The Fair Work Commission (‘the Commission’) as part of its 4-yearly review of modern awards has clarified “overtime for casuals” in 97 awards.  The need for clarification was initiated by a Statement issued by the Full Bench (as then constituted) on 4 December 2017.  This Statement included a table identifying modern awards which were considered ambiguous in relation to overtime entitlement for casual employees.

The Commission has since published relevant decisions (8 October 2019, 18 August 2020 and 30 October 2020).  As a result of the October decision, generally from the first full pay period on or after 20 November 2020, 97 modern awards have been varied to provide clarification regarding overtime and casual provisions.  There are a few awards where the operative date for commencement differs, such as the Aged Care Award where confirmation that a ‘compounding rate’ applies does not become operative until 1 March 2021.

A ‘model clause’ has not been adopted to clarify overtime and casual provisions as part of the review process.  Primarily, the modern awards have been reviewed and updated individually to provided clarity around the following common issues:

• how casual and overtime loadings interact;
• whether casuals are entitled to overtime; and
• the hours when overtime applies.

Importantly, as part of the review process the Commission has confirmed whether the modern award calculates penalty rates for casuals using a ‘compounding’ or ‘cumulative’ approach.  Below is an outline of both methods:

Compounding Approach

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

E.g.      Hourly rate ($25.00) x 125% casual loading x 150% overtime loading = $46.88

Cumulative Approach

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

E.g.      Hourly rate ($25.00) x 25% casual loading = $6.25; plus

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

= $25.00 + $6.25 + $12.50

Total = $43.75

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

For this reason, along with the impact of COVID-19 on the aged care industry, the Commission has provided the aged care industry with additional time (until 1 March 2021) to adjust to confirmation that the ‘compounding approach’ applies to the Aged Care Award.

A full list of the modern awards varied in relation to casual and overtime provisions can be accessed here. Aitken Legal strongly recommends that employers take the time to review casual and overtime provisions for each modern award that applies to their business.  Employers requiring assistance are encouraged to contact one of Aitken Legal’s employment law specialists.