The need for employees to work overtime is a reality faced by many employers and is usually unavoidable when it comes to running a business. You may have a busy period, an unexpected emergency or an unwell employee, which requires more staff to be rostered than usual, or more hours to be worked by an individual. While these issues can cause significant stress to a business owner, the need to find coverage and calculating how much overtime should be allocated and paid can be even more challenging. These situations usually raise questions like what constitutes overtime? how can I get employees to work overtime? and how much do I need to pay? Well we are here to help answer those questions and give you an overview of everything you should know to keep your business on the right side of the law.
What constitutes overtime?
The first place you should look is the Modern Award that covers your employees. The award will set out when overtime applies, how much is to be paid and what ordinary hours apply to your employee. Usually, any work outside of 38 hours per week, outside the agreed number of hours, and outside the spread of ordinary hours, as set out in the award, will be considered overtime. The spread of hours refers to the times in which ordinary hours can be worked, for example between 7:00am and 7:00pm, so if you have an employee that worked past 7:00pm they would have worked overtime.
It is also important to know that under the National Employment Standards, which are found in the Fair Work Act 2009 you cannot request an employee to work more than 38 hours per week, or for a part time employee to work more than their ordinary hours, unless the request is reasonable.
Things you should consider:
Despite the ordinary hours set out in awards you can always ask employees to work reasonable overtime and often the requirement to work reasonable overtime will be included in your employee’s contract of employment. However, asking employees to work overtime can be difficult as you may face employees who are unwilling to work and some may even refuse.
Before asking an employee to work additional overtime, it is important to consider whether the request is genuinely reasonable in the circumstances. Things you will need to think about when asking an employee to work additional hours include:
- Any risk to the health and safety of the employee from working additional hours;
- The employee’s personal circumstances such as family or caring responsibilities or other personal commitments;
- The workplace’s needs;
- Any applicable overtime payments or penalty rates;
- Whether the employee has received enough notice of working overtime; and
- Any patterns of work in the industry.
Once you have considered these factors, and if satisfied that it is reasonable to make the request, you can ask an employee to work overtime. In asking an employee to work additional hours, you should be open and frank with them and provide them with an explanation as to why additional hours may need to be worked. By doing this, an employee may be more open to working overtime. You should also tell the employee how many hours they will need to work and how long the arrangement may last.
It is also important not to discipline or terminate an employee for refusing to work overtime without being able to prove that it is reasonable to require the employee to work those hours.
If the employee is entitled to be paid overtime rates (that is, their salary does not already compensate for reasonable overtime or they are not paid a loaded rate which includes overtime), ensure that you tell the employee that they will be compensated for working overtime.
Payment for overtime
If your employee is covered by an award or enterprise agreement, they will usually set out what the payment for working overtime will be. This can also be covered in the employee’s contract of employment, so it is important to check that document as well.
Awards may also provide for time off in lieu (‘TOIL’) rather than an overtime payment, however this generally requires the mutual agreement of both the employer and the employee.
Payment for overtime when an employee is Award-free
If an employee is not covered by a award, that is, they are ‘award free’, there is not a specific provision for overtime payments, however the Fair Work Act 2009, does provide that the maximum hours for a full time employee is 38 hours per week. You may consider introducing an overtime policy, which provides the guidelines for employees working overtime (for example, a requirement that any overtime is approved by management), payment for overtime or TOIL.
Another consideration is if an employee works overtime every week is to contract employees to a 40 hour work week, rather than a 38 hour week, provided that their salary or rate of pay reflects the additional hours worked. However, if you are looking to change an employee’s contract of employment, remember that the employee must consent to those proposed changes.