If you received a small, one-off end of year bonus, any super that might have also come as part of the bonus potentially won’t have a massive impact on your super balance. However, for people whose bonuses are calculated based on factors such as sales targets or revenue numbers, your bonus – and potentially the accompanying super – could add up to quite a hefty amount and make up a substantial part of your income. Additionally, for some top level executives, it’s not uncommon to receive up to half your annual salary or more as a yearly bonus.
Whether you’ve received a bonus or are an employer giving an employee a bonus, it could be helpful to understand what some of the main different types of bonus payments are and which ones attract super contributions.
What are bonus payments?
A bonus is a payment made to an employee, often to recognise and thank them for their performance or service. Bonuses are typically also designed to incentivise and boost employee productivity and morale. While they’re often given at the discretion of the employer offering them, bonuses can be contractually required in some cases.
Bonuses can be given for a number of reasons and to mark various milestones. For example, they can include end of year bonuses, sales bonuses, performance bonuses, sign-on bonuses for persons beginning their employment or starting other agreements, and retention bonuses for employees who stay with their employer for an agreed period.
How a bonus is calculated is likely to depend on your employer. For instance, bonuses could be determined based on the employee’s position and salary, or on their individual performance. Some employers consider the performance of the company as a whole when determining bonus payments, while others may give employees the same bonus across the board.
What payments do employers have to pay superannuation on?
Employers must pay eligible employees – generally those over 18 years who earn over $450 a month – a minimum super guarantee contribution based on the employee’s ordinary time earnings (OTE), according to the Australian Taxation Office (ATO). In other words, employers must pay super on what an employee earns for their ordinary hours of work, which depending on the employee may include certain allowances, annual leave, sick leave and certain types of bonuses. Since 1 July 2014, the minimum superannuation guarantee contribution has been 9.5% of the employee’s OTE.
So, whether an employer must pay super on bonus payments will depend on whether the bonus is within the employee’s OTE.
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What bonus payments do employers have to pay superannuation on?
The ATO sets out which payments are part of an employee’s OTE and therefore attract super payments. It states that in most cases, bonus payments are OTE. So, for example, a performance bonus given to reward an employee for their strong results achieved during the year will be considered OTE. Christmas bonuses, sign-on bonuses, retention bonuses and discretionary bonuses are also all typically included as OTE.
The only exception are bonus payments that relate solely to work performed entirely outside of the employee’s ordinary hours. For example, a bonus to recognise a project undertaken by an employee during overtime hours would not be part of OTE and so would not require super payment.
Here’s a table to summarise:
| Payment | Ordinary time earnings (OTE) |
|---|---|
| Performance bonus | Yes |
| Bonus labelled as ex-gratia but in respect of ordinary hours of work | Yes |
| Christmas bonus | Yes |
| Bonus in respect of overtime only | No |
Source: ATO
To help avoid any confusion, employers may want to clearly communicate with their employees whether any bonus given includes super or if super will be paid in addition to the bonus.
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