Is It Legal For Employers To Refuse Their Employees’ Overtime Payments? (2019 Update)
Not sure whether you're legally obliged to pay your employees overtime? Find out what the legal requirements are for overtime payments in this guide.
The idea of working overtime can seem unappealing, but there are often times when it’s necessary. Many employees will have to work overtime at least once throughout their career. This is a frequent occurrence across all industries, whether it be in hospitality, healthcare or professional industries. Overtime payments depend on a number of factors. These include the terms of your employment contract, the basis on which you get paid, and your Award.
In this guide, we’ll outline whether your employees are entitled to overtime payments and the circumstances in which they’re not.
What is overtime?
Part and full time employees have set hours of which they have to work. Further, for shift work hours may not always be the same, but they have to be defined. The national standard for hours of work per week is 38 hours. Subsequently, any hours worked outside of set hours or beyond 38 hours is overtime work.
Generally, employees are covered by a modern award, enterprise agreement or other registered agreement that applies depending on the type of industry the business operates in. This also depends on the duties and work employees are allocated.
If you’re an employer, it’s important that you familiarise yourself with the minimum pay and conditions of employment contained in the modern award or registered agreement. Further, if you employ workers under contract, you should make sure your terms meet the minimum conditions. Some employees compensate employees for working overtime by having a Time Off In Lieu (TOIL) scheme in place. This means that the hours your employee accumulates in working overtime can be taken further down the track as paid leave. If you wish you implement this, you will need to put it in your employment contracts and consult a lawyer beforehand.
Do I have to make overtime payments?
In some circumstances, yes. In others, no. Below we’ll discuss what you need to take into account.
1. Look At Your Employee’s Award Or Agreement
Technically, it is not exactly illegal for employers to refuse their employees overtime payments, particularly if the award, enterprise agreement or other registered agreement sets out that overtime rates do not apply.
For example, consider the Retail Award. If an employee works full-time then he or she gets overtime rates if they work. However, if an employee works on a casual basis, then he or she will not receive overtime rates. Instead, your employee will receive their ordinary pay rate and casual loading.
Therefore, you must take account of how your workers are employed. This will determine if you’re employees can receive overtime.
Overall, if you are unsure about when to pay overtime, you should refer to the Modern Award.
This will tell you:
- How to pay overtime
- Payment for overtime worked on weekends
- Required rest periods after employee has worked overtime
- Whether time off in lieu of overtime is available
2. You can only request your employees to work overtime if it’s reasonable
Overtime is reasonable so long as it meets the following:
- Health and safety risks are considered
- Your employee’s personal circumstances
- Your workplace’s needs
- Whether your employee can receive overtime payment rates
- If your employee will receive a higher rate of pay
- Your employee receives adequate notice of having to work
- If your employee has notified you that they cannot work overtime
- The usual patterns of work in your industry
3. You Must Give Notice
Be aware that you must give a reasonable amount of notice to your employee. If your request is unreasonable, then the employee does not have to accept. As a result, you cannot legally penalise an employee for refusing an unreasonable request.
Finally, if you pay your employee overtime or penalty rates, don’t forget to authorise it. If you don’t, your employee will technically not be entitled to any payments.
It is not illegal to refuse to make overtime payments. However, this is dependent on what your employees’ modern award or agreement says. Otherwise, you must pay your employees overtime payments or penalty rates.
Chris is a member of the content team at Lawpath. He is currently studying a Bachelor of Business and Bachelor of Laws at UTS. He is interested in how marketing communication strategies can influence the future of the legal industry.