Overtime – Voluntary? Guaranteed? – what are the rules?

When people are financially struggling and times are uncertain, many employees see overtime as a great way to increase their income and professional security. For employers seeing their employees working extra time can be a benefit, both economically and for their clients. But what are the rules on payment? Can employers or employees refuse to provide or work overtime? Understanding the rules related to overtime will help ensure your business runs smoothly and effectively. It will also help avoid disputes in the future. Let’s take a look at what employers need to know.

What is Overtime?

Overtime is any time worked beyond the standard working hours set out in your contract. In the UK, the law on working hours is governed by the Working Time Regulations 1998 (WTR). These regulations set out both the maximum hours that employees can work in a week and the minimum amount of rest breaks and holidays that they are entitled to. Employers can ask their employees to opt out of the 48 working hour rule. However, this agreement must be in writing and signed by the employee.

An employee can choose to opt back in at any time, provided they gives three months’ notice. There is no statutory obligation to work or pay overtime. Equally, if an employee does work overtime then an employer must ensure that employee’s average pay does not fall below the national minimum wage rate, which for the year 2022/23 is £9.50 per hour.

Overtime falls into three different categories:

1. Voluntary overtime

In case of voluntary overtime, there is no obligation on either the employer or the employee. The employer is not liable to provide or pay for overtime. If the employer chooses to offer overtime, the employee has full rights to accept or refuse to do it.

2. Guaranteed and compulsory overtime

In case of compulsory and guaranteed overtime, the employer is obliged to pay for the overtime to the employee. Meanwhile, the employee is obliged to accept the offer and work those hours.

3. Compulsory and non-guaranteed overtime

When compulsory and non-guaranteed overtime is concerned, the employer is not obliged to offer overtime to the employee. But, if the employer choosesto offer overtime, the employee is obliged to accept the proposed offer and work extra hours.

ACAS Guidelines

The 2018 guidelines by ACAS provide that if an employer wants to rely on either guaranteed or non-guaranteed overtime, they should clearly lay this out in the terms of employment, stating that overtime is mandatory. For example, some contracts will state core working hours. In addition, they may explain that occasionally these hours may need to be varied or exceeded according to the business needs of the employer. It may state that such extra hours are covered by their annual salary. For this reason, it is more likely to see paid overtime given to staff who are paid on an hourly basis as opposed to those on an annual salary.

Time off in Lieu

It is also, as a consequence, not a legal requirement for employees to be provided with time off in lieu (“TOIL”), paid or unpaid. If it is not stipulated in the contract of employment, then it is entirely a matter of discretion for the employer. If the employer wishes to provide for TOIL, there should be a system in place for approving overtime in advance of the employee actually working that overtime. This would apply whether the employee was submitting a travel request or seeking permission to stay late and accrue some TOIL. A TOIL system should set out the rules and procedures for the accrual of TOIL, as well as how and when it can be taken, just like a holiday leave policy.

So, what should employers do to make it clear to their employees what is expected?

If you want your staff to work overtime, then it must be set out in their contracts. It needs to be clear if such time is paid or not, or whether TOIL is provided or not.

It’s important that you keep accurate records of all overtime worked. Not only does this protect you legally if there are any disputes, but it also helps ensure that employees are paid correctly for any additional hours worked if you have stipulated this in the contract.

Lastly, it’s advisable that you discuss expectations around working hours with your staff. This ensures that everyone is clear on what is expected from them in terms of available working hours each week.

Keeping clear lines of communication is important. Also, not taking your staff’s extra hours for granted is key to a productive relationship.