Most awards specify limitations on the ordinary working hours of employees covered by the award. These limitations usually relate to the number of hours that may be worked on any day, week, or other period specified, as well as the times each day during which such hours may be worked.

‘Overtime applies to all hours worked in excess of these limitations.

 

What is considered ‘overtime’?

Overtime, in most cases, includes all time worked by day workers:

  • in excess of the maximum number of hours fixed for each day
  • in excess of the maximum hours fixed for each week
  • before the usual starting time or after the usual finishing time each day
  • outside the times during which the award requires the ordinary hours to be worked each day.
  • In the case of shift workers, overtime generally includes all time worked
  • in excess of the maximum hours fixed for each day
  • in excess of the maximum hours fixed for each week
  • in excess of the maximum hours fixed for any 14 consecutive days or longer period specified
  • in excess of a specified number of shifts per week, day, or other specified period.

 

The National Employment Standards (NES) prescribes the maximum weekly hours that a full-time employee can be required to work as 38 plus reasonable additional hours.

When determining whether additional hours are reasonable, the following factors are to be considered:

  • any risk to employee health and safety from working the additional hours
  • the employee’s personal circumstances, including family responsibilities
  • the needs of the workplace or enterprise in which the employee is employed
  • whether the employee is entitled to receive overtime payments, penalty rates or other compensation for, or a level of remuneration that reflects an expectation of, working additional hours
  • notice (if any) given by the employer of any request or requirement to work the additional hours
  • the notice (if any) given by the employer of his or her intention to refuse to work the additional hours
  • the usual patterns of work in the industry, or the part of an industry, in which the employee works
  • the nature of the employee’s role and the employee’s level of responsibility
  • whether the additional hours are in accordance with the averaging terms of the modern award or enterprise agreement that applies to the employee, or with an averaging arrangement agreed to by the employer and employee under s64 of the Fair Work Act
  • any other relevant matter.

 

Understanding the overtime allowance

An employer should be wary of any arrangement in a contract of employment where an employee receives an 'overtime allowance' to compensate for working extra hours.

Where an employee receives regular payment, even if working irregular hours, industrial courts have determined this 'allowance' would form part of the employee's ordinary remuneration for the purposes of calculating the employee's entitlements.

 

When is an employee authorised to work overtime?

No employee is entitled to pay overtime or penalty rates unless authorised by an employer. Tribunals have never recognised the self-authorisation of overtime by employees who are trusted to work alone or in responsible management positions.

Overtime under such circumstances is allowed only where it is expressly or impliedly authorised, and it may be authorised by implication where the circumstances permit no alternative.

 

Calculating overtime pay for casual employees

Casual employees who work outside the span of ordinary hours prescribed by the applicable industrial instrument or in excess of the maximum ordinary weekly hours are entitled to the appropriate overtime penalty rate prescribed by the instrument. The instrument may also limit the number of ordinary hours an employee (including a casual employee) may work each day.

Generally, in modern awards, where penalties apply, the penalties and the casual loading are calculated based on an employee’s ordinary time rate.

Where an industrial instrument provides for a span of ordinary hours, eg 6:00 am to 6:00 pm, Monday to Friday inclusive, any work performed by a casual outside these hours is regarded as overtime and, therefore, not included in ordinary time earnings (used to calculate superannuation guarantee contributions).

 

Directing an employee to work overtime

Overtime is paid to employees when they are directed to perform such work by an employer. It is not payable when the employee initiates a work request or performs work of their own choice.

An employer knowingly allowing an employee to perform overtime without directing the employee to cease work may be required to pay overtime under such circumstances.
 

Double time payments

Most awards provide that overtime shall be paid at time and a half for the first two (or three) hours worked each day and double time thereafter. Where an employee under an award works overtime before their usual start time and again works overtime after their normal end time, the relevant overtime formula is applied to all overtime hours worked that day.

For example, where the award prescribes time and a half for the first two hours and double time thereafter, an employee who worked two hours overtime before commencing the day’s work and who also worked overtime after their normal finishing time on the same day would be entitled to payment at double time rates as soon as they commenced work for the second period of overtime.