Overtime provisions in several modern awards have been amended for casual employees from the first full pay period on or after 20 November 2020. The changes made by the Fair Work Commission (FWC) aim to simplify overtime for casual employees and reduce common confusion around casual loading versus overtime penalty rates.
Making variations to several awards, casual overtime is now calculated using one of the following three methods:
1. The Compounding Method
Using this method, overtime is calculated once the casual loading has been applied to the base rate of pay. For example:
$20 (base rate + 25% casual loading) x 150% (overtime rate) = $30.00
2. The Substitution Method
Using this method, overtime does not include any casual loading. It is calculated using the permanent base rate. For example:
$17.00 (base rate) x 150% (overtime penalty) = $25.50
3. The Cumulative Method
Using this method, the casual loading and overtime entitlement are applied to the permanent base rate. For example:
$20.00 (base rate) x 175% (overtime penalty) + (25% of casual loading on base rate) = $40.00
Remember, the above methods will vary from award-to-award. To ensure you are paying your staff the correct overtime penalty rates, click here to view which awards have been affected and which calculation method to apply.
Do you need some HR help getting your head around the changes? Click here to get in touch with our team.