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In Short
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There is no legal requirement in the UK to pay an overtime rate, but total pay must not fall below the National Minimum Wage when averaged across hours worked.
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Whether overtime is compulsory, optional or offered depends on the employment contract.
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If you offer overtime pay or time off in lieu (TOIL), clearly set out the method and terms in writing.
Tips for Businesses
If you decide to pay overtime, make sure the contract or a written agreement explains how it’s calculated, whether you will offer extra pay or TOIL, and who qualifies. Keep accurate records to avoid disputes or claims of unfair treatment.
As an employer, you may fix specific working hours within your employee’s employment contract. These are considered an employee’s normal hours of work. Where an employee works beyond these hours, it is considered overtime. Sometimes you may require your staff to work overtime. For example, this may be to ensure your business is sufficiently staffed for a busy period. Employment law in the UK contains rules relating to employees working overtime that you must be aware of. This can help you avoid timely and costly problems for your business, including legal disputes. This article will briefly explain the basic rules associated with employees working overtime and look in more detail at the rules surrounding overtime rates in the UK.
What Are the Basic Rules About Working Overtime?
There is no compulsory requirement for an employee to work overtime unless their contract states so. However, you can require your employees to work overtime if it is stated in the employment contract.
Does an Employer Have to Pay Their Employees Overtime?
There is no legal requirement in the UK for you to pay employees overtime rates. There is, therefore, no statutory amount of overtime rate of pay. However, there are some rules concerning overtime pay. For example:
- there is a legal requirement that when working out the total hours an employee has worked and the total pay relating to this, that the pay does not amount to less than the National Minimum Wage for each hour worked. This will vary depending on the age of the employee; and
- you must treat part-time employees fairly and, therefore, the same rules must apply as for full-time employees.
Paying Your Employee Overtime
Where you opt to pay your employees for working overtime, you will call this overtime pay. You may choose to pay overtime as a way to incentivise your employees to work over their standard contractual hours. It is more usual to pay hourly employees overtime than those you pay a salary.
As an employer, it is helpful to ensure that you detail any overtime pay rates in your employee’s employment contract and also detail the methods for calculating overtime pay. You can also agree on these details with the employee verbally.
This factsheet outlines key developments in 2025 affecting workforce management. In particular, the proposed Employment Rights Bill (2024) will drive significant changes, anticipated to start late 2025.
Examples of Overtime Pay
Here are some examples of what overtime pay might look like:
- time off instead of extra pay termed ‘time off in lieu’ (TOIL); or
- paying for hours worked outside of the employee’s regular hours at a higher rate than usual hours; or
- paying for overtime at the usual rate of pay
There are some rules to consider when paying your employees overtime pay. For example, you may need to consider overtime pay when calculating an employee’s holiday pay if the employee does overtime regularly. However, where overtime is only carried out on occasions, it is unnecessary to include it.
Furthermore, unless you have otherwise stated in the contract, you have no obligation to pay a part-time employee overtime. However, you must pay them overtime when:
- they have worked the equivalent hours to a full-time employee, and a full-time employee would usually receive extra pay for working above these hours; or
- your employee is working unsocial hours, and you would typically pay full-time staff working these unsocial hours overtime.
Unsocial hours include hours of work that are outside of hours that would be considered normal working hours. For example, employees who work night shifts are usually considered as working unsocial hours. Usually, if an employee commonly works outside of 9am-5pm Monday to Friday, this category will apply to them.
Overtime and Collective Agreements
In some industries, overtime rates and conditions may be set by collective agreements between employers and trade unions. These agreements can establish standard practices for overtime pay that go beyond the legal minimum requirements. If your business operates in an industry with strong union presence, it is important to be aware of any applicable collective agreements that might affect overtime policies.
Overtime for Night Workers
Special considerations apply to night workers when it comes to overtime. Under UK law, night workers should not work more than an average of 8 hours in a 24-hour period. If overtime would cause a night worker to exceed this limit, employers need to be particularly cautious and ensure they are not breaching working time regulations.
Record Keeping for Overtime
Proper record-keeping is crucial when it comes to overtime. Employers should maintain accurate records of hours worked, including overtime, for each employee. This is not only good practice for payroll purposes but also helps demonstrate compliance with working time regulations if ever questioned.
Overtime and Salary Sacrifices
If an employee has entered into a salary sacrifice arrangement, such as for pension contributions or childcare vouchers, it’s important to consider how this might interact with overtime pay. In some cases, overtime pay might need to be calculated based on the post-sacrifice salary to ensure the arrangement remains compliant with minimum wage laws.
Reviewing Overtime Policies
It is good practice for employers to regularly review their overtime policies. This helps ensure they remain fair, competitive, and compliant with any changes in employment law. Regular reviews also provide an opportunity to assess whether current overtime practices are meeting the needs of both the business and its employees, potentially leading to more efficient workforce management.
Key Takeaways
There is no legal requirement in the UK for you to pay employees overtime rates when requiring them to work overtime. However, where you choose to, there is no statutory amount you are required to pay. This article has detailed the basic rules regarding an employee working overtime and the rules relating to any overtime rates paid. You must follow these rules and detail any of your own rules within the employment contract or any other written agreement with the employee for clarity.
If you need help with rules regarding employees working overtime and overtime pay, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 258 4780 or visit our membership page.
Frequently Asked Questions
When requiring your employees to work overtime, you are not legally obliged to pay them an overtime rate of pay. However, there are rules for when you require your employees to work overtime and pay them an overtime rate.
An employer cannot force their employees to work overtime unless overtime is a requirement detailed within their employment contracts. Three types could be detailed, and two out of three require the employee to work overtime.
If an employee regularly works overtime, you may need to include this when calculating their holiday pay. However, if overtime is only occasional, it does not need to be included in holiday pay calculations.
Yes, employers can offer TOIL instead of overtime pay. However, this should be clearly outlined in the employment contract or a written agreement. The terms should specify how TOIL can be booked and used, and what happens if it is not taken by the end of the leave year.
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