As part of its’ 4-yearly review, the Fair Work Commission has clarified overtime for casuals in 97 of the 100+ Modern Awards. The need for clarification was initiated back in 2017 due to the ambiguous nature of awards in relation to overtime entitlements for casual employees.

The Commission has since published a number of decisions on this topic however the latest decision handed down in October 2020 has resulted in 97 of the modern awards being varied from the first full pay period on or after 20 November 2020.

The modern awards have primarily been reviewed & updated individually rather than the Commission taking a ‘model clause’ approach around the following common issues:

• How casual & overtime loadings interact;
• Whether casuals are entitled to overtime; and
• The hours when overtime applies.

Importantly, the Commission has confirmed whether the modern award calculates penalty rates for casuals using a ‘compounding’ or ‘cumulative’ approach.

Compounding Approach

Overtime penalty rate is applied to the casual rate of pay inclusive of casual loading:

EG. Base hourly rate ($25.00) x 125% casual loading x 150% overtime = $46.88

Cumulative Approach

Casual loading and the overtime penalty rate are added separately to the minimum hourly rate:

Base hourly rate ($25.00) x 25% casual loading = $6.25

Base hourly rate ($25.00) x 50% overtime penalty rate = $12.50

= $25.00 + $6.25 + $12.50

= Total of $43.75

The ‘cumulative approach’ results in a lower rate compared to the ‘compounding approach’.

If you employ casuals, we highly recommend you review your Modern Award for any updates at the following link: https://www.fairwork.gov.au/awards-and-agreements/Awards/list-of-awards

If we can help you with the processing of your payroll or any other day to day bookkeeping needs, please contact us for a no-obligation consultation and quote on 07 5413 9393 or queries@evolveonlinebookkeeping.com.au