Overtime is a fudgy business. Nobody really wants to broach the subject, but failing to do so in clear terms can lead to staff resentment, confusion and distrust. There are few hard and fast rules, so overtime policies can vary wildly from employer to employer. But there is still a lawful and unlawful way to do it. Here’s what everybody should know about the law and overtime – including when working overtime isn’t legal.
You may be surprised to know there are actually three different types of overtime:
In all cases, “overtime” relates to any time you work in addition to your normal working hours, as defined in your contract. It isn’t an inherently bad thing, offering companies the flexibility to meet unprecedented demand, and employees the opportunity to earn more cash – that is, if overtime is actually paid.
In the case of voluntary overtime, overtime is at the employee’s discretion. Their contract makes no obligation for them to work overtime, so they are not obliged to accept an overtime offer from their employer. An employee should not be penalized for turning overtime down in this set-up.
Compulsory and guaranteed overtime is where an overtime arrangement is written into an employee’s contract, explicitly stating that an employee must accept overtime when it is offered. It’s typically used when your work set-up regularly involves work for a client outside of normal working hours, or on-call duties.
In contrast, with compulsory but non-guaranteed overtime, the possibility of working overtime is written into your contract, but won’t necessarily be offered regularly or at all. Whenever it is, though, employees are obliged to accept it. This is the type employees most commonly encounter; reserved for meeting unprecedentedly high workloads or busy periods in the year.
You are only obliged to work overtime if an overtime provision is directly written into your contract of employment. All terms and conditions of what that overtime entails should be included there too, including any payment rates for overtime, or processes and allowances for taking time off in lieu.
For most people, this arrangement is fairly vague – often just a brief clause in your contract. This is because the exact nature of overtime (like length and frequency) can’t be easily predicted. Employers often contractually word the possibility of overtime in general terms for maximum flexibility.
For those who work on-call, it’s a bit more complex. Whether it qualifies as overtime largely relates to the amount of restrictions put on an employee during an on-call period. But generally, the more restrictions, the more likely it is that a whole period of on-call work should be seen as working.
Wage theft is a huge issue in the debate around overtime. Surely, if you work additional hours beyond your contract, you should receive some sort of compensation? Interestingly, it actually varies dramatically from country to country.
In the UK, employers are not actually legally obliged to pay employees anything for overtime, so long as the pay they receive for the total hours worked meets minimum wage requirements. Otherwise, employees have no legal right to receive an additional payment or higher rate for overtime.
But in other European countries, like Germany, employees must be allowed to accrue “time in lieu” for overtime. Certain US workers are entitled to overtime pay for working more than 40 hours, as laid out in the Fair Labor Standards Act, which was extended to an extra 1.3 million Americans as of January 2020. Australian law is much more robust in this respect, laying out set rates of overtime pay employers must pay depending on the hours, time of day and days of the week overtime was worked.
Regardless, the terms of overtime pay should be laid out directly in your contract. That includes whether overtime is to be paid and the rate of that pay (like single time or time and a half for weekends, double time for national holidays etc.). The same goes for time off in lieu – when leave can be taken, the process for booking leave and provisions for unused time off should all be clearly defined in your contract.
Even if you’ve signed an employment contract detailing compulsory overtime, there are cases where legally you can refuse to work it. In the EU, employers are legally bound by the Working Time Directive, which sets limits on the amount of continuous work they can ask employees to perform. The main things to be aware of include:
There are a few exceptions – including employees working in security, armed forces, emergency services or for themselves. But while certain industries requiring continuous service are allowed to postpone rest periods, employers cannot require workers to work more than 48 hours a week. If you already work 48-hour weeks, any overtime is unlawful. Whenever overtime takes you up to the 48-hour work week threshold, you legally don’t have to work beyond it.
They totally have the choice to do so. Employees can actually opt out of the EU 48-hour week cap. They need to put it in writing that they want to work beyond the 48-hour limit, and have the right to rescind this decision by giving their employer at least 7 days notice. The terms of this employee notice period should also be stated in the written agreement, but should be no longer than three months.
Of course, workers aren’t obliged to opt out of this protection – they shouldn’t be penalized if they choose not to – but many people fear workers are often expected to do so by their employers, making the level of employee choice in the decision a rather gray area. It's not unknown for law firms, for example, to write opt-outs into new employee contracts.
While it makes sense for both employees and employers to track overtime – to ensure compliance with a 48-hour week and calculate any overtime pay or time in lieu – tracking overtime is now a legal obligation in the EU. As of May, all employers in the EU need to systematically record the daily working hours of all employees.
The European Court of Justice passed the ruling in an attempt to better protect workers’ rights and health. Only by tracking all working hours, they argue, can employers and employees ensure compliance with EU labor laws. However, individual member states are free to decide how to implement such employee time tracking systems.
Thankfully, there's a whole market of time tracking tools out there to help employees and employers to document all working hours. The most accurate are automatic – which record employee hours to a private timeline for them as they work – but the vast majority of tools remain manual, requiring employees to manage timers as they switch between tasks. For a deeper dive on methods, take a look at the four main types of time tracking software available for documenting overtime.
To ensure overtime doesn’t destroy your company culture:
Ultimately, overtime should be a choice and positive opportunity for workers. It should be something you offer and control – not a regrettable and resented regular feature of your workplace.