The general industrial understanding of allowances and loadings expressed as “all-purpose” is that the calculation method involves a cumulative rather than a separate calculation of the independent components, resulting in a compounded effect.
However, with some recent decisions having tested this understanding, Perth-based employee relations consultant Chloe Sargent provides AREEA members with this update on what does and doesn’t apply as “all-purpose” for loadings and allowances.
The 2016 case of MSS Security Pty Ltd t/as MSS Security  FWCA 2774, comprising the original decision of 23 May 2016, and upheld on appeal on 3 August 2016, has confirmed that “all-purpose” allowances and loadings aren’t always applied “for all and any purposes”.
In this case the Company (MSS) made an application to remove an ambiguity regarding the application of allowances in two of its enterprise agreements, which the Union (United Voice) opposed.
The dispute concerned how the “Aviation Allowance” which was expressed to be an “all-purpose” allowance should be applied:
- The Company contended that the Aviation Allowance should paid as a flat “standalone” allowance in addition to the ordinary rate of pay (and therefore overtime loadings and penalties should be calculated on the ordinary rate only), as per the following formula:
(Ordinary Rate x Overtime Loading) + Aviation Allowance
- The Union submitted that the Aviation Allowance should form part of the ordinary rate of pay (and therefore overtime loadings and penalties would be calculated on the compounded rate), as per:
(Ordinary Rate + Aviation Allowance) x Overtime Loading
Deputy President Sams acknowledged that while the general industrial understanding of the words “all purpose” typically employs a compounded calculation method, there are exceptions to this understanding and the appropriate calculation method will ultimately depend on the parties’ intentions and the language of the particular instrument.
In deciding that the Aviation Allowance was an example of this exception and that all-purpose allowances and loadings aren’t always applied in an “all-purpose” fashion, the Deputy President relied on a number of factors, including:
- Language in the agreement and historical application
Despite being expressed as an “all-purpose” allowance, MSS had been applying the allowance as a standalone allowance for a number of years in previous agreements and was able to adduce evidence of its intentions to apply it as a standalone allowance during negotiations.
- Distorted outcome
The Deputy President noted that applying the Union’s method of calculation would result in a distorted outcome because the Aviation Allowance would have greater value for some employees in certain circumstances, for example where a person worked overtime because it would result in a penalty being paid on a penalty.
- Modern Award Review Decision
In the Modern Award Review Decision, the Full Bench confirmed that despite the general understanding of the meaning of “all purpose”, parties can agree for it to mean something else.
The union unsuccessfully appealed the decision.
Lessons for AREEA members
The key take-out for AREEA members is that simply because an allowance is expressed as “all-purpose”, this does not necessarily mean a compounded calculation method should be adopted.
If in doubt, AREEA can assist and advise members on the appropriate calculation method and for any other queries relating to loadings and allowances.
To contact an experience AREEA employee relations consultant, contact your local AREEA office.