Q. An employee has tendered their resignation by giving two weeks’ notice. The employee works a considerable amount of overtime and is expected to do so during the notice period. The employee has an arrangement with the company whereby any overtime worked is taken as time off in lieu of overtime. What is the employee paid on termination with respect to any overtime worked during the notice period? The employee is employed under the Clerks Private Sector Award 2020. 

A. Whether an employee may take time off in lieu of payment of overtime penalty rates will depend on the terms of the applicable modern award or enterprise agreement. 

Under the Clerks Private Sector Award 2020, an employee may request payment for overtime worked where TOIL has not been taken within four weeks of accrual. Payment must be made at the applicable overtime rates (time and a half for the first two hours and double time thereafter).

In practice, there is limited opportunity for the employee to take time off in lieu of overtime during the period of notice. Consequently, any overtime worked (and not taken as time off in lieu of overtime) is to be paid at the appropriate overtime penalty rate prescribed by the Award. 

 

Modern award considerations 

Whether an employee and their employer are permitted to agree to taking time off in lieu of payment of overtime is subject to the terms of the applicable modern award. Such a term is not ‘standard’ in modern awards. Usually, the term allows an employee, with the consent of the employer, to take leave at an agreed time. Time is taken at the ordinary time rate that is an hour for each hour worked (although an award may provide the hours equivalent to the appropriate overtime penalty rate). 

There is usually a period of time if time off in lieu of overtime has not been taken, commonly four weeks, after which the employee may elect to be paid at the appropriate overtime penalty rate.

Modern awards which contain time off in lieu of payment of overtime terms include: 

  • Food, Beverage and Tobacco Manufacturing Award  

  • General Retail Award  

  • Legal Services Award 

  • Manufacturing and Associated Industries Award

  • Road Transport and Distribution Award 

  • Social, Community, Home Care and Disability Services Award 

  • Storage Services and Wholesale Award  

  • Timber Industry Award 

  • Vehicle Repair, Services and Retail Award 

 

Bottom line 

As the provision of time off in lieu of payment of overtime is not a ‘standard’ provision in modern awards. Reference should be made to the applicable modern award or enterprise agreement to determine whether the parties can agree to such an arrangement.