As part of their 4 yearly review, the Fair Work Commission is continuing to roll out changes to many Modern Awards, with the latest changes providing clarity in the way casual employees are paid for overtime. These changes need to be implemented from the first pay run on or after 20 November 2020.

Under most modern awards, casual employees are entitled to what is known as a ‘casual loading’. This is an additional amount (usually 25%) on top of the minimum hourly rate and is designed to factor in the absence of paid leave and other entitlements.

Why do casuals get even more for overtime?

While casuals do already get this ‘casual loading’ increasing their hourly rate, when an employee works over time, they will also be entitled to overtime rates in addition to, or instead of their casual hourly rate.

When do overtime rates apply?

Overtime must be paid when an employee performs work beyond their ordinary hours specified in an award or agreement or outside an agreed number of hours. These extra hours worked are considered overtime and attract overtime penalty rates.

How are overtime rates calculated for casuals?

Each award affected will have one of three methods applied in calculating overtime:

  • The cumulative approach whereby the casual loading and the overtime penalty rate are added separately to the minimum hourly rate.
  • The compounding approach where by overtime penalty rate is applied to an ordinary hourly rate consisting of the minimum hourly rate and the casual loading.
  • Overtime penalty rate is payable instead of the casual rate that includes loading.

For example, in the Clerks – Private Sector Award 2020 overtime is calculated with a cumulative approach. That is, where a full time or part time employee is paid an overtime rate of 150% or time and a half, a casual employee would be paid 175%. The 175% comprises 100% minimum hourly rate + 50% overtime penalty rate + 25% casual loading.

With around 100 awards affected by these recent changes, it’s important to review pay rates against the new overtime rate calculations set out in the award that applies to your business.

To ensure that you are not at risk of underpaying employees, get in touch with our team, via the chat box here or by calling us on 08 6150 0043.

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