Overtime is work performed outside the ordinary hours listed in an award, agreement, or as specified in the employment contract. Ordinary hours are an employee’s regular hours of work, which do not attract overtime rates.
Generally, a full-time employee can work a maximum of 38 hours a week unless an employer asks them to work reasonable extra hours. These extra hours will usually be payable as overtime. There may be variations depending on the nature of the job and modern award, which may specify the maximum ordinary hours an employee can work per day or week and times within which the employee can work those ordinary hours.
Many awards define overtime as work beyond the maximum number of daily and or weekly hours, outside the daily span of ordinary hours (i.e. 7.00 am – 7.00 pm), or outside the agreed number of hours in the employment agreement.
These terms may apply to full-time, part-time, and even casual employees.
What are overtime rates?
When an employee works overtime, they may be entitled to an overtime rate, which may be higher than the ordinary rate. This will depend upon the Modern Award or Industrial Instrument which covers the employee. As the rate of pay for overtime may differ depending on when it is worked, the applicable rate should also be specified in the respective award, registered agreement, or employment contract.
Such payments are intended to compensate employees for the inconvenience of working additional hours and reward them for doing so.
Overtime and penalty rates
Overtime and Penalty Rates are not the same. Usually, penalty rates refer to higher rates of pay for working specific hours or days, e.g. weekends, public holidays, after a certain time (6.00 pm) for example. Employers should be familiar with the overtime and penalty rates of their award, or they could face a dispute and be forced to pay back any money owed.
When do overtime rates apply?
An award, registered agreement, or employment contract will set out the overtime rate and when overtime rates apply, generally when working:
- Beyond the employee’s ordinary hours of work.
- Outside the agreed number of hours.
- Outside the ‘spread’ of ordinary hours.
An employer may not have to pay extra for ‘reasonable’ overtime if the employee is paid a higher rate to off-set award entitlements as expressed in their employment contract or registered agreement.
Some awards, registered agreements, or employment contracts may allow an employee to take paid time off instead of receiving overtime pay. This is commonly known as ‘time off in lieu’. If employers opt for this approach, it must be established in writing with the employee’s consent and meet any award or agreement requirements.
Time off instead of overtime
Some awards and registered agreements allow an employee to take paid time off instead of being paid overtime pay.
Reasonable overtime
The health and safety of an employee must be taken into account when asking them to work overtime. Working beyond a normal 38-hour working week may increase the risk of personal injury, fatigue and work-related stress.
It is reasonable to ask an employee to work overtime if the following factors are considered:
- Whether there is any risk to the health and safety that specifically arises from working extra hours.
- The employee’s situation including, but not limited to, their family responsibilities.
- The needs of the workplace.
- Compensation for having worked the additional hours.
- Notice given to the employee that they may be required to work overtime.
- If the employee has previously stated they cannot work overtime.
- The usual patterns of work in the industry.
An employee can only refuse to work overtime if having considered the relevant factors above, the request is unreasonable.
When considering whether the employee has received adequate compensation, you can look to any arrangement whereby the employee is paid a higher ordinary rate on the understanding they are required to work some overtime from time to time.
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This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.