Understanding different payment terms can be confusing. There’s ordinary time, overtime and time off in lieu to make sense of.
Given the penalties for getting things wrong, it is important to understand when an employee is entitled to be paid overtime for the hours they have worked or whether providing time in lieu of paying overtime is available for you and an employee, and if so what rules apply.
When would an employee be entitled to overtime?
If the employee is not covered by a modern award or enterprise agreement, then whether they can earn overtime is a matter for their employment contract.
Very few employees not covered by a modern award or enterprise agreement get overtime in Australia. Some shift supervisors do in the heavy manufacturing sector, but this is rare.
If the employee is covered by a modern award or enterprise agreement, then whether they can earn overtime will be set out in the modern award or enterprise agreement.
When overtime applies can vary greatly between modern awards. It usually includes an employee working:
- more than a certain number of hours each day or week
- outside of a certain spread of hours
- (for part-time employees) more than their usual hours each day or week.
How is overtime calculated?
In modern awards (and most enterprise agreements) overtime payments are based on a multiple of an employee’s ordinary time hourly rate of pay. Modern awards that provide for overtime require overtime to be paid:
- At 150% (time and a half) of an employee’s ordinary time hourly rate for the first two or three hours of overtime worked
- At 200% (double time) of an employee’s ordinary time hourly rate after the two or three hours of overtime worked.
Some modern awards provide different overtime payment arrangements for:
- shift workers
- working overtime on Saturday
- working overtime on Sunday
- working overtime on a public holiday.
How much overtime can an employee work in a week?
The question is answered in the National Employment Standards. An employee does not have a right to work overtime unless you have created one through your employment contracts. Deciding that overtime is needed is a matter for the employer.
In simple terms, an employer can ask an employee to work “additional hours” each week as long as the request is reasonable. Keep in mind an employee can decline the request if it is unreasonable for them.
Additional hours are:
- for a full-time employee: anything over 38 hours a week
- for other than a full-time employee: the lesser of 38 a week or the employee’s ordinary weekly hours.
Clear as mud, right?
It’s a little unusual as it requires two very similar but not identical tests for the employer and employee:
- the original request needs to be reasonable
- the right to refuse must be based on unreasonableness.
So it could be reasonable in the circumstances for the employer to request additional hours to be worked, but then in the circumstances of a given employee, the request could be unreasonable.