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A guide to overtime pay for employers

Waitress serving a customer in a cafe

Whether you’ve got a big event coming up or just a busy seasonal period of activity, there could be an option for your employees to work more than their contracted hours.

Read on to find out how overtime works and the rules you have to follow as an employer.

What is overtime?

All of your employees should have a contract that sets out how many hours they’re expected to work each week.

If you want them to work more than their contractual hours, or they choose to, this counts as overtime.

Employees can work overtime for a number of reasons, such as:

  • earning extra money
  • covering colleagues who are off sick or on holiday
  • working to meet a project deadline
  • coping with a rise in demand or workload

As an employer, you must follow UK overtime laws. It’s important to note that you’re not legally required to offer overtime to employees. Equally, there’s no expectation for UK employees to work overtime.

However if you do choose to offer voluntary overtime, or your employees request the opportunity, you need to make sure their contracts include an overtime policy or any agreement for extra hours is recorded in writing.

You’ll also need to consider the working time break regulations. These regulations state that employees can work no longer than an average of 48 hours a week, unless they opt out.

When does overtime become contractual?

As mentioned above, it’s important that you keep your employment contracts up to date with your overtime policy.

You’re also required to make sure that your overtime policy is consistent for all staff. For example if you allow one employee to work overtime, then you must allow all employees to work overtime.

As well as including overtime details in your employment contracts, it could be useful to give more information and context in your staff handbook.

What is compulsory overtime?

In many cases working overtime is offered on an optional or voluntary basis. However, there are times when it can be compulsory.

If you want to make sure that your employees work overtime when you need them to, you’ll need to include the details in their contracts.

Compulsory overtime can be ‘guaranteed’ or ‘non-guaranteed’.

Guaranteed overtime is when you’re obliged to offer employees a specific amount of overtime (as stated in their contract) and they’re obliged to accept.

Non-guaranteed overtime is when you’re not obliged to offer employees overtime, but if you do they’re obliged to accept.

Businesses that use the guaranteed or non-guaranteed overtime system may need to increase staff hours to complete a project or meet high demand for their services during a seasonal period.

If you’re expecting staff to work compulsory overtime, remember you need to make sure you’re not breaking working time directive regulations.

How does overtime pay work?

As an employer, there’s no legal obligation for you to pay extra to staff that work overtime.

Whether you do or don’t pay overtime, you’ll need to make it clear in your employment contracts.

Some businesses will even include a clause in their contract that says employees are required to work overtime for no extra pay.

Employers that don’t offer extra pay for staff who work overtime will need to make sure that their average pay for the total number of hours worked doesn’t fall below the national minimum wage.

How much is overtime pay?

If you do choose to pay overtime to your staff, how much you pay is up to you. There are no rules on how much overtime you have to pay – some employers offer the same hourly rate, while others offer ‘time and a half’ or ‘double time’.

Bear in mind that the more you offer to pay, the bigger the incentive for staff to work overtime.

What is time in lieu?

As an alternative to paying for overtime, some businesses offer their employees ‘time off in lieu’, also known as TOIL.

This means employees can claim back extra hours worked as time off on top of their annual leave. For example, a member of your team works all day on a Saturday (which isn’t in their contracted hours), if you offer TOIL they could take a Monday off later in the month and it wouldn’t come out of their holiday allowance.

If you do offer TOIL, again you’ll need to make sure that the employee’s average pay for the total number of hours worked doesn’t fall below the national minimum wage.

What is a reasonable amount of overtime?

In the UK the average number of hours worked a week is between 35 and 40, with the working time directive regulations stating that people should work no more than 48 hours a week (unless they opt out).

It’s more common for businesses that employ people on an hourly basis (rather than on an annual salary) to need them to work overtime.

For example, the number of hours worked by people in retail is usually a lot higher over Christmas, while outdoor event staff may need to work overtime in the summer.

As an employer, you’ll need to consider the maximum number of hours people are working and the laws around them. For example:

  • all UK workers over the age of 18 are entitled to one day off a week (which can be averaged over two weeks)
  • workers are entitled to a 20-minute break if they have to work more than six hours at a time
  • young workers cannot usually be made to work more than eight hours a day or 40 hours a week

At the same time, you’ll need to monitor employees’ average pay in relation to the total number of hours they’ve worked as explained above.

Overtime for part-time workers

If you employ staff on a part-time basis, you’ll need to treat them the same as full-time workers. This means if you offer overtime to full-time staff, you’ll also need to offer it to those on part-time contracts.

How much overtime they can work and how much they’re paid for working extra hours, depends on what’s in their contract.

It can be complex so if you’re taking on part-time staff or temporary employees and expect them to work overtime, it’s worth getting legal guidance or speaking to an HR expert.

This article is intended as a guide. If there’s anything you’re unsure about, make sure you get advice from a legal professional or HR expert.

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Conor Shilling

Conor Shilling is a professional writer with over 10 years’ experience across the property, small business, and insurance sectors. A trained journalist, Conor’s previous experience includes writing for several leading online property trade publications. Conor has worked at Simply Business as a Copywriter for three years, specialising in the buy-to-let market, landlords, and small business finance.

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