Annual leave: generally does not accrue on overtime. Under the National Employment Standards, paid annual leave accrues on an employee's ordinary hours of work — and overtime is, by definition, outside ordinary hours.
Super: generally is not payable on overtime. For earnings paid from 1 July 2026 the super guarantee is calculated on qualifying earnings (QE) — before that, ordinary time earnings (OTE) — and overtime is excluded from both, provided the overtime hours are clearly identifiable and distinct from ordinary hours.
The catch: "clearly distinct" is the whole ballgame. If ordinary and overtime hours are blurred — an all-inclusive flat rate, or an award that folds extra hours into "ordinary hours" — the earnings can become qualifying earnings and attract super.
Annual leave accrues on ordinary hours, not overtime
The National Employment Standards (NES) in the Fair Work Act 2009 give full-time and part-time employees four weeks of paid annual leave per year (five for some shift workers). That leave accrues progressively across the year based on the employee's ordinary hours of work.
Because accrual is tied to ordinary hours, overtime hours generally do not add to the annual-leave balance. An employee who works 38 ordinary hours plus 5 overtime hours in a week accrues leave on the 38, not the 43.
What counts as "ordinary hours" is set by the relevant modern award, enterprise agreement or contract — not by the payroll system. Most awards specify the maximum ordinary hours (commonly 38 per week) and define anything beyond that, or outside a span of hours, as overtime.
Some awards let ordinary hours be worked at times that look like overtime (for example, weekend ordinary hours in certain retail or hospitality awards). If the award treats those hours as ordinary, they accrue leave and attract super — even though they carry a penalty rate. Always read the ordinary-hours clause of the specific award.
Super is paid on qualifying earnings (built on OTE)
The super guarantee (SG) — 12% from 1 July 2025 — is calculated, for earnings paid from 1 July 2026, on an employee's qualifying earnings (QE) under Payday Super, not their total earnings; for earnings paid up to 30 June 2026 the base was ordinary time earnings (OTE). QE builds on the OTE concept (adding all commissions and amounts salary-sacrificed to super), and the ATO's public ruling SGR 2009/2 remains the authority on what is and isn't OTE.
Under that ruling, overtime payments are not OTE — and they are equally excluded from qualifying earnings — so no super is payable on them, where the overtime hours are clearly identifiable as such. Broadly, OTE includes:
- Earnings for ordinary hours of work
- Most allowances, over-award payments, shift loadings and commissions
- Paid leave taken during ordinary hours (annual, personal/carer's leave)
And OTE generally excludes:
- Overtime payments (where hours are clearly overtime)
- Reimbursement of expenses and unfair-dismissal / redundancy payments
- Unused annual leave paid out on termination
When it stops being compliant
Overtime not accruing leave or super is the normal, compliant position — but it depends on the hours being genuinely and clearly overtime. It gets risky when:
- Ordinary and overtime hours aren't distinguished. SGR 2009/2 says that if you can't clearly identify the overtime component — for instance you pay a single all-inclusive rate for all hours — then all of the earnings count towards the super base (OTE, and now qualifying earnings) and attract super.
- The rate is "all-purpose" or loaded. An all-purpose allowance folded into the hourly rate is generally OTE.
- The award defines ordinary hours broadly. If the award treats the extra hours as ordinary (not overtime), they accrue leave and attract super.
- Annual leave loading. Leave loading is generally OTE and attracts super — unless it is demonstrably referable to a notional loss of the opportunity to work overtime. This is a narrow exception; treat leave loading as OTE unless you have advice otherwise.
Set up your payroll so ordinary hours and overtime are recorded and paid as separate line items, mapped to the correct award classification. That single habit is what makes "no leave / no super on overtime" defensible — the ATO and Fair Work both key off whether the overtime is clearly identifiable.
Quick answers
Does overtime accrue annual leave?
Generally no. Annual leave accrues on ordinary hours under the NES, and overtime is outside ordinary hours. What counts as "ordinary hours" is defined by the relevant award, agreement or contract.
Is super payable on overtime?
Generally no. For earnings paid from 1 July 2026 super is calculated on qualifying earnings (before that, ordinary time earnings), and overtime is excluded from both, as long as the overtime hours are clearly identifiable — the ATO's ruling SGR 2009/2 sets out that test. If ordinary and overtime hours aren't clearly separated, all earnings may count towards the super base and attract super.
So is it compliant to not accrue leave or pay super on overtime?
Usually yes, when the hours are genuinely overtime and clearly distinguished from ordinary hours. It stops being safe with ambiguous ordinary hours, an all-inclusive rate, or an award that treats the hours as ordinary. Check the ATO OTE ruling and the award.
What's the difference between OTE and overtime?
OTE is broadly what an employee earns for their ordinary hours (including many allowances, loadings and paid leave), but not overtime. Overtime is work outside the ordinary hours set by the award, agreement or contract, usually at a penalty rate.
Ordinary vs overtime, mapped to the award — automatically
Ledra Pay separates ordinary hours from overtime on every pay run, applies the correct award treatment, and calculates super on qualifying earnings only (OTE for pay runs before 1 July 2026) — with an auditable evidence trail behind each figure. No spreadsheets, no guessing which hours attract super.
See Australian payroll →Government sources
- Fair Work Ombudsman — Annual leave (accrual on ordinary hours, NES).
- Fair Work Ombudsman — Overtime pay (ordinary hours vs overtime).
- Australian Taxation Office — Ordinary time earnings and super support.
- ATO — Superannuation Guarantee Ruling SGR 2009/2 (meaning of "ordinary time earnings").
- ATO — What payments are qualifying earnings (the SG base for earnings paid from 1 July 2026; overtime excluded where ordinary hours are clearly identified).
- ATO — How much super to pay (SG rate 12% from 1 July 2025; quarterly rules — for earnings paid up to 30 June 2026 only).
- Federal Register of Legislation — Fair Work Act 2009 (National Employment Standards).