REWARD
Considerations when staff are clocking up the overtime
Employees working overtime could be helping a business out, especially during a busy patch. However, Danny Done, managing director, Portfolio Payroll , highlights areas organisations must consider when staff are working excess hours
F irst, an employer should decide whether overtime is going to be voluntary or compulsory. This will probably be a decision based on how much overtime is likely to be needed in the organisation and the necessity of having a workforce ready to carry it out as and when required. Wider implications: holiday pay / national minimum wage / part- time workers However, it can have wider implications, given that the calculation of holiday pay and whether overtime is part of this or not, depends on the type of overtime completed. If an employee doesn’t have normal working hours, then to calculate the rate of holiday pay, the employer would need to look back over the previous 52 weeks and take an average. If an employee does have normal working hours, they will generally only receive holiday pay based on the pay for working those normal hours. But what constitutes ‘normal hours’ is more widely defined than you might think. Guaranteed overtime is regarded as part of normal working hours so will be included. Additionally, pay for non- guaranteed overtime and voluntary overtime (if the payments are sufficiently regular and paid over a sufficient period) are also regarded as part of normal working hours. This only applies to the four weeks of annual leave derived from European Union (EU) legislation, and not the remaining 1.6 weeks of UK-derived leave, or any contractual annual leave
given on top of this. A recent government consultation response confirmed that this will continue to be the case. “If an employee is carrying out overtime, consider
But if employees are required to work a certain number of hours over their normal working hours without pay before they qualify for any extra pay, this may be indirectly discriminatory against women. This is because such a requirement could place a greater burden on those who work part-time, many of whom could potentially be women. If an employee is carrying out overtime, consider why they’re doing this. It could be because otherwise the work wouldn’t be done due to low staffing levels, or that there are misconduct or performance issues. If this is the case, employers will need to take action to resolve these problems as soon as possible, as they could be having (or could potentially have) a serious impact on the business. While employees may be willing and able to carry out overtime now, there’s a risk that all this extra work and regularly going above and beyond could lead to them becoming ‘burnt out’. If this happens, it can lead to their well-being diminishing, as well as potentially their mental and physical health. Eventually, this could cause absences, creating problems for employers as they try and cover workloads. As such, it’s a good idea to check in with employees about this. Although employers don’t necessarily need to ask the employee to reduce what they’re doing (unless it’s causing them harm or causing their pay to fall below statutory requirements), speaking to them about why they’re doing this will give you important insights into what’s happening with them as an individual and maybe, with the business too. n
why they’re doing this”
Whether or not overtime will be paid, and at what level of pay, will also be a key decision for the business. If the employee is paid the national minimum or living wage (or close to it), these additional hours might cause their pay to fall below the statutory minimum. This could lead to HM Revenue and Customs taking action against the business for failing to pay minimum wage and issuing a fine. The organisation may also be included on the government’s ‘naming and shaming’ list, which is published on GOV. UK and includes the names and regions of employers found to have underpaid minimum wage by more than £500 across their employees. An enhanced rate may be offered to employees as an incentive to carry out overtime. Interestingly, part-time employees aren’t considered to be treated less favourably in respect of overtime if they only receive any such enhanced rate after they have worked the same total number of hours that a full-time employee would have to work to receive the enhanced rate.
| Professional in Payroll, Pensions and Reward | December 2023 - January 2024 | Issue 96 50
Made with FlippingBook - Online magazine maker