What are Ordinary Time Earnings (OTE)?
Ordinary Time Earnings (OTE) is the amount your employees earn during their standard working hours. It’s a key payroll concept in Australia because it’s used to calculate superannuation contributions under the Superannuation Guarantee (SG). OTE includes most payments received for ordinary hours of work, but excludes certain allowances, overtime, and reimbursements.
In simple terms, OTE determines how much super must be paid for an employee and ensures compliance with Australian legislation.
What's include in OTE?
The Australian Taxation Office (ATO) defines OTE as covering most earnings for ordinary hours. Common inclusions are:
- Base salary or wages
- Shift loadings and allowances (paid for ordinary hours)
- Commissions and bonuses (if related to ordinary hours)
- Paid leave (annual leave, sick leave, long service leave)
- Casual loadings
What’s excluded from OTE?
Some payments are specifically excluded from OTE and therefore don’t attract superannuation:
- Overtime payments
- Expense reimbursements (e.g., travel, uniforms)
- Redundancy payments
- Termination payments (in lieu of notice, unused leave paid out on exit)
- Dividends and distributions
Why OTE matters
- Super compliance: Employers must calculate Superannuation Guarantee (SG) contributions as a percentage (currently 11.5%, moving to 12% from July 2025) of OTE.
- Avoiding penalties: Incorrect OTE calculations can lead to underpayment of super and ATO penalties.
- Consistency: OTE provides a standard measure across industries and roles, ensuring fair and compliant superannuation practices.
