Overtime is any time worked over the normal working hours stated in a contract. The employment contract you provide should include working hours and how overtime will be handled.
The following should be included in your overtime policy:
- Request for overtime
- Approval of overtime
- Recording of overtime
- Payment for overtime
Different types of overtime
Compulsory overtime and employee rights
Your employees only need to work overtime if it is specified in their contract. If you need employees to work overtime, you should include compulsory overtime provisions in their terms and conditions.
Where your employees are required to work overtime as part of their contract, you’ll need to comply with The Working Time Regulations (WTR).
The WTR state that employees don’t have to work more than 48 hours per week, averaged over 17 weeks. Employees can choose to work more than 48 hours in a week, but they’ll need to have a written and signed agreement.
Voluntary overtime is where you ask your employee to work overtime and they are free to say no. That’s because there’s no duty in the contract for you to offer overtime or for your employee to accept it.
In the case of non-guaranteed overtime, you don’t have to offer overtime but, if you do, your employee has to work because they’re bound by the terms of their contract.
You’re not legally obliged to pay your employees for overtime. However, you must ensure that your employees’ average pay for the total hours worked doesn’t go below the minimum wage.
The decision to pay for overtime is up to the employer. If you choose to pay overtime, you can also decide the rate, as long as it’s at or above the minimum wage. It’s important to note that you must stick to whatever overtime terms that you include in your employee's contract.
Time off in lieu (TOIL)
Instead of paying employees for overtime, some employers offer them time off in lieu (TOIL). You’ll need to come to an agreement with your employee to specify terms, such as:
- How many days can be accrued
- When the time off needs to be taken by
Overtime and holiday pay
There have been some recent court judgments that you should consider when calculating holiday pay in relation to overtime.
The current position for workers and employees is that holiday pay should include:
- Guaranteed, compulsory overtime
- Non-guaranteed compulsory overtime (if this is worked frequently)
- Probably voluntary overtime
The issues around holiday pay and overtime may become clearer as the Employment Appeal Tribunal is due to make its decision on a pending case.
Different types of workers and overtime
Except for where your part-time workers’ contract has different terms, you’ll normally pay overtime if:
- They work more hours than the number stated in their contract.
- Work longer than the hours of full-time staff who would get paid overtime for working these extra hours.
- The work is done during unsociable hours (late night work) that you would otherwise pay full-time staff an additional amount for.
Your temporary worker is entitled to the same basic terms and conditions as your employees after they have spent 12 weeks working with you. This is called ‘equal treatment’ and attracts rights including:
- The same pay as someone permanent doing the same role
- Overtime pay
- Paid annual leave