Calculating Overtime: What is overtime and how is it paid?
What is overtime and how is it paid?
This is any hours that you work, after your agreed hours in your contract of employment.
Unless your contract includes compulsory overtime, you do not have to work more hours than your contract states. Your employer does not have to pay you to work overtime, unless it is written into your contract, or an agreed condition of the hours worked. Compulsory overtime means that you have to accept it.
Overtime laws
Even if your contract includes compulsory overtime, you have a statutory right to work no more than 48 hours per week. Your employer cannot force you to work more than 48 hours unless you have signed an agreement to waive this right in writing.
Unpaid overtime is called discretionary overtime. This means your employer can choose whether to pay you, not pay you, or give you TOIL (Time Off In Lieu). Non discretionary overtime is when your employer has to pay you if you work overtime
Even if your employer does not pay for additional hours, you cannot be paid less than minimum salary wage.
For example: You are a salaried entry level employee who works 35 hours per week, your salary is based on an hourly rate of £8.72 (national minimum wage for over 25's). You must be paid for all the additional hours that you work. Otherwise your pay per hour over the total hours worked would fall below the national minimum wage.
Your employer can stop you from working extra hours, unless your contract guarantees it. However, they must be fair in the way that they do this. For example, they couldn't stop some people from working overtime, but not others. If they are unfairly stopping you from taking on extra work, this may be discrimination.
How is overtime calculated?
Because there is no legal requirement in the UK for employers to pay for hours beyond your contract, this will depend entirely on your contract of employment.
For example: A salaried employee who works an extra five hours to meet a deadline, without any pre-agreed pay or clause in their contract, does not have to be paid for those five hours. However, some employers will agree to discretionary overtime pay, or to 'time off in lieu' (TOIL) instead. This means you'd be allowed to take an extra five hours off work, paid, when the time pressures ease off.
A shift worker who is contracted to 20 hours might be asked to work an extra shift to cover another employee who is off sick. In this example it is most likely that you will be paid at your normal hourly rate for the additional shift. This may be expressed in your contract, be an implied term of your contract (that's just the way the company do things), or, be a verbal agreement between you and your employer.
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Is overtime more money?
When calculating overtime, it depends on your employer and your contract. Most employers who do offer overtime pay, only pay a higher rate on hours above full time, or at unsociable hours.
For example:Your contract states that your employer offers time and a half pay on any hours worked above your full time contract (35 hours), but only a standard hourly rate to part time workers, working up to a full-time week. They would then be eligible for time and a half pay on any hours after 35 hours.
You might also expect that in a role where you work office hours, you could expect a better rate of pay if you agree to extra work late in the evenings or at weekends. This, again, would have to be specified in your contract or agreed by your employer.
Holiday overtime pay
Should your overtime be included in calculating your holiday entitlement? This will be dependent on the individual case.
Precedents set by recent court cases indicate that it should be included when calculating your holiday accrual. The only time they should be overlooked is for overtime that is worked on a 'genuinely occasional and infrequent basis'.
For example: You don't normally work overtime. Your team work late one evening to meet a deadline. This would not be included in your holiday calculation.
Frequently Asked Questions
This is usually based on the hours worked over the whole week, but will depend on your contract of employment.
Most salaried positions do not include overtime pay. However, your weekly pay divided by your total hours worked (including any overtime) must not fall below national minimum wage. Your contract of employment will set out any overtime pay that you are entitled to.
Do you have a problem with your overtime pay?
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This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of our company. For employment law advice you can click here to organise meeting with one of our panel of employment law solicitors.
This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of our company. For employment law advice please get in contact and speak to your employment law solicitors.
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