It is important that all employment contracts address overtime and reflect your policyThe issue of working late can be a sensitive one within many businesses, as the line between flexibility and unhealthy overtime becomes increasingly blurred.
Most people don’t mind staying late occasionally if there’s a vital piece of deadline-dependent work that still needs to be completed, and this is commonplace for organisations across a range of sectors.
However, when unpaid overtime is pushed to unreasonable lengths and negatively impacts personal time and sociable hours, it can have significant implications on employees’ work-life balance.
Not only this, but excessive unpaid overtime can have serious consequences for employers, as the boundaries are pushed to unacceptable lengths, resulting in a potential breach of contract.
The culture of overtime
Usually, the term overtime means staying behind past the contracted hours and working late into the evening. However, this isn’t always the case, as employees who work through their lunchbreak or get to work much earlier than their colleagues are also classed as working overtime.
One of the biggest reasons for salaried staff working later hours is workplace culture, where people feel they cannot leave the office on time for fear of criticism. This can lead to people becoming overworked without the correct pay, which can lead to various personal and professional issues.
It is important for employers to ensure their contracts give all staff clear guidance on what is expected with regards their working hours – clear parameters will prevent any grey areas becoming more complicated issues later down the line.
Junior and senior staff
Understandably, senior staff, who are on higher salaries, should expect some additional hours just to get the job done. The bigger issue comes when more junior members of staff are working late, as there is a risk they could end up working below the minimum wage.
Under the working time directive, UK workers cannot work more than an average of 48 hours a week unless they sign an opt-out, and most workers are entitled to a rest break of at least 20 minutes if they work longer than six hours per day.
While employers do not have to pay for overtime, an employee’s average pay for the total hours worked must not fall below the National Minimum Wage (NMW).
Failing to protect junior workers can result in serious legal issues, which can be damaging for the reputation of a company if looking to recruit new staff in the future.
Holiday pay
The case of Lock v British Gas was initially decided in 2014, and the principles it established have since been built upon. The decision is that workers are entitled to receive ‘normal remuneration’ during periods of annual leave to prevent workers from not taking annual leave out of fear they will only receive basic pay instead of potential separate allowances.
The current position states that a number of payments should be included in holiday pay provided they are paid regularly or repeatedly over a sufficient period. These areas include; commission payments, incentive bonuses, overtime pay, payments based on personal and professional status, productivity/performance bonuses, shift allowances and premiums, standby payments and travel allowances or allowances that can be treated as taxable.
Possible penalties
If an employee is continually working over their contractual hours and their average pay falls below the National Minimum Wage, the employer can face both civil and criminal penalties, once it’s been reported by the worker.
Under civil penalties, the employer will be issued with a Notice of Underpayment and they will be required to pay a financial penalty to the Secretary of State within 28 days, alternatively they may be ordered to ‘self-correct’.
The current financial penalty is 200% of the total underpayment up to a maximum of £20,000 (reduced by 50% if it is complied with within 14 days of service). Those employers who fail to pay in accordance with NMW can be named by HMRC, meaning offending businesses will be ‘named and shamed’, which can negatively impact ongoing operations and relationships.
Where an employer refuses to engage with the civil enforcement procedures, criminal penalties can be applied, which could include the conviction of a summary offence and the fine in respect of this can be unlimited.
Comprehensive contracts
It is important that all employment contracts address overtime and reflect your policy. It may be necessary to specify that staff will sometimes have to work unpaid overtime, but you must not ask them to work for more than 48 hours a week for legal reasons.
Your contract may also explain that staff can claim time off in lieu (TOIL) for some overtime, such as working evenings or weekends, but it’s up to businesses to ensure their employment contracts are legal and reflect their own needs and expectations.
Therefore, it is important that businesses who pay their employees for overtime hours continually review their own contracts and policies, reflecting this in the amount employees receive as holiday pay. For those who are unsure, it is important to seek professional guidance during the drafting of contracts as this can prevent any serious issues occurring later down the line.
Finding the perfect balance…
While overtime has become an accepted part of modern business, with employees favouring increased flexibility over rigid and structured days, there still needs to be a fair balance between normal and excessive working.
Most businesses will accept that busier periods require staying later so that work is completed, but when this overtime consumes entire evenings or limits time with friends and family then it can quickly become a much more serious issue.
For businesses, it is crucial that policies and contracts are routinely reviewed and updated to allow for overtime and make clear distinctions between what additional time will be covered and what won’t be. If you are unsure whether your business has the appropriate measures in place, contact our legal team for guidance with handling overtime-related issues.
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