Overtime and employment contracts
Overtime payment rates, call-out payments, and employment contracts.
If you expect employees to work regular overtime, it's a good idea to state this clearly in the employment contract, together with:
- whether overtime is guaranteed or non-guaranteed
- whether overtime is compulsory or voluntary
- whether payment or time off in lieu (TOIL) is given
- rates of overtime pay/how TOIL is worked out
- when overtime becomes payable/when TOIL becomes applicable
- any notice arrangements for overtime working
- the authorisation process, eg overtime must be agreed in advance and in writing by the employee's manager
Overtime payment rates
Overtime rates are for you to agree with your employees. There are no minimum statutory levels, but rates may be fixed by an industry-wide agreement.
Overtime pay varies from business to business. Some of the more typical overtime rates are:
- weekdays and Saturday mornings - time-and-a-half
- Saturday afternoons, Sundays, and public holidays - double-time (Sunday shop workers may be an exception)
- Christmas Day and New Year's Eve - double-time and above
Overtime can also be paid at a basic rate.
When does overtime become payable?
It's important to define the point at which overtime becomes payable. Many employers expect employees to be reasonable in finishing a task without demanding overtime payment. This may be up to 15 minutes for manual workers or as long as an hour for supervisory or management posts. You will need to ensure that when pay is averaged out, the national minimum, at least, has been paid for each hour worked.
Other organisations vary premiums according to the length of time worked, eg time-and-a-third for the first two hours and time-and-a-half after that.
Call-out payments
Employees who are called out from home to perform urgent duties normally receive call-out allowances or guaranteed hours at overtime rates. As call-out is likely to occur at nights, weekends, or statutory holidays, it's usually paid at the relevant overtime rate.
Many organisations pay agreed travelling time as well as actual hours worked. Usually, employees are paid for being on standby ready to respond to any call outs. You may decide to pay at different rates for time on standby or pay a separate fixed allowance. See pay: employer obligations.