Overtime and your business

Businesses use overtime to help deal with sudden surges in work or unexpected shortfalls in staffing levels.

Employees must agree to work overtime. The only exception to this is if there is a clause in the employee's contract stipulating that overtime forms part of their employment agreement.

Agreements with employees

Some employers organise their business in such a way that overtime happens on a regular basis. In these instances, it makes sense for the employer to include overtime working as part of the employment contract.

The contract should make it clear if the overtime is mandatory or voluntary; it should specify the level of overtime pay as a rate, or multiple, of normal pay; it should indicate when overtime payments begin; and it should detail any notice periods that must be given for an employee to work overtime.

Pay

Overtime payment is usually calculated as a multiple of normal rates of hourly pay according to when the overtime is worked. For example, weekday evenings can be paid at a rate one-and-a-half times that of the normal rate; while public holidays can be paid at a rate double that of the normal rate.

Any employee whose job involves being called out to work from home for urgent purposes must be paid at an agreed overtime rate that takes account of when the call out happens (an evening, a weekend or a public holiday, for instance). Employers often pay employees a waiting-time or standby allowance while they are at home, and a separate overtime rate while they are out on call.

Employers need to be clear about what constitutes overtime. Many businesses will assume that a project that requires only a small, additional amount of time - a few minutes for a lower grade worker or an hour for someone at management level - to complete, over and above the contracted normal working hours, does not qualify for overtime payment.

Part-time workers

A part-time employee can be asked if they agree to work longer than their usual hours. Doing so does not automatically mean that they are working overtime.

A part-time employee who puts in extra hours during what, for full-time workers, would be the usual working day is entitled to a basic rate of pay for those additional hours.

When, however, a part-time worker exceeds the number of hours a full-time employee would normally work in a day, then they are entitled to overtime pay. This should be paid at the same rate as for full-time employees.

Time off in return for overtime

Employers can offer employees time off in lieu rather than overtime payment.

With time off in lieu, the amount of overtime worked is given back to the employee as extra time off work.

An employer can only offer time off in lieu if the employee agrees to it. The employer can, however, insist that the time be taken off when it fits in with workloads and when there is sufficient cover from other staff.

To avoid an employee storing up weeks of credited time off in lieu, an employer is allowed to stipulate a ceiling to the number of 'time-off' hours accumulated in any given month. The employer can also insist that the time accrued in one month must be taken off in the next, and that 'time-off' hours cannot be held over except with the employer's consent.

Any such agreement on time off in lieu must be set down in writing and must be understood by the employee.

Looking after employees

An employer must conduct a risk assessment study to make sure that the extra hours of overtime do not pose a threat - through tiredness, for example - to the wellbeing of the employees. Night shift workers in particular must be protected from too much overtime as this can have an adverse effect on their health.

Employees should not be left in a position where they alone hold responsibility for an environment, like a factory floor or area, that is too large for them to manage by themselves.

Where it is unavoidable that someone works alone, the employer must ensure that the employee does not have a medical condition that would make being on their own inappropriate.