Managing Overtime

Travel companies unsurprisingly work in a different way to many other industries, with employees often working irregular hours or travelling abroad to work for extended periods. Ensure you have clear policies in place to manage overtime to maintain an efficient business and preserve employee confidence.

Overtime policies

Employers are not obliged to pay employees for overtime or offer time off in lieu (TOIL). These policies can however be good professional practice to reward staff for additional hours worked, whilst allowing flexibility for busy periods and staff shortages. Potential issues may arise such as long hours on premium rates for paid overtime or excessive holiday accrual on a TOIL policy, but these can be managed by identifying the type of policy most suited to the business and ensuring all aspects are set out clearly and coherently.

Having a clear policy for overtime will allow the employer to manage any disadvantages and encourage a positive working relationship for both employer and employee.

Whether you are a new business considering implementing an overtime regime to suit your business needs or looking to update existing policies as they are not working, keep in mind the following guidance.

Legal considerations

The various legal rules employer must adhere to can be complex. In relation to overtime, there are some important considerations to keep in mind when determining your policy.

UK Working Time Regulations

The general rule is that employers must take all reasonable steps to protect workers’ health and safety to ensure that each worker’s average working time (including overtime) does not exceed 48 hours per week, calculated on average over the appropriate reference period.

This is easier to monitor when there are clear procedures in place for the recording of overtime hours worked by each individual employee. If employees are working long hours, it may be beneficial to include in your policy an authorisation procedure and a cap on the maximum amount of overtime that can be undertaken during a specific period. Employers should keep adequate records to show compliance with this rule, unless compliance can be demonstrated without doing so.

If employees are likely to exceed 48 hours, ensure that an individual opt-out agreement is in place to disregard the limit. This agreement must be in writing and terminable on no more than 3 months’ notice.

National Minimum Wage

If employees are regularly working hours over and above their normal contractual hours, then consideration should be given as to whether a worker’s average pay falls below the National Minimum Wage (NMW). This is usually more relevant in a situation where there is no policy to pay an employee for overtime worked. If additional hours worked pushes an employee’s average pay below NMW, an additional payment should be made to make up the shortfall.

Holiday pay

Employees are entitled to at least 5.6 weeks of paid holiday each year. At least 4 weeks of the worker’s statutory entitlement should be calculated on the basis of the employee’s ‘normal’ pay. As such, where an employee normally works more hours than contracted and regularly receives overtime payments, these should be included in the calculation of their holiday pay. The remaining 1.6 weeks of holiday can be paid at a ‘basic’ rate. This should therefore be kept in mind when considering whether to implement a policy for overtime pay.

Discrimination

In order to avoid the risk of potential discrimination, all employees should generally be on the same or equivalent terms in relation to overtime, as far as is reasonably practicable depending on their position. It should also be ensured that certain employees are not prevented from working paid overtime whilst others are allowed to do so where it is not justified.

In practice

When implementing an overtime policy, ensure that the following points are addressed:

  • Have a clear policy in place stating how overtime pay/TOIL is accrued and calculated
  • Clearly set out any limits on the maximum amount of overtime/TOIL
  • When overtime is paid or when TOIL must be taken by
  • For TOIL, what happens if this is not taken and position on termination
  • Set out the procedure to approve and manage any overtime/TOIL
  • Be in a position to be able to show compliance (e.g. with records) that employees are not working more than 48 hours (without written agreement) or being paid less than National Minimum Wage

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If you have any queries about anything in this article, please contact Katie Spencer (katie.spencer@mb-law.co.uk).

Please note this information is for general guidance only and is not intended to be a substitute for specific legal advice.

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