Overtime – A term that is well known across the UK but its not as simple a term as you may first believe. Quite a variety of overtime types and rules are utilised by organisations across the UK.
What does overtime mean? Overtime is used to describe hours worked by an employee which go above those expected by an organisations regular full time hours i.e 37.5, or the hours worked above an employees fixed hours.
Many businesses rely on overtime to help cope with increased demand or to cover staff absences.
The practice or recording, and paying, overtime is most often found in job roles which are hourly paid rather than staff that are paid annual salaries, although it is not unusual to find companies that do implement overtime procedures for salaried employees.
Employers do not have to pay employees overtime but the average pay those employees receive for the hours they have worked must not fall below the national minimum wage.
Overtime Rates
Whilst a business is not required to pay enhanced rates for hours worked above contracted hours a majority of businesses do tend to pay a higher hourly rate, or premium, on these hours.
Terms such as Time and a Half and Double Time are well known but there are many others, which are implemented for certain scenarios such as Time and a Quarter for the first couple of hours with the premium gradually increasing.
Premiums tend not to kick in until after a full time set of hours have been achieved so most of the time. Staff on part time contracts will find any additional hours they work are often paid at their standard hourly rate until they have achieved a full time quota of hours.
Types of Overtime
Overtime can be placed into three distinct categories .
Guaranteed – Guaranteed Overtime places requirements on both employer and employee. The business stipulates that there will be overtime at certain periods and the employee contract stipulates that the employee must work it. These scenarios are used when a business knows there are specific times they will need additional hours worked. I,e every 2nd Saturday to cover a specific recurring order.
These details must be clear in the employees contract.
Non – Guaranteed – Non-guaranteed overtime is utilised in instances where the business knows they will require additional hours to be worked but isn’t sure when and for how much time. The employee contract will stipulate that when it is needed the employee must be available to work.
As with guaranteed overtime the policy of Non-Guaranteed overtime must be clearly specified in the employment contract.
Voluntary – Voluntary overtime occurs where there is no requirement for a business to offer overtime, neither is there a requirement for an employee to accept it, when it is offered. The most common type of overtime it ensure flexibility for both employer and employee. Voluntary overtime is often used when there are sudden increases in demand or there are sudden staff shortages.
Limits to Overtime
Hours worked at premium rates are still subject to Working Time Regulations which places specific limits on what an employee can be requested to work, without opting out.
Working Time Regulations state that employees:
- must not work more than 48 hours per week on average over a 17 week period, though a worker may choose to “opt out”
- must be allowed at one day off each week or two days off in a fortnight
- should have 11 hours uninterrupted rest in a 24 hour period
- is given at least a 20 minute break if their shift lasts more than six hours.
Overtime Calculations
This section will be getting a blog all to itself as there are a variety of options utilised by businesses across the UK. Here’s a brief idea
- Daily Threshold – This overtime focuses on the hours worked on individual days. Overtime is generated once certain hours have been worked. For instance if an employee is expected to work 8 hours but completes 9 they would be due 1 hour of overtime. There additions to this whereby the rate may increase as the hours do. For instance the first 1 of overtime is at Time and a quarter and anything above that is Time and a Half. The employee does not lose any accrued overtime if they don’t go on to achieve the weekly target of hours
- Daily Time Zone – As above this overtime works on a day to day basis, however the rate of overtime is determined by time of day the hours are worked. For example on a 0900 – 1700 working day extra hours worked between 0600 and 0900 may be credited at a different overtime rate to hours worked between 1700 and 2100. This is common with businesses that may pay unsociable hour rates etc.
- Weekly Thresholds – Weekly (or pay period) thresholds work when overtime is only calculated once the employee has achieved their weekly (or pay period) contracted hours. For instance if an employee is expected to work 40 hours but over the course of the week works 44 the 4 extra will be split out as an overtime premium. It doesn’t matter what days the hours where worked on, everything is added to Basic until the target has been achieved.
- Weekly Clawback – Weekly clawback is essentially a combination of the above. Overtime is still calculated based on daily rules, however at the end of the week, or pay period, checks are made to ensure full hours have been worked over the period. As long as the employee has achieved core hours (i.e 40) then the overtime stands. However if there is a shortfall in the basic on other days, the daily overtime is used to supplement it. There are a variety of scenarios for this method which we will be looking at in a future post.
As you can see overtime, its use, and its calculation methods can vary quite widely within organisations. It is important that those businesses specify their policies, and terms and conditions to employees, within their employment contract. With the additional costs premium hours can place on a business it is also vital that they implement suitable procedures and systems for managing overtime.
A good time and attendance system can do this for you. It should give you the facility to apply your rules for overtime and automatically calculate when an employee has accrued overtime, and at what rate.
Please get in touch to learn more about Premium rates and how specific rules may suit your business
