Where income is not earned at a constant or clearly recognisable rate and the delegate is satisfied that employment is continuing, it is acceptable to average the variable earnings over a specific period to obtain a notional actual earnings (AE) amount.
It is suggested that a period of at least three months be the basis from which to derive an average for the notional actual earnings amount. Where the delegate is dealing with an entitlement to arrears of compensation, it is appropriate for an average to be drawn from the whole of the period of the arrears.
The following procedure involves calculating a notional actual earnings (AE) amount and averaging the weekly hours worked for a specific period (hereafter called the review period). The entitlement can then be calculated for the review period and the benefit paid for a future period. Notional figures are then recalculated for the second and subsequent periods.
15.3.1 Notional AE
For a person who may be commencing work after a rehabilitation program, the notional AE can be established for the first period by using industry award rates or alternatively, based on actual earnings from pay slips when they are provided by the person.
Upon completion of the first period, the notional AE for the second period can be calculated by averaging the actual earnings from the payslips that relate to the review period, being the first period in this circumstance.
15.3.2 Weekly Hours
The notional hours for the next period are based on an average of the actual hours from the review period. When commencing a person and no weekly hours are available, the weekly hours could be based on medical opinion of the person's capacity for employment. As with the notional AE, the average weekly hours are recalculated for each new period.
15.3.3 The Review Period
The length of the review period will need to be established for each case. Accordingly, the length of review periods should have regard to the particular circumstances of the person's employment. A review period of three months (13 weeks) is frequently chosen, as this allows for regular provision of pay slips. Longer or shorter review periods may be preferred, if the persons' earnings are known to have seasonal or shift variations.
A review period of 12 or 14 weeks may be preferred to a period of three months (13 weeks) to align with fortnightly pay periods.
The following examples may assist delegates in deciding how long the period should be:
Where a person's hours vary from week to week, with no real pattern, the review period may be three months.
Where a person works as a fruit picker, with seasonal variations in the hours worked. The review period could be twelve months thereby taking all the seasonal variations into account.
In the case of a car salesman who earns monthly commissions over and above his weekly rate of pay, the delegate may choose a review period of a month in accordance with the pay arrangements for the car salesman.
Where a person receives trailing commissions, such as might be the case for a finance broker, then it may be appropriate to average those earnings out over a full financial year to arrive at an appropriate AE.
Similarly royalty payments from book sales are considered actual earnings and it may also be appropriate to average these earnings over a financial year. Where a person receives an advance from a publisher to write a book, it will be appropriate to average those earnings out over the period of time the publisher has given the person to write the book. In the case of a former member who has utilised their maximum rate weeks entitlement, it will be necessary for the person to maintain a work attendance diary for the purpose of calculating the correct adjustment percentage to be applied to NWE.
The delegate has the option to choose the length of the review period according to the circumstances of the case. However the review period should never be greater than twelve months. The length of the review period should be discussed with the person during initial liaison.
15.3.4 Liaison with the Person
Before instituting this procedure there must be liaison between the delegate and the person. The person must agree to the proposal in writing.
15.3.5 Ongoing Claim Management
The process of averaging the earnings and hours of the review period to calculate a notional AE and hours for the next period is repeated for the life of the claim, or until circumstances change.
The responsibility still remains with the person in receipt of incapacity payments to immediately advise when their circumstances change.
Case study
The person works differing hours each week with corresponding fluctuating earnings. It has been agreed that the review period will be of 4 weeks duration. Normal weekly hours are 36.75 hours per week.
|
Week |
Normal Earnings |
Actual Earnings |
Hours worked |
% of NE |
Entitlement |
|
1 |
$1,000 |
$400.00 |
20 |
||
|
2 |
$1,000 |
$300.00 |
15 |
||
|
3 |
$1,000 |
$500.00 |
25 |
||
|
4 |
$1,000 |
$340.00 |
17 |
||
|
$385.00 (average) |
19.25 (average) |
90% |
$515.00 |
||
|
5 |
$1,000 |
$320.00 |
16 |
||
|
6 |
$1,000 |
$500.00 |
25 |
||
|
7 |
$1,000 |
$400.00 |
20 |
||
|
8 |
$1,000 |
$200.00 |
10 |
||
|
$355.00 (average) |
17.75 (average) |
85% |
$495.00 |
The average of the benefits for the first review period is $515.00. This is the amount the person is paid for each week of the second period.
The average for the second review period is $495.00. This is the amount the person would be paid each week for the third period.
For the initial period of top-up incapacity payments, the delegate calculates the benefit each fortnight, upon receipt of payslips. When the first period has passed, for example at the end of three months, the average of that period can be used as the review period for future calculations.