Calculating concurrent penalties & loadings in awards

Analysis

Calculating concurrent penalties & loadings in awards

This article identifies some common circumstances and problems that may raise questions regarding calculation of concurrent penalties, loadings or allowances under modern awards.

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This article identifies some common circumstances and problems that may raise questions regarding calculation of concurrent penalties, loadings or allowances under modern awards.
 
Most modern awards prescribe penalty rates, loadings and allowances that are paid to an employee when work is performed in specific circumstances.
 
Penalty rates usually describe payments prescribed by a modern award or an enterprise agreement for shift work, overtime, weekend work and public holiday work. Loadings would include casual loadings.
 
Monetary allowances can generally be separated into two broad categories; namely, those that are intended to reimburse actual expenditure incurred by an employee (eg tools, travelling, meals), and those that relate in some way to the nature or location of the work itself (eg disabilities, special skills, locality).

Possible confusion
 
The number of different penalty rates prescribed by an industrial instrument that can apply in different circumstances means that two (or more) penalties, loadings or allowances, can apply to the same work.
 
This can create confusion for an employer — do all the payments apply or does one payment take precedent. For example, a common question from subscribers to WorkplaceInfo relates to the calculation of overtime when worked by a shift worker. Is the overtime penalty rate calculated on the employee’s shift penalty?

Cumulative penalty rates — no award/agreement provision

It can generally be implied in a modern award or enterprise agreement that an employee is not entitled to the calculation of a ‘penalty on a penalty’.
Example

 
A shift worker who works overtime will have the appropriate overtime penalty rate prescribed by the modern award calculated on the ordinary hourly rate, exclusive of the relevant shift allowance or penalty, unless otherwise specified by the applicable modern award or enterprise agreement.
This is because the shift penalty applies to an employee’s ordinary shift; whereas, overtime penalty applies to work performed outside the employee’s ordinary rostered hours.

Anecdotally, it would seem confusion can occur in this circumstance because it is common for an employee to work an ’overtime shift’, implying the overtime is somehow part of a shift worker’s ordinary hours of work.

Casual loading and overtime

Another common circumstance relates to the appropriate calculation when a casual employee works overtime. Is the appropriate overtime penalty rate calculated on the casual loading?

Most modern awards provide for the payment of a loading to casual employees. The ‘standard’ casual loading is 25 per cent. This will be the case across-the-board from 1 July 2014 when transitional arrangements for casual loadings in modern awards will cease. The loading generally is not considered a ‘penalty rate’ because the benefits for which a casual is compensated includes entitlements such as annual leave, personal/carer’s leave, public holidays, etc.

As a general rule in modern awards, where penalties apply, the penalties and the casual loading are both to be calculated on the employee’s ordinary time rate.
Example

 
A modern award that provides a casual loading of 25% and a penalty rate for work on a public holiday of double time and a half (250%) would receive an ‘all-up’ casual rate for public holiday work of 275%.  
See: Award Modernisation Decision — Priority Awards [2008] AIRCFB 1000.

Public holidays and overtime

An employee who works hours on a public holiday in excess or outside the times worked on a normal shift are not entitled, under most modern awards, to be paid overtime rates in addition to the appropriate public holiday penalty rate.  
Example

 
Where an award prescribes double time and a half rates for all work performed on a public holiday work, an employee whose normal hours are eight per day would, if ten hours was worked on the holiday, be paid ten hours at double time and a half and NOT eight hours at double time and a half, and two hours at treble time and three quarters, (ie time and a half on double time and a half), unless otherwise prescribed by the applicable modern award or enterprise agreement.
All-purpose allowance

An award or enterprise agreement may provide that an allowance is ‘payable for all purposes of this award’. This means the allowance is to be included in any calculations under the industrial instrument that are based on an employee’s ‘ordinary pay’, such as overtime and penalty rates. Examples of an ‘all-purpose allowance’ include industry allowance, tool allowance, leading hand allowance and first-aid allowance, although reference should be made to the relevant industrial instrument to determine whether a particular allowance is payable for all purposes of the award.
 
A modern award that provides for all-purpose allowances is the Manufacturing and Associated Industries and Occupations Award 2010.
 
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