Many employers expect their employees to work additional hours to complete projects, especially during busy periods or because it may be the culture of their business.
Employers need to consider a few different factors before confirming they don’t have to pay overtime or before establishing that the salary meets entitlements that may be due. There are three factors to remember when considering whether you need to pay overtime or not:
- Is the overtime reasonable? Consider the factors below and make sure your employment agreements and policies make your expectations around working overtime clear.
- Is it paid overtime? Check any relevant Modern Awards, industrial agreements or registered agreements to see what overtime rates may be payable. If these agreements do not govern your employee’s employment, you should factor in a higher rate of pay if you want your employee to work reasonable additional hours.
- Is there an alternative? In some cases, you may be able to offer an alternative to overtime such as time in lieu. Check any relevant Modern Awards, industrial agreements or registered agreements to see what your options might be regarding alternatives to overtime.
What is Overtime?
Overtime is the time that an employee works over their regular hours of work. It can be unpaid or paid and the typical hours of work vary from role to role. In many Modern Awards, the employee’s “ordinary hours of work” refers to their typical hours of work.
What Governs Overtime?
The National Employment Standards (NES), and the Fair Work Act 2009 (Cth), both of which address what constitutes reasonable overtime, covers most employees.
When assessing whether your employee is due overtime pay you need to check the Modern Award, industrial agreement or other agreement that covers their employment. Their employment agreement may also address overtime, and is useful to check.
Most Modern Awards have provisions which address overtime including when an employee is considered to be working overtime and the rates of pay. You can check which Modern Award may apply to your industry. If you are unsure what Modern Award applies or it is not clear, you can contact an employment lawyer to help you assess the most applicable Modern Award.
The Fair Work Act sets out the maximum weekly hours that employees should work. You can only request that an employee work additional hours if it would be reasonable. Under the Act, an employee may refuse to work unreasonable extra hours above their maximum weekly hours as per the Act.
What are Reasonable Additional Hours?
The Fair Work Act sets out the factors to consider when determining whether additional hours are reasonable. These include:
- health and safety risks for the employee if they were to work the additional hours;
- any personal factors, including family/carer responsibilities of the employee;
- the businesses’ needs;
- does the employee receive overtime pay, penalty rates or other remuneration for overtime worked;
- does their higher salary reflect an expectation of having to work overtime;
- was there any notice given that working overtime is likely to be required;
- was there any notice given by the employee of their intention to refuse to work the additional hours;
- is overtime typical in the industry the employee works in;
- what is the employee’s role, and level of responsibility;
- whether the additional hours are per the averaging terms included under a Modern Award or enterprise agreement that applies to the employee, or with an averaging arrangement agreed to by the parties;
- any other relevant matter.
As an employer, you need to consider the safety of the employees and provide a safe working environment. By overworking your employee’s, you may be in breach of your work health and safety obligations. If your employees have not had sufficient breaks or sleep, then they will not be performing at their best or be working safely. Therefore it is essential to have policies in place to ensure that employees are not put at risk to meet your obligations.
Modern Awards and other agreements may also specify total shift lengths, gaps between shifts and additional requirements that may affect how much overtime an employee can work. Weekend work, night shifts, early morning work and other times may also incur further penalty rates.
In some cases, you may not want your employees to work overtime without your permission (due to the additional costs), and you should ensure that your overtime policy and employment agreement, covers this.
If, as an employer, you don’t want to pay overtime then you should consider the factors above and check that you can appropriately answer the questions below:
- Is it a legal requirement for me to pay overtime? Check applicable Modern Awards, industrial agreements or other agreements. These may address what overtime is payable.
- If my employee is Modern Award free, but I expect them to work unpaid overtime, have I factored this into their salary? Factoring additional hours into an employee’s salary can make the overtime more reasonable. You should make it clear that the Fair Work Act may require reasonable additional hours. You should also mention that their salary considers that additional hours may be necessary.
- Can I average the hours under a Modern Award or NES? Depending on the number of hours worked this may be possible, although there will still be maximum weekly hours the employee can work.
- Can I offer alternatives to overtime such as time in lieu? Depending on any applicable Modern Award, industrial instrument, or other agreement you may be able to offer time in lieu instead of paying overtime.
If you have any concerns about your obligations to employees or options for how to deal with paying overtime, contact LegalVision’s employment lawyers, who can run through your various options and provide guidance.
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