How Should Employers Reward Overtime Work?

By Glenn Hayes, Head of Employment Law at Irwin Mitchell, Manchester

03.02.2009

It was recently reported that in excess of five million people in the UK worked overtime without being paid for it. Estimates put the value of this work at £26.9 billion. These figures relate to employees and neither take account of any overtime worked for less than an hour nor those who work at managerial or director level who have traditionally worked overtime for no reward other than contribution to the success, or otherwise, of a company.

The UK workplace has earned a reputation for a culture where long hours are the norm. This is unlikely to undergo an overhaul given the current economic climate, as extra hours are likely to be invested in a bid to ensure survival – the employee's own and/or an organisation's own, which may of course amount to the same thing.

Employee representatives point out that working an excessive number of hours has a number of contra indications – impact on health, family life and effective performance in the work place. This view is also shared by health professionals and many employers.

So, how many hours are employees meant to work, for which they receive remuneration? Towards the back-end of last year, Europe voted to rescind the UK's opt-out from the Working Time Regulations. The opt-out remains until 2012 and there are likely to be several rounds of fierce negotiation in the interim and thereafter.

Should the opt-out be removed, however, the impact of the current regulations would be to only allow employees to work 48 hours per week, averaged out over twelve week periods.

The core rights which workers could enjoy under the Working Time Regulations are:

  • A cap of an average of 48 hours' work per week
  • Night-workers to only work an average of 8 hours in 24 and receive free health checks
  • Eleven hours' rest per day
  • Should the working day be longer than six hours workers to have a break during work
  • A day off each week
  • Four weeks' paid holiday per annum

The opt-out is in force, of course, and employers are expected to keep records relating to workers who have opted out. Payroll records may be sufficient on this, particularly if workers clock on and off work. Any employees who agree to work beyond 48 hours must do so in writing and employers must keep an up-to-date list of all who have agreed to do so. It is worth noting that while employees may opt-out of the 48 hour limit they are not permitted to opt-out of any in-work rest breaks.

Returning to the specific subject of overtime, employers need to either ensure that there is a written agreement to cover it or that the employee's contract makes it clear that overtime will be a feature of the role. The contract should make clear areas such as the rates of overtime pay, at what point in the working day overtime is payable and the rate of pay, for example time-and-a-half for Saturday morning or double-time for a Sunday.

Working excessive hours can give rise to concerns about health, so employers need to consider the health and safety implications of any and all overtime. Should the role performed by the employees mean that overtime has the potential to put them and/or others in harm's way, for example operating machinery or driving, employers should conduct risk assessments, record the outcomes and take any action required.

An example is where an employee's role calls for him or her to work alone in a manufacturing plant. The employer might want to check the individual's medical history to ensure that the employee does not have a condition which would make working alone risky, such as epilepsy, where the employee could suffer an episode and not be discovered for some time thereafter.

In times of economic turbulence, the flexibility of an overtime strategy to respond to changing levels of demand may well prove attractive. This would need to be balanced against the generally accepted position that over-deployment can be expensive or even counter-productive if the same employees are constantly putting in additional hours and so becoming fatigued.

There are alternative approaches, including flexible working or the taking on of part-time personnel. Management may determine the overtime rate for part-time staff but, anyone working in excess of the standard full-time hours is entitled to the same overtime hourly rate that a full-time worker on a similar grade would receive.

Should an employer find that there is a need for overtime, but that it is prohibitive because of the rates of pay, and still want to reward those workers concerned, it may be possible to offer time off in lieu. Again, there is a need for this to be agreeable to all parties and the process will need careful management to ensure that workers are not left with a huge credit or bank of time-off by year-end.

It may sound cliché-ridden but, when it comes to potentially contentious issues like overtime, employers and employees may want to heed the maxims 'the labourer is worthy of his/her hire' and 'a fair day's wage for a fair day's work'.