What is Overtime?
Overtime is work performed outside the ordinary hours listed in an award, agreement or as specified in the contract of employment. Ordinary hours are an employee’s normal and regular hours of work, which do not attract overtime rates.
Generally, a full-time employee can work a maximum of 38 hours in a week unless an employer asks them to work reasonable extra hours. These extra hours will usually be payable as overtime, but 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 performed beyond the maximum number of daily and/or weekly hours, outside the daily span of ordinary hours (i.e. 7.00am – 7.00pm), or outside the agreed number of hours in the employment agreement.
The application of the above 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 is 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 having to work additional hours and provide reward for them doing so.
Overtime Rules
Each industry award and agreement has its own overtime rules, which dictate when overtime, also known as penalty rates, is applicable. Employers should be familiar with the overtime rules of their particular award, or else they could face a dispute and be forced to pay back any money owed.
When Do Overtime Rates Apply?
An award, registered agreement or the 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 of pay 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 needs to be established in writing with the employee’s consent and meet any award or agreement requirements.
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 as long as the following factors are considered:
whether there is any risk to the health and safety that specifically arises from the working of extra hours
the employee’s personal 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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