What is ordinary time earnings?
Ordinary Time Earnings (OTE) represent the standard earnings an employee receives for their ordinary hours of work, excluding certain additional payments such as overtime, bonuses, and allowances. OTE forms the basis for various employment-related calculations, including superannuation contributions and leave entitlements.
What payments are considered to be OTE?
OTE includes the following types of payments:
- Base salary or wages
- Non-discretionary bonuses (those guaranteed or expected)
- Shift loadings for working shifts
- Overtime where the ordinary hours of work are not stated in an award or agreement, or not separated from other hours
- Allowances that are part of the regular salary package
- Termination payments – in lieu of notice
What payments are not considered part of Ordinary Time Earnings (OTE)?
Payments that are not included in OTE encompass:
- Overtime payments
- Discretionary bonuses (those not guaranteed or expected)
- Reimbursements for expenses incurred during work
- Employer superannuation contributions
*For more information, please refer to ATO.
Is overtime included in OTE?
No, overtime payments are typically not included in OTE.
Overtime refers to extra hours worked beyond an employee’s ordinary working hours listed on award, EA or employment contract and is calculated separately from OTE. Overtime payments are subject to different taxation and superannuation rules. But overtime where the ordinary hours of work are not stated in an award or agreement, or not separated from other hours, can be included in OTE.
How is OTE calculated?
OTE is calculated by adding up an employee’s regular earnings for their ordinary hours worked. You also have to consider the guaranteed or expected bonuses, commissions, and allowances that are part of the regular salary package. It is the figure used to determine the employer’s superannuation contribution obligations and various employee entitlements, such as paid leave.
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