Paying overtime: What is currently in place and could this change to benefit employees?

Many businesses across the UK will offer staff the opportunity to work overtime and earn much-needed extra cash but there is no current legal obligation for businesses to do this.

Overtime is a familiar part of working life for many but given there is a lack of legislation in place for this, it leaves employers and employees unsure of their position.

However, the upcoming Employment Rights Bill will address several contractual details including overtime which may have some legislation in place.

This will give much needed clarity to employers but also ensure employees have the ability to earn more via overtime should companies offer this.

Are employers legally required to offer or pay overtime?

Currently, there is no legal obligation in the UK for employers to offer overtime, nor is there a requirement for employees to accept it. Likewise, you’re not automatically required to pay staff more for those extra hours.

However, even if you’re not offering extra pay, the average hourly rate must not drop below the National Minimum Wage, and this takes overtime into account.

If your employee’s extra hours are pulling their overall wage below that threshold, you are breaching employment law which could have serious consequences for yourself and your business.

Another factor to consider is there is no legal minimum overtime pay rate, but many employers choose to offer what’s called an overtime premium, often described as “time and a half”, usually 1.5x the hourly wage.

Though not required by law, it’s a popular way to show staff they’re valued and to encourage them to pick up extra shifts when needed.

Should I draft an overtime policy?

As noted above, you don’t legally have to offer your employees overtime but having procedures in place for it will provide your staff with clarity.

If overtime is a possibility within your business, it should be included in your employees’ contracts.

Including this in the contracts you offer outline your expectations and gives staff clarity. You should clarify whether overtime is compulsory or voluntary so there isn’t an expectation staff have to work beyond their paid hours.

In addition to this, you should include what this means for pay alongside how and when they receive any overtime payments.

Putting procedures in place gives you peace of mind and your staff clarity. It also improves your legal position, giving you protection should any employee have questions or are considering some form of legal action.

What legislation is in place and what could change?

According to the Working Time Directive 1998, employees can’t be forced to work more than an average of 48 hours per week. This average is usually calculated over 17 weeks.

If a staff member agrees to work longer hours, they must sign a written opt-out agreement. Without that agreement in place, requiring them to go over 48 hours could land you in hot water.

There is expected to be further changes to the rights of employees when the upcoming Employment Rights Bill comes into effect later this year. This new legislation will cover several employment factors including overtime pay which could be significant for both employers and employees.

Unsure about overtime?

If your considering offering employees in your company any form of overtime, you need to be sure that is right for the business but also you have a plan in place.

While it is not a legal obligation, it is wise to seek legal advice because offering overtime affects your employment costs, and it needs to be viable.

The upcoming Employment Rights Bill could provide much needed clarity but will bring plenty of changes that you will need to prepare for.

Considering offering overtime to your employees? Speak with our team who can advise and help you put a plan in place.