Ordinary Time Earnings

OTE mistakes to avoid

Under Australia’s Superannuation Guarantee laws, employers must pay a minimum amount of super (11.5% from 1 July 2024) to their eligible employees. This percentage is based on the Ordinary Time Earnings in a staff member’s salary.

i.e. OTE x 11.5% = minimum super to be paid

What are Ordinary Time Earnings?

Ordinary Time Earnings, or OTE, are specific types of income earned by employees. OTE generally includes basic salary or hours worked, as well as some types of allowances, loadings, bonuses and leave entitlements. But not all jobs are the same, and not all sources of income are treated the same either.

Working out OTE can be complex when you’re not using accurate and up-to-date payroll software and doing regular manual checks. Even honest mistakes can have serious consequences.

Tips – mistakes to avoid with super and OTE

• Up-to-date software: You can minimise the chance of errors by making sure your payroll software works with the ATO’s single touch payroll and it is continually kept updated.
• Relevant software: OTE can be defined in the various Australian wage awards and agreements, and your software should be able to handle these.
• Know all your wage awards and agreements: Some awards and agreements may make particular stipulations about what an OTE is and/or how and when to pay super. For example, your company may be allowed to make quarterly super payments, however an award might stipulate that super must be paid monthly.
• Cross check the system results: Since OTE normally includes items such as shift loadings, paid leave, allowances and commissions, take time to periodically check some payroll results for this. Mistakes left undiscovered over time can build up and become very costly.
• Pay by the due dates: Make sure you pay the right amount, and on time. If you underpay super, even by accident, later catch-up payments may not be tax deductible, and fines for late payments cannot be claimed as a business expense.

Note: In John’s example, super is not paid on overtime but some industrial agreements remove the distinction between ordinary hours and other hours so super becomes payable on overtime.

Is payment for annual or long service leave included in the calculation?

Yes... and no. It all depends on when the payments are made. In short, if they're made as part of normal employment (i.e. not part of termination payments) then generally yes. See the Australian Taxation Office website at ato.gov.au for more information.