A recent FWC appeal bench has dealt with the often vexed question of what rate of pay applies to casuals on overtime and other penalty-attracting situations. Agreeing with the decision made at first instance, the bench applied certain penalties to the loaded casual rate, which appears to be at odds with the raison d’etre for a casual loading.
That loading is to compensate a casual for various foregone permanent employee benefits. However, those benefits are fixed for the permanent. That is to say, no matter how much overtime, or how many night shifts, a permanent worker does during a service year, that permanent employee still gets the same annual leave, sick leave and so on. So, it follows that when working overtime, a casual should not have their casual loading, compounded by the overtime penalty, added to their earnings. It simply isn’t fair.
But that is what this decision upholds, and the principal reason appears to be because the award concerned uses the term “ordinary hourly rate” – without this term been defined so concerned parties can understand its usage. This leaves something open to interpretation that should not be. It is certainly open to argue that the use of the word “ordinary” in this context mean’s ordinary time. However, that is not the way it has been interpreted by the FWC in this and other cases.
Yet even in the award under discussion, in certain applications like night shifts, the casual loading and the shift loading are added together, not compounded. This means that to calculate the hourly rate for a casual on night shift, the two percentages are added together and then applied to the base rate. This prevents the compounding effect of adopting the “ordinary hourly rate” approach.
So even within the one award there are two different approaches about how to deal with this. And just to muddy the waters further, the Fair Work Ombudsman (FWO), the body that polices award compliance, adds the percentages together for overtime, differently to how the FWC full bench calculated it, resulting in a lower rate, for the award in question. The difference at the minimum wage level is close to $4 per hour for Sunday overtime. The result? An employer acting on the FWO advice is in breach of the award according to this full bench decision.
If a matter is so unclear that the FWC is at odds with the FWO, then obviously, the awards are not meeting the Modern Awards Objective that there is a “need to ensure a simple, easy to understand, stable and sustainable modern award system”.
There is no case for the compounding of a casual loading in any circumstance. It should be clear in awards that the 25% loading is for the base 38 hour week and no more. Where a casual works ordinary time in a penalty situation, the two loadings should be added together to establish the correct hourly rate and meet the purpose of the casual loading. And when a casual work overtime, the hourly rates should be identical to a permanent working overtime.
The smartest way to meet the modern awards objective to prevent over or underpayment and make the awards “simple, easy to understand” documents is for every award to have a table of hourly rates applying to permanents and casuals for all occasions included in the award as an appendix.