Overtime is usually classed as hours worked over a businesses full-time hours requirement. If an employee has fixed working hours, for example, Monday to Friday 9.00am until 5.00pm then overtime becomes additional hours that are worked over and above the standard hours specified with an employees terms and conditions.
Employers can offer overtime for a number of reasons like increased workloads in order to fulfil an order and the option can be compulsory or voluntary. A recognised system of paid overtime is more common with hourly paid staff than salaried staff.
Whether an employee is required to work overtime depends on the employment contract. Details should be set out in their contract of employment or the staff handbook.
Is overtime compulsory or voluntary?
Overtime can be compulsory or voluntary. It will depend on the terms and conditions of the employee’s contract whether overtime is:
- compulsory and guaranteed
- compulsory but non-guaranteed.
Voluntary overtime means there is no obligation for an employer to give overtime and there is no obligation for an employee to work overtime if it is offered to them. An employee should not be subject to any detriment for turning down voluntary overtime.
For example, Several employees are absent from work due to sickness. This leaves their employer short-staffed. The employer offers overtime to their colleagues so they continue to meet customer demand. The employees are able to choose whether or not to work the extra hours as there is nothing in their contract to say they must do so.
Guaranteed overtime is overtime that an employer is contractually obliged to offer and a worker is obliged to accept.
For example, An employer knows they need to fulfil an order from a particular customer on the last Sunday of every month. The contracts of employment include that staff will be scheduled to work overtime on this particular day each month and they will be obliged to work it.
Non-guaranteed overtime does not have to be offered by an employer. However, when it is offered, the worker must accept and work it.
For example, an employer knows that their business is likely to be busier at certain times of the year but does not know how much overtime they will need their employees to work. The employer includes in its contracts of employment that, if needed, workers will have to work extra hours during the busy periods.
An employer who wants to rely on either guaranteed or non-guaranteed overtime should clearly set out in the terms and conditions of employment that the overtime is compulsory.
If an employee refuses to work overtime they are obliged to work, the employer may view this as a breach of the contract and a disciplinary matter.
Is there a limit to how much overtime can be worked?
All working hours, including overtime, are governed by the Working Time Regulations. These state that a worker:
- must not work more than 48 hours per week on average, though a worker may choose to “opt out”
- must be allowed at one day off each week or two days off in a fortnight
- should have 11 hours of uninterrupted rest in a 24 hour period
- is given at least a 20-minute break if their shift lasts more than six hours.
There are some exceptions to these rules depending on the nature of the work that is being done.
Different rules apply to 16 and 17-year-old workers. They cannot work more than 8 hours per day or 40 hours per week. Young workers cannot sign an opt-out agreement and must have two days off per week.
Pay when working overtime
There is no legal right to receive an additional payment or be paid at a higher rate for any overtime worked.
An employer should clearly state in the employee’s terms and conditions of employment what, if anything, will be paid for working additional hours.
An employer may offer a higher rate of pay than normal for overtime as an incentive for staff to work the hours.
While overtime may be worked for no additional pay, a worker’s hourly rate must not fall below the National Minimum Wage.
Alternatives to paying staff for working overtime
As an alternative to paying, an employer may offer time off in lieu to workers who have worked above their contracted hours. Time off in lieu means that any overtime hours the individual works, they can take off from work in addition to their annual leave.
Both employer and worker should ensure that they keep detailed records of how much overtime has been worked and how much additional time off has been taken.
The agreement for taking time off should be set out in a written agreement and include:
- when leave can be taken
- the authorisation process for booking the leave
- what happens if the contract ends before all accrued overtime is used.
Employers should consider how much leave is allowed to accrue as the running of the business could be affected when workers look to take this time back.
An employer also needs to ensure that working additional hours to take the time back at a later date does not take their worker below the National Minimum Wage for that Pay Reference Period.
Overtime for part-time workers
Part-time workers should not be treated less favourably than full-time workers. If a full-time worker receives extra or an enhanced rate of pay for overtime, a part-time worker should receive the same rate of pay after working the same amount of hours.
Unless the contract says differently, there is no obligation on an employer to pay a part-time worker an overtime rate until they have worked the same amount of hours as their full-time counterpart.
Impact of overtime on holiday calculations
Recent court decisions have indicated that all overtime worked should be included when calculating a worker’s statutory holiday pay entitlement. The only exception to this is overtime that is worked on a genuinely occasional and infrequent basis.
These court decisions apply to the four weeks of annual leave which are required under European law. All workers in the UK must receive an additional 1.6 weeks of leave by law, and some receive more as part of their terms and conditions of employment. Many employers choose to apply the judgments to this extra annual leave. Doing this is not a legal requirement but can help to keep their processes simple and understandable.
As all court decisions are case-specific an employer may want to take legal advice as to how these decisions will impact on their organisation.
For more information, go to our page on Calculating holiday pay.