Overtime is a really blurred area, and often there is confusion around both employee rights and employer responsibilities. This lack of understanding can create resentment and disengagement among employees, which is why it’s important to ensure that there is clarity across the business.
What is overtime pay?
Any pay for work outside contracted hours, e.g. an employee is contracted to work 20 hours per week but works 25 hours in one week, which means 5 hours of overtime paid.
Employees will not be entitled to overtime where a contract pays an annual salary and the contract requires staff to be flexible. That being said employers need to be careful and ensure they are paying at least the National Minimum Wage according to the hours worked.
Can a company not pay overtime? Is not paying overtime illegal?
Employers in the UK don’t have to pay workers for overtime but must ensure employees’ average pay for total hours worked doesn’t fall below the national minimum wage. This contrasts markedly with other labour markets in the west. For example in Germany, employees must be allowed to accrue overtime as time in lieu. In the United States, employees working more than 40 hours must receive overtime payments inline with the Fair Labour Standards Act. However, it’s Australia that likely has the most legislation around overtime payments and is one of the world’s most generous labour markets for workers. By adhering to ‘award rates’ for different industries businesses must pay workers set rates of overtime depending on hours worked, time of day and days of the week. For example, many businesses must pay their workers time and a half at weekends and more than double time on public holidays.
When does overtime become contractual?
Overtime is always contractual. If there’s no such arrangement, employees can’t be forced to work overtime. Hours of work need to be set out in a Written Statement. Overtime pay is contract-dependent and overtime is usually paid for, often at enhanced hourly rates. Overtime rates should be agreed in the employment contract. If an employer does not pay overtime, but an employee has contracted to work overtime, that is when the employee’s average pay for the total hours worked must not fall below the National Minimum Wage. To summarise then: provided minimum pay levels are met, whether overtime is paid or not is a contractual matter.
It is a good idea for any Employment Contract to say overtime must be agreed by a line manager in advance. Failure to do so could mean that employer is subject to a unlawful deduction of wages claim.
Are employees required to work overtime? Can employees be forced to work overtime in the UK?
Employees in the UK only have to work overtime if it is clearly agreed and in their contract. Even then, by law they can’t be forced to work more than an average of 48 hours per week, averaged over a 17-week period. An employee can agree to work longer, but this agreement must then be in writing and signed by the employee.
Exceptions are made for certain employees working in security and surveillance, in the armed forces, emergency services or police, as domestics in a private household, as seafarers and workers on vessels on inland waterways, and in positions where working time is controlled by the employee herself, such as a managing executive of a company. If employees are under 18 years old, they can work a maximum of 40 hours a week.
Employers will also need to be careful not to fall foul of sex discrimination. This could occur if women are unable to work overtime due to childcare commitments.
Do employees have a right to refuse to work overtime?
Yes, as long as they have worked their contractual working hour obligations and have not signed a Working Time Directive waiver. For example, if an employee’s contract states a 48-hour working week (as is standard in many contracts), an employee can refuse to work more hours, unless a signed agreement has been made which states otherwise.
What counts as overtime?
All hours beyond the hours of work defined in the employment contract as normal working hours.
What is a reasonable amount of overtime?
If compulsory overtime is occuring often then the hours of the contract may need to be revisited. It is more important for staff to have adequate rest periods in between working time. It is also important for employers to look after employee health.
How do I calculate overtime?
The simplest way is to measure over hourly rate and pay accordingly.
Is time and a half mandatory for overtime?
No, unless it is written in the contract.
Is working more than 8 hours overtime?
Not unless it is written in the contract.
Is anything over 40 hours overtime?
Not unless it is written in the contract.
You may also want to consider the following – Employers must pay holiday pay based on regular overtime. For example; An employee is contracted to 25 hours per week but usually works 30 hours per week – the employer must therefore pay annual leave based on 30 hours per week.
We are very grateful to the following people for providing the expert answers to these common overtime policy questions:
– Steve Woods, UK Spokesperson for Deputy
– Jemma Fairclough-Haynes, Managing Director of Orchard Employment Law
– Michael Hatchwell, director at Globalaw