What is overtime?
The Fair Work Ombudsman defines overtime as any extra time worked by an employee. This means any work completed:
- beyond their ordinary hours of work
- outside their agreed number of hours
- outside the spread of ordinary hours.
Overtime can be paid or unpaid. However, it is usually compensated in line with the employee’s industry award or registered agreement – a document between employer and employee that stipulates the specific employment conditions.
Overtime stats
According to a 2019 study by the Australia Institute, respondents across all employment types, both part- and full-time, reported working an average of 4.6 hours of unpaid time each week.
The same survey found that the aggregate value of all these extra hours amounted to around 2.4 billion hours of unpaid overtime in 2019, worth a total of $81.5 billion! These figures make clear just how important the issue of overtime is.
When can overtime be a good thing?
First, it’s important to acknowledge that there might be some situations in which having employees work overtime can actually be beneficial. Here are some examples:
- Recognition: If you pay high rates for extra work, employees can feel valued and more motivated to finish tasks or projects even after business hours.
- Target achievement: As long as it doesn’t become a habit, occasional overtime can help your company achieve its business targets and ensure your team meets important deadlines.
- Team building: Overtime can be a team-building exercise! Situations in which everyone pulls together as a team and is willing to sacrifice a few hours of their free time for the benefit of the company as a whole can have a very positive effect on your staff’s team spirit.
Pitfalls of overtime
Not surprisingly, overtime comes with some pitfalls that you should be aware of as a responsible employer. These include:
- Employee health: Working extra hours on a regular basis can be a source of great stress for employees, leading them to experience burnout and a poor work-life balance .
- Productivity loss: Stretched workers may suffer from a lack of focus and persistent tiredness. Although it may seem counterintuitive, studies have shown that productivity can actually suffer when employees work too much overtime. Astonishingly, a study by the International Labour Office showed that a 10% increase in overtime resulted, on average, in a 2.4% decrease in productivity measured by hourly output.
- Poor results: Overtime can be bad for business and lead to financial losses owing to employee absences and lower productivity and morale.
- Deliberate stalling: Some employees may be tempted to deliberately aim to put in as much overtime as possible, especially if it is paid well, to increase their overall earnings. This may cause them to stall and slow down during their regular working hours in order to justify having to put in extra hours and accumulate overtime.
Legal aspects of overtime
Apart from the pitfalls outlined above, there may be legal repercussions related to your staff doing overtime. Familiarise yourself with your local overtime laws to ensure you’re on the right track and not unwittingly getting yourself or your company in hot water.
Is it paid fairly?
Employers must ensure they pay employees at least the amounts they are entitled to be paid under any applicable industry award or agreement. Failure to do so may result in a breach of the Fair Work Act, which is something you will obviously want to avoid.
Is it reasonable?
Keep in mind that an employee is entitled to refuse overtime work if your request is unreasonable.
The National Employment Standards stipulate that an employer cannot request or require full-time employees to work more than 38 hours per week and part-time employees to work more than their ordinary hours of work, unless such a request is considered reasonable.
According to the Fair Work Act, the following considerations determine whether a request for overtime is reasonable:
- any risk to employee health and safety that may arise from working the additional hours
- the employee’s personal circumstances, such as their family responsibilities
- the needs of the company
- whether the employee receives appropriate compensation for working the additional hours
- the amount of notice given by the employer when requesting staff to work additional hours
- the usual patterns of work in the relevant industry
- the nature of the employee’s role and their level of responsibility.
Time off in lieu of payment?
Also remember that employees can ask for time off in lieu or choose to have their overtime paid out. Some modern awards include a ‘time off in lieu’ clause, which stipulates that an employee is entitled to take paid time off instead of receiving overtime pay. This differs from industry to industry and award to award, though, so it’s worth checking the rules for your particular sector to make sure you are up-to-date.
Importantly, you are not required to automatically green-light any time off in lieu request by your staff. Just like your request for overtime must be reasonable, any request for time off in lieu must also be reasonable. Time off right in the middle of an important project or just before a tight deadline with a major client may not be reasonable and can be declined on these grounds.
What to do if your employees work too much overtime
If you notice your overtime total is getting out of hand, it’s time to take action. Look into the reasons for any excessive overtime, and actively try to counteract the problem.
Investigate the reasons
The first step should be to get to the bottom of things. Ask yourself:
- Why are staff working so much extra time?
- Do they feel pressured to stay until late into the night in order to earn recognition?
- Is their workload too great, and they can’t cope within regular hours?
- Or, perhaps, do they simply like their job and don’t mind putting in the extra time because it gives them satisfaction?
Develop strategies to reduce overtime
Once you’ve got to the bottom of your employees’ overtime, develop strategies to reduce employee overtime hours as appropriate. These could include the following approaches:
- streamline current processes to increase productivity
- encourage delegating tasks to other team members as appropriate
- hire new staff as needed if it is clear that you are understaffed
- offer training to improve employee performance and output
- ensure your expectations are realistic.
If you show that you are actively tackling the issue, this can also boost your reputation as an employer.
Related: 4 Ways to Build Your Employer Brand Without Breaking the Bank
Keep an eye on home-based employees
With more people working from home than ever before, not least due to the ongoing COVID-19 crisis, the boundaries between work and home life can easily become blurred. Although flexible working promises employees a better work-life balance, it’s easy to work too much and put in too many hours when working from home.
Read more: Australia Leads the Way on Family-Friendly, Flexible Jobs
Stay in touch with your home-based staff and listen to their concerns if they feel like they are working too many hours and find it hard to switch off their computer at the end of their regular working day. Reassure them that it’s okay to unplug work devices after their scheduled shifts, and that you don’t expect them to be available for work-related tasks 24/7 just because their office is based at home.
Related: Grow Your Business
Final considerations
Before requiring an employee to work additional hours, employers should carefully consider whether it is reasonable to ask employees to work additional hours, and keep in mind any obligations to compensate their employees for overtime in the form of penalty rates or loadings according to the relevant industry awards or agreements.
While it’s important to grow your business and achieve solid results, this shouldn’t happen at the expense of your workers. Follow the recommendations in this article, and your staff will thank you. Keeping tabs on extra work and overtime ensures that your business operations are legally sound, and your employees’ health and productivity will be at their best.
