HR EXPERT: Managing Overtime

HR EXPERT: Managing Overtime

Q- My client anticipates needing their staff to work overtime during an upcoming busy period, can they just make them do this?

A- Overtime is often used by employers as a way of managing times of peak business or high customer demand. The way in which overtime is managed can differ significantly and your client should consider the pitfalls that can come with introducing this to their organisation.

The question of whether your client can make staff work overtime depends largely on the structure of their contracts of employment. Where overtime is mentioned the exact wording will be important, as this will determine whether staff are able to refuse work when it if offered to them.

Overtime typically occurs in three forms: voluntary; guaranteed and non-guaranteed. Voluntary overtime is where there is no obligation on your client to offer overtime and similarly no obligation on staff to accept any overtime that is offered. Guaranteed overtime is overtime that your client will be contractually obliged to offer and a worker is obliged to accept. Finally, non-guaranteed overtime describes overtime that does not have to be offered by your client, however when it is offered staff must accept and work it.

If your client’s contracts feature no mention of overtime, or if they are looking to move to a more favourable policy of guaranteed or non-guaranteed overtime, then they must make the appropriate amendments to staff contracts. For this they must follow the necessary procedure, which includes a period of negotiation followed by written confirmation. Naturally, this process can be time-consuming and clients should plan well in advance, taking into consideration any requirement for trade union involvement.

Clients should be aware that there is no legal requirement to pay staff for overtime work, however, they must consider how this will impact those on National Minimum Wage (NMW). Making staff work extra time without paying them could see their hourly rate dip below NMW limits, meaning your client could find themselves included in the next round of HMRC’s naming and shaming of NMW offenders.

Alternatively, a number of employers choose to pay staff above their normal hourly rate as a way of incentivising overtime, whilst others chose to offer staff time off in lieu. This can be useful in encouraging staff participation, particularly where a practice of voluntary overtime is in place.

Your client should also consider how overtime impacts holiday pay and it is important to understand that contractual overtime must be included in any calculations. Additionally, recent cases have seen the courts rule that non-guaranteed and voluntary overtime may also need to be included in these calculations where this work occurs with ‘sufficient regularity’, meaning this must also be carefully assessed.

Whilst many clients will turn to overtime to help overcome busy periods, managing the process is not as simple as it seems. Before proceeding clients should take steps to review any pre-existing overtime arrangements and consider which form of overtime will work best for their organisation.

AEScott