Overtime is taken to mean any work which is over and above the basic working hours included in an employment contract.
Paid overtime is more common with hourly paid staff than salaried staff. The pay rate for overtime, if any different to normal pay, should be clearly outlined in the employee’s employment contract.
An employer may offer overtime to cope with an increase in demand for their products or services. For example to satisfy a large customer order, or during staff shortages. It can be compulsory or voluntary.
Overtime can be voluntary (it may be offered or requested by an employer during very busy periods) or compulsory (it can be guaranteed or non-guaranteed). It will depend on the terms and conditions of the contract whether overtime is:
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 a worker refuses to work overtime that they are obliged to work according to the terms and conditions of their employment (ie their employment contract states they must work overtime), the employer may view this as a breach of the contract and a disciplinary matter.
Voluntary overtime is where an employer has no obligation to offer overtime and there is no obligation on the worker to do the overtime. It’s up to the worker to decide whether they want to participate in the extra work or not. However, workers should not be treated less favourably or unfairly for rejecting voluntary overtime.
Voluntary overtime may be used where several employees are absent from work which leaves the employer under-staffed. The employer may then offer overtime to continue to meet customer demands. The workers 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 where an employer is contractually obliged to offer the extra work and the employee is obliged to accept it. For example, if an employer knows they have work due at a particular deadline each month, the employee’s contract will include an express clause outlining that they are obliged to work extra time each month around the particular deadline.
Non guaranteed overtime is where an employer may or may not offer overtime to an employee, but when it is offered the employee must accept it. For example, an employer knows that their business is likely to be busier at certain times of the year but they do not know exactly how much overtime will be needed to complete the work. The employee’s contract will include that, if needed, they will have to work the extra hours. For example that 'reasonable overtime may from time to time be required, in accordance with the needs of the business'.
All working hours, including overtime, are governed by the Working Time Regulations. A worker must not work more than 48 hours per week (on average), though they can choose to opt out of this. There are some exceptions to the rules depending on what work is being done and the age of the worker. For more information read How to opt-out staff from the 48 hour week.
An employer does not have to pay their employees a higher rate for doing overtime. The pay rate for overtime should be clearly outlined in the contract of employment. Enhanced pay for overtime can be used as an incentive for employees to work the extra hours, but it's not essential. If an employer doesn’t offer enhanced pay for overtime, they must make sure their employee's hourly rate does not drop below the National Minimum Wage. For further information read Minimum wage.
Some employers choose to offer time off in lieu of payment to employees who have worked more than their contracted hours. This means that the employee will not get paid for the extra work they do, but they can take hours off in additional to their annual leave instead. Taking time off in lieu for extra hours worked can be set out in a written agreement between the employee and the employer. This agreement should outline when leave can be taken and the process for booking this leave and what happens if an employee's contract ends before all the accrued overtime is used.
All types of overtime, including voluntary, must be included when calculating a worker's statutory holiday pay entitlement. However, it is not included if the overtime is worked on a very occasional and infrequent basis. For more information read How to calculate holiday entitlement.