A Guide to Managing Employee Overtime Effectively

Overtime is an excellent way for employers to meet additional demand, or resolve staff shortages, without having to take on additional staff.

There are no specific overtime laws in the UK, however there are many legal principles that can be applied, including a new ruling on overtime and holiday pay (explained below).

Failing to follow those legal guidelines can result in employment tribunals, and costly penalties.

In this guide, we’ll explain what overtime is, the rules around overtime pay, and whether staff can refuse to work overtime.

What is overtime?

Overtime is time worked over contracted hours. It can also be used to describe pay earned during that additional time.

Despite typically being the time worked outside of contract hours, overtime can also sometimes become contractual.

When does overtime become contractual?

Overtime can become contractual if it’s performed regularly, such as always working late on a Tuesday, or being required to do so.

What is a reasonable amount of overtime in the UK?

UK law doesn’t define a reasonable amount of overtime. It will depend on your organisation, the individual, and whether they’ve signed the opt-out to the 48-hour working week.

Unreasonable expectations could lead to overtime not being worked, and so it’s important for the employer to consider the demands they are placing on employees.

Can you refuse to work overtime in the UK?

Employees can’t refuse to work contractual overtime. However, overtime can’t be required if it’s not part of the contractual agreement.

Can you get sacked for not turning up for overtime?

In short, most likely not. It’s unlikely to be a fundamental breach of the contract leading to dismissal, although it can cause the employer to lose trust in the employee.

Overtime pay

The overtime pay rate is subject to the same rules as normal pay and should be outlined in the contract.

It can either be paid at the same rate as basic pay, or there can be a special overtime rate.

This is for the employer to determine and set out clearly. Once a rate has been decided upon, it should only be changed after consultation with staff.

Can an employer refuse to pay overtime?

Sometimes, it can be unpaid overtime, although this is unlikely unless it’s entirely voluntary.

Otherwise, it will be determined by the rules of the contract. If this is the case, failure to pay if required to do so would be unlawful.

It may be that there’s an expectation to stay until the job is finished for salaried staff, this type of overtime could be built into their basic pay. However, if the employee earns close to the minimum wage this approach should be used with caution, as too many hours over could cause the pay to fall below this.

Holiday pay overtime

Holiday pay overtime has been considered in case law. There was a concern that failing to include regular or guaranteed overtime in holiday pay could lead an employee to be reluctant to take holiday and become burnt out.

As a result, the courts found that contractual overtime pay should be included in holiday pay (determined by using an average of the total pay over the last 52 weeks worked) for the full 5.6 weeks holiday entitlement.

Alternatively, non-guaranteed or voluntary overtime pay need only be included when it is considered to be regular, and then only for the first 4 weeks of holiday (the holiday required in the Working Time directive, under EU law).

Is overtime pensionable?

will depend on the earnings that are being used as pensionable earnings by the employer. If the employer is using basic pay for this, it won’t be pensionable.

Expert support on overtime with Peninsula

There’s a lot to keep in mind when offering overtime to staff.

Not offering the correct pay, or making staff feel like they must agree, could lead to resentment from your employees, or even employment tribunals regarding wage claims.

Let our expert team draft an overtime policy. Peninsula clients get access to 24/7 HR advice, and our document specialists can help you create policy documents that lets your team know exactly what’s required from them.

Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.