Overtime – An employer’s guide

An area that continues to cause employers confusion is the right to overtime and overtime pay.

Whilst there is no statutory right to overtime or overtime pay you need to take a look at what is written in your contracts of employment for guidance on what you should be doing.

Overtime entitlements and pay rates do vary from industry to industry.  The decisions you make around this area will reflect on your business and your values, attitudes towards your employees.

It is illegal to pay your employees less than the national minimum wage (NMW) so this needs to be taken into consideration when setting contractual hours and requesting overtime to be worked.  If you are regularly requesting overtime that will take employees below the NMW for hours worked, you will need to pay them for their overtime to keep them above the NMW.

Additionally a European court of Justice ruling created a change in the way overtime and holiday calculations are made which caused further confusion to employers.

What is Overtime Pay?

Overtime pay is the pay for any hours worked in addition to those stated in the employees’ contract, irrespective of whether you are full or part time. (it is a legal requirement to specify how many hours are worked in the written statement of terms and conditions)

Your contracts of employment must give the company’s stance on overtime and any payment rates including their calculation.

There are three types of overtime pay:

  1. Voluntary – there is no obligation to offer overtime and no obligation to accept overtime
  2. Guaranteed – overtime that you are contractually obliged to offer and must be accepted and worked
  3. Non-guaranteed – This is overtime that does not have to be offered but when offered must be accepted and worked

Do I have to offer overtime pay to everyone?

In most cases you ought to have the same levels and rates for all employees. This is to avoid any potential discrimination for differences in overtime rates across your workforce.

Is there a maximum amount of overtime I can request my employees work?

The working time directive prevents you from forcing employees to work more than an average of 48 hours a week over a 17-week period.  However, employee may choose to sign an ‘opt out’ agreement and work over 48 hours a week if they’re over 18.  There are some limitations to this.

Holiday Pay and overtime

Whilst you are not obliged to pay overtime your holiday payments must include any regular overtime worked.  For example, if an employee is contracted to work 35 hours a week but regularly works 40 hours a week, they must be paid holiday pay based on 40 hours a week, even if they do not receive overtime pay.

In summary:

  • Contracts of employment are the most important document for managing and calculating overtime payments.
  • Overtime can be voluntary, guaranteed or non-guaranteed.
  • Employees can opt out of the working time directive
  • Holiday pay must reflect all regular hours worked.

Thanks for reading this short guide. Should you have further questions or would like to check your current overtime status please get in touch here.