Flat Rates Under Scrutiny: What the WorkPac Decision Means for Coal LSL Levy Compliance

| August 17, 2026

The Federal Court’s decision in WorkPac Pty Ltd v Coal Mining Industry (Long Service Leave Funding) Corporation [2026] FCA 874 highlights the risks associated with all-inclusive or “loaded” hourly rates. 

WorkPac employed casual workers in the black coal mining industry and paid them flat hourly rates said to incorporate overtime, penalty rates, allowances and casual loading. The dispute concerned how WorkPac’s Coal Mining Industry Long Service Leave Scheme levies should be calculated between 4 July 2012 and 31 December 2023. 

The Federal Court (Court) considered two issues: the employees’ “base rate of pay” and the number of hours to which that rate applied.

No 35-Hour Limit

WorkPac argued that the levy should be calculated using no more than 35 hours per week, reflecting the ordinary hours identified in the relevant industrial instruments. 

The Court rejected this argument. The reference to “ordinary hours of work” in the Fair Work Act 2009 definition of “base rate of pay” identified the relevant rate, but did not limit the number of hours included in the calculation. 

The levy was therefore calculated by reference to the hours employees were rostered and entitled to be paid, including hours exceeding 35 per week. Those hours were included at the base rate, rather than at any separately identifiable overtime or penalty rate. 

Flat Rates Must Be Genuinely Capable of Disaggregation

WorkPac also sought to deduct notional loadings, penalties and allowances from the flat rates. 

The Court found that simply stating that a flat rate “included” or “absorbed” particular entitlements did not make those amounts separately identifiable. Where the employment documents did not specify the value of each component, the entire flat rate was generally treated as the employee’s base rate. 

WorkPac could not reconstruct a lower base rate by reference to rates paid to another category of employee or deduct a general “All Purpose Loading”. Casual loading could only be excluded where the employment documentation identified it as a specific dollar amount. 

Key Lessons for Employers

The decision demonstrates that labels alone will not determine how an all-inclusive rate is treated. Key lessons for employers include:

• Clearly identify remuneration components
  Employment contracts, remuneration schedules and payroll records should clearly identify the amount or calculation method for each loading, allowance or penalty component.

• Review Coal LSL levy calculations
  Employers covered by the Coal LSL Scheme should review historical levy calculations where rostered hours were capped at 35 hours per week or estimated components were deducted from flat rates.

• Ensure contracts and payroll records align
  More broadly, HR and payroll practitioners should ensure that the contractual description of an employee’s remuneration reflects how payments are actually calculated and recorded.

Reviewing Your Payroll Compliance

The WorkPac decision is a timely reminder to ensure remuneration arrangements and payroll practices align. 

IRiQ Law’s Payroll Audit and Remediation service, supported by IRPAY, helps employers identify payroll risks, address compliance issues and manage remediation. 

If your organisation uses all-inclusive or loaded rates, contact our team to discuss your payroll compliance needs.