Issue
Whether the employer is required to include long service leave entitlements (paid as a lump sum in lieu of leave) in the earnings base for the purposes of the Superannuation Guarantee (Administration) Act 1992 ('SGAA') when there is no termination of employment.
Decision
The employer is required to include long service leave entitlements (paid as a lump sum in lieu of leave) in the earnings base for purposes of the Superannuation Guarantee (Administration) Act 1992 ('SGAA') when there is no termination of employment.
Facts
An employee was paid accrued long service leave as a lump sum while they remained an employee of the same employer. The employer sought clarification on whether the paid out leave should be included in the ordinary time earnings (OTE) for purposes of the SGAA.
Reasons For Decision
Section 6(1) (SGAA) defines OTE to include earnings 'in respect of ordinary hours of work'. Superannuation Guarantee Ruling SGR 94/4 discusses what constitutes OTE and what 'in respect of ordinary hours of work' means. LSL paid in a lump sum on termination is specifically excluded from OTE by the definition in section 6(1) (SGAA). The Ruling specifies that 'in respect of' means to have some connection with, which means that an amount will be included in OTE if is paid to satisfy an entitlement that accrued as a result of attending, or working, in those hours.
LSL is determined on the basis of attending or working the relevant ordinary hours and therefore, on this basis, the payment of LSL to an employee in lieu of taking the leave is included in OTE.