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31.2.3 Calculation of ordinary time NWE for Reservists
NWE forms the basis for setting rates of compensation under the SRCA. It represents a deemed value in respect of the client's pre-injury earnings. This applies equally to part-time and full-time employees.
Reservists are part-time employees of the Commonwealth
Except rare occasions when called up for Full-Time Service (e.g. a deployment overseas), Reservists are part-time employees of the Commonwealth.
- During call–up and full-time service their conditions of service and compensation entitlements become those of members of the permanent force, i.e. for that period only.
- Note full-time service does not include participation in periodic multi-day courses and annual two-week training camps incidental to part-time service.
NWE of part-time employees = part-time earnings PLUS full-time (i.e. non-C'wth)
In respect to part-time service, Subsection 8(3) says:
8(3) Where an employee was, at the time of the injury, employed by the Commonwealth or a licensed corporation in part-time employment, any earnings for the employee from any other employment shall, for the purposes of this section, be treated as earnings of the employee from his or her employment with the Commonwealth or the licensed corporation.
Subsection 8(3) recognises that a person incapacitated for work by an injury in part-time employment is thereby incapacitated for all other (concurrent) employment also. The intent of Ss8(3) is therefore that the weekly compensation must encompass all earnings lost due to the injury.
Military/civilian earnings to be separately investigated.
This means that in addition to the payments for reserves attendance, a reservist's civilian earnings (i.e. earnings other than from the Commonwealth) must also be taken into account, i.e. a reservist's NWE is composite and consists of both:
- military salary and allowances from Reserve employment, and
- salary and allowances from civilian employment.
Determining Reservists' NWE therefore requires two separate investigations from a delegate.
- 31.9 deals specifically with Reservists' military salary and allowances.
- 31.10 deals only with Reservists' civilian salary and allowances.
S8(1) requires that NWE for any employee be calculated as (NH x RP) + A where
NH = average weekly hours, RP = average pay rate and A = average allowances paid for the period. (see 31.2.1)
This means for reservists, where the earnings are split between two sources with differing rates, conditions and allowances, that the composite NWE be calculated as:
[military (NH x RP) + A] + [civilian (NH x RP) + A]
or, more succinctly:
[(average reserves earnings & allowances) + (average civilian earnings & allowances)]
- The average reserves and civilian earnings/allowances are derived from applying the relevant strategy in 31.9 and 31.10, respectively.
- 31.11 gives guidance as to which allowances may be included.
Where the client is required to work regular overtime in his/her civilian employment, the resultant aggregate NWE can be expressed as:
[(average reserves earning/allowances) + (average civilian earning/allowances + average overtime)]
Re: Tax status of Reserves earnings
Reserves payments (earnings) are tax-free. All other earnings, i.e. earnings from civilian employment, are subject to tax. However there is only one NWE. Both civilian and reserves earnings combined, form a single amount, only part of which is taxable. The Defcare Incapacity Calculator identifies what portion of any compensation paid is taxable and non-taxable.
That obviously adds some complication with respect to the actual calculation of the amount payable.