Working hard or working overtime? Overtime is when an employee works over their normal or ordinary working hours specified in their employment contract, award or agreement. There are many different payment terms and buzzwords to make sense of regarding an employee’s working and non-working hours, including overtime, ordinary time and time off in lieu. As an employer, it is important to understand when an employee is entitled to overtime pay for extra completed work to avoid legal complications, or if providing time off in lieu is an option for your business. Keep reading this Business Kitz article to know what overtime rates are, when you have to pay them and the other alternatives available to you.
Overtime rates are paid when an employee works extra hours than the ordinary hours listed in their award, enterprise agreement or other registered agreement such as an Australian workplace agreement, or individual transitional employment agreements. Extra time can be considered work done outside the spread of hours, or the times in the day when ordinary hours can be worked, generally 7am - 7pm. When overtime applies can be different across agreements, so it is advised that you look at the terms set out in your specific employment document or award. The Fair Work Commission, along with their Pay and Conditions tool, outline the award that your job role is covered by, the overtime rates for different types of industries and what rate of pay is applicable.
For example, if you are working in clerical administration within the real estate industry, you are covered by the Clerks - Private Sector Award [MA000002]. You are entitled to overtime pay if you work outside your agreed ordinary hours, within 7am - 7pm Monday to Friday and 7am - 12:30pm on Saturdays, if you work a minimum of 30 extra minutes during one week. This applies for full-time, part-time, casual and shift workers, however it is better to check if there may be other entitlements if you are doing shift work, as these generally can differ from other types of work.
So how much work is too much work? Under the National Employment Standards, additional hours are:
An employer cannot request an employee to work these hours of work, unless the extra hours are reasonable. But what does this mean?
Is doing extra work reasonable if I’m leaving my child with no food at home alone? The National Employment Standards lists that this may not be, as many conditions must be taken into account, including:
Money truly can be funny when you work over your set ordinary hours of work in a week. The overtime rate will depend on your industry, for example, if you work in building and construction, four hours of overtime on a weekday may be twice the rate for the following two hours or 1.5 times your base rate for the first two hours.
Is overtime taking its TOIL? Employers have the option to offer paid time off instead of overtime, known as time off in lieu, or ‘TOIL’. This is when certain awards and registered employment agreements allow for employees who work extra hours to take paid time off during their ordinary hours of work instead of receiving overtime pay. This can benefit both the business and the employee if the ‘breaks’ do not disrupt the work flow, as it grants more flexibility and work-life balance. When a worker can choose an early finish on a Friday afternoon as their time in lieu, the business does not face the extra costs of paying overtime rates and the employee is satisfied with the liberty of having this form of leave in their back pocket. What TOIL provisions are applicable to you will be set out in your enterprise agreement or award, however if you are not covered by any of these legal documents, you may not have the option to be able to use TOIL; rather it will be up to your employment contract.
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It is best practice for employees to record their hours and to keep a scheduled staff time sheet for your business to refer to when extra hours are done, or in the worst case, if there is a legal dispute. If you are organising your employment contracts, Business Kitz has customisable templates and free customer support to ease the process! If you are seeking help regarding a legal dispute or issue with overtime rates, our sister company, Legal Kitz, can provide legal advice. You can book a free 30-minute consultation with their experienced and highly qualified team via our website now.
