Don't act casual, get smart—understanding the Casual Loading Offset Regulation

Overview

The Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Amending Regulation) came into effect on 18 December 2018, varying the Fair Work Regulations 2009 (Cth) (Regulations). This will enable employers to offset the casual loading paid to casual employees against entitlements they would be owed if the employee is later found to be a permanent employee during the course of their employment.

Background—double dipping?

The amendment was prompted by WorkPac Pty Ltd v Skene [2018] FCAFC 131 (WorkPac) (see our earlier article) in which an employee, Paul Skene, was classified by his employer as a casual employee, but was later found to be a permanent employee by the Full Court of the Federal Court. WorkPac was ordered to backpay Mr Skene the annual leave he should have accrued, despite WorkPac’s claim that Mr Skene had been paid a casual loading to compensate him for not being entitled to paid leave.

WorkPac triggered concern among industry professionals that it set a precedent for casual employees to “double dip”, by accepting a casual loading in lieu of permanent employee benefits, while being afforded annual leave entitlements following the termination of their employment. However, it should be noted that the Court in WorkPac did not accept that Mr Skene was paid a casual loading at all.

Application of Amending Regulation

The Amending Regulation applies where all of the following criteria are met, where an employee is:

• employed on a casual basis
• paid a casual loading that is clearly identifiable as an amount paid to compensate the employee instead of NES entitlements (which casual employees are not entitled to, such as paid personal/carer’s leave or paid annual leave)
• classified by their employer as a casual, when they were in fact a part-time or full-time employee for some or all of their employment, and
• making a claim to be paid for one or more of the NES entitlements that they did not receive for some or all of the time that they were incorrectly classified as a casual.

An employer can claim to have an employee’s casual loading payments offset against the NES entitlements that the employee claims they did not receive for the time they were incorrectly classified as a casual.

The Amending Regulation covers employment periods that occurred before, on or after 18 December 2018. As such, they apply to former, existing and new casual employees.

Practical next steps for employers

To take full advantage of the Amending Regulation to offset entitlements as described above, we recommend that employers: 

• ensure all payslips for casual employees record any applicable casual loading as a separately identifiable amount, and
• provide all casual employees with a written breakdown of their ordinary hourly rate and the applicable casual loading paid to them, including where the employee is paid a flat hourly rate (i.e. identifying the separate components that make up the flat rate, such as the ordinary hourly rate and casual loading). It should specify that the casual loading is paid to compensate for one or more of the relevant NES entitlements that casual employees are not entitled to. This could be outlined in the contract of employment, an industrial instrument or in a separate document (e.g. a letter).

While the Amending Regulation will enable an employer to offset the loading paid to a casual employee in the prescribed circumstances, it is not a substitute for properly characterising the true nature of the work relationship of employees, which can change over time. We recommend reviewing employment contracts and the basis of the engagement of employees on a regular basis to avoid misclassification.