Under most modern awards, casual employees are entitled to what is known as a 'casual loading', representing an additional amount (often 25%) on top of the minimum hourly rate. While this is welcomed by those engaged on a casual basis, it often presents a nightmare for employers, who are tasked with interpreting the often ambiguous wording of the award in order to figure out how to appropriately pay a casual who is entitled to both a casual loading and an overtime rate.
In order to clarify this confusion, in a recent decision the Fair Work Commission has set out the way casual employees are paid for overtime under each award. In doing so, it split up the way awards deal with paying overtime to casuals into three different categories, namely awards where:
- overtime penalty rates are payable in substitution for the casual loading
- the casual loading and the overtime penalty rate are added separately to the minimum hourly rate (the cumulative approach)
- the overtime penalty rate is applied to an ordinary hourly rate consisting of the minimum hourly rate and the casual loading (the compounding approach).
Employers should check which category their award falls into and ensure they have been paying overtime to casual employees correctly to avoid any discrepancies that may result in a claim for underpayment.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
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