Casual loading and overtime

How do I calculate the overtime rates for casual employees? Does the casual loading get paid on top of the overtime rate?

How the casual loading interacts with overtime and other penalty rates will vary based on the award or enterprise agreement that applies.

There are three main ways in which the casual loading may interact with overtime rates:

1. The casual loading is not paid when the casual employee works overtime (e.g. the Meat Industry Award 2020)
2. The casual loading and the overtime are both calculated separately on the base rate of pay before being added to the final rate (e.g. the Clerks - Private Sector Award 2020)
3. The casual loading compounds with the overtime penalty, often referred to as an “all purpose” rate (e.g. the Manufacturing and Associated Industries and Occupations Award 2020).

An example of how these alternatives produce different results is below:

Stefan is a casual employee. His base rate is $20 per hour, plus a casual loading of 25% ($5 per hour), which means for ordinary hours Stefan is paid $25. Stefan performs two hours of work after his ordinary hours, which provides an overtime rate of 150%.

Which of the methods above will apply depends on which modern award applies to Stefan’s employment. Each of the methods produces a different result as follows:

Method 1: Casual loading not paid on overtime

$20 * 150% overtime penalty = $30 per hour (150% of the base rate)

Method 2: Adding casual loading

$20 (100% base rate) * 150% overtime penalty = $30, or 150%
$30 (150%) + $5 (25% casual loading) = $35 per hour (175% of the base rate)

Method 3: Compounding casual loading

$20 (100% base rate) + $5 (25% casual loading) = $25 (125%)
$25 (125%) * 150% overtime penalty = $37.50 per hour (187.5% of the base rate)

Determining how the casual loading interacts with penalty rates in a particular award is not always straightforward. The wording that indicates which method to use is not always consistent between different industries, and often the basis for one award applying one method over the other is historical in nature. To further complicate matters, the Fair Work Commission recently handed down an overtime for casuals decision as part of the 4-yearly review of modern awards that varies what have been longstanding practices on how a number awards should address on this issue (Overtime for Casuals [2020] FWCFB 4350).

Ai Group's Annotated Awards

Ai Group’s Annotated Awards have long been among the services most valued by business. The additional explanations, interpretations and guidance notes they offer – above and beyond the complex and often confusing official award publications– are designed to help you and your business correctly interpret and apply the award in your workplace, ensuring your obligations are met.

Available in both hardcopy and online formats, our Annotated Awards also offer an updating service, ensuring that the publications remain accurate and 100% reliable whenever changes occur. Visit our dedicated Annotated Awards page to find out more!

Further information

For more information about the recent Overtime for Casuals decision, see our member advice: NAT 095/20 – Award variations – Overtime for casuals and related matters.

For assistance with your workplace matters, Members of Ai Group can contact us or call ourWorkplace Advice Line on 1300 55 66 77 for further information.

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