Legal Considerations for Shift Penalties and Overtime

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Table of Contents

• What Are Overtime Rates?
• What Are Penalty Rates?
• Minimum Hours for Overtime Shifts
• Breaks During Overtime Shifts
• Requesting Overtime
• Shift Allowances
• Key Takeaways
• Frequently Asked Questions

As an employer, you must stay on top of the rights and entitlements of your employees. This extends to their entitlements to shift penalties and overtime rates, which is particularly pertinent if you operate in an industry where working outside of the standard business day is the norm. The applicable award, enterprise agreement, and employment contract determine entitlements to penalties and overtime rates. To help you better understand your role as an employer, this article will take you through the legal considerations for shift penalties and overtime. 

What Are Overtime Rates?

Employees may be entitled to overtime rates (i.e higher pay rates) if they work:

• more than the maximum number of ordinary hours of work (per day or per week);
• outside agreed hours of work; or
• outside the spread of ordinary hours.

The ordinary hours will be outlined in the relevant employment contract, award or enterprise agreement. For example, the ordinary hours set out in the Clerks – Private Sector Award 2020 are as follows:

• the maximum number of ordinary hours that can be worked by an employee is an average of 38 hours per week;
• ordinary hours may be worked between 7am to 7pm Monday to Friday and 7am to 12:30pm on Saturday; and
• the maximum number of ordinary hours that can be worked on any day is 10, excluding unpaid meal breaks.

What Are Penalty Rates?

Penalty rates refer to higher pay rates that can apply when employees work particular hours (such as evenings) or days (such as weekends and public holidays).

For example, the General Retail Industry Award 2020 provides that an employer must pay an employee as follows for hours worked by the employee during a period, or on a day, specified in column 1:

Specific rates may change depending on the industry, such as changes in the retail industry.

Minimum Hours for Overtime Shifts

Employees may be entitled to a minimum rest period between leaving and returning to work. 

For example, consider the Electrical Award. An employee required to work overtime on a Saturday, Sunday, rostered day off or public holiday must be paid a minimum of 4 hours at the appropriate overtime rate.

Breaks During Overtime Shifts

It is also important that you consider break entitlements when asking employees to work overtime or shiftwork. The law entitles employees working overtime to specific breaks. Considering again the Electrical Award,  you must provide an employee a paid rest break of at least 20 minutes after every 4 hours of overtime worked. 

Requesting Overtime

Further, as an employer, you can request your employees work overtime so long as the request is reasonable. The law takes the following factors into consideration when determining if a request is reasonable: 

• risk to health and safety from working overtime (such as issues with fatigue);
• the employee’s personal situation, such as their family responsibilities;
• if the employee is entitled to receive overtime payments or penalty rates for working additional hours;
• if the employee is given sufficient notice that they may have to work overtime; or
• if the overtime is worked in alignment with the relevant award or employment agreement.

The above list is not exhaustive. Likewise, the law will consider any number of factors when determining if overtime is reasonable. If an employee considers the request unreasonable, they can refuse to work overtime. 

Shift Allowances

The nature of shift work means that it often falls into working hours that are considered antisocial. As such, shift workers are paid penalty rates. Additionally, the law grants them additional reimbursements, such as meals, travel, accommodation or additional breaks.

The applicable award or agreement will determine what constitutes shift work. For example, the Road Transport Award determines that shift workers are entitled to overtime rates if they work:

• more than the maximum number of ordinary hours of work; or
• on a shift other than their rostered shift.

For road transport employees covered by the Road Transport Award, the maximum number of ordinary hours employees can work is eight hours per day and an average of 38 hours per week (or 35 hours per week for oil distribution workers).

Key Takeaways

The applicable award, enterprise agreement, and employment contract determine entitlements to penalties and overtime rates. However, you must have a well-rounded understanding of your employee’s rights and entitlements. Some of the key legal considerations for shift penalties and overtime work include alterations to rights to:

• additional pay;
• minimum working hours; and
• breaks.

If you need assistance understanding your obligations as an employer, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions