. The reduced amount is equal to the casual loading amount. The Court decides what casual loading amount is appropriate.

Importantly, this applies retrospectively. So, businesses can rely on this provision for permanent entitlement claims which have already been made.

Halleluya on that one, we were starting to get seriously worried!

Making casual employees redundant

Redundancy and termination pay used to take into account the period of service that a casual employee has worked. This has changed.

The periods of service worked by a casual employee no longer counted as ‘continuous service’ for the purposes of redundancy and termination pay. Only periods worked as a permanent employee will be considered for such purposes.

This is also good news for employers of casual employees..

Information requirements for casual employees

All employers must provide new and existing casual employees with the Casual Employment Information Statement. This has information about:

  • the definition of a casual employee
  • when an employer has to offer casual conversion
  • when an employer doesn’t have to offer casual conversion
  • when a casual employee can request casual conversion
  • casual conversion entitlements of casual employees employed by small business employers
  • the role of the Fair Work Commission to deal with disputes about casual conversion.

So, there you have it, a lot to digest! If you need help with documentation to support any of the above processes, then reach out to HR Gurus on 1300 959 560.

Written by resident HR Guru Emily Jaksch.

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