Where overtime practices have evolved organically without underlying standard rules, there is a risk that certain employees or groups of employees may be treated in a less favourable manner. This can give rise to individual grievances or to collective disputes. Legal challenges could arise from different groups within the workplace who are afforded protections under the Employment Equality Acts and the legislation on fixed-term or part-time work.
Where an employer has not taken a consistent approach to managing overtime across the staff body, there is a risk that these practices could become part of the custom and practice and that the employer’s ability to amend or introduce more efficient rules is impeded. It is thus important that an employer understands the current overtime arrangements (which may vary amongst teams and departments) before considering any changes.
In order to manage overtime consistently and efficiently, an employer needs to consider the issue at a macro and a micro level. A documented approach to overtime is useful to ensure that managers and staff have a clear understanding. A company overtime policy can be created and should be consistent with the employment contracts. As with any company policy, it is important that the business retains some discretion to react to unforeseen events and some flexibility to adjust the policy based on business needs. Please note that these clauses can only be relied on to the extent that the employer’s actions are reasonable. The use of ‘employer discretion’ in a manner that is unreasonable will not be viewed favourably by a third party.
At a macro level, the business needs to be clear on how overtime is managed across different groups and levels of staff. It is not unusual for rostered overtime (which generally attracts a payment) to be available only to certain groups of staff. For example, hourly paid staff would often be entitled to overtime, while salaried staff may not be. However, staff at all levels of a company may be required to work overtime. Where this is the case, the wages and salaries should be at an appropriate level to compensate for this. In considering how to compensate for overtime, an employer should consider the frequency and likelihood of overtime across the different groups/levels of staff. Where there is a specific formal overtime arrangement in place, the employment contract must specify any terms or conditions relating to overtime. This is a requirement under the Terms of Employment Information Act.
Where payment for overtime is given, employers will tend to have different rates in place. It is common for a lower hourly rate of overtime payment to be given for hours worked on a weekday than at a weekend. Different overtime rates may be available to different staff groups. For competitive reasons, overtime rates are generally set at comparable levels to those that apply in comparable companies, in order to attract and retain staff. The Organisation of Working Time Act requires that any hours worked on a Sunday must be compensated at a higher rate (through the granting of an allowance, a higher rate of pay or time off or a combination of these).
Some employers have a TOIL (Time Off In Lieu) system in addition to or instead of paying for overtime worked. A TOIL system grants employees time of in lieu of the additional hours worked and generally will provide that these TOIL hours must be availed of within a particular period. TOIL can present a challenge to many businesses as it means that the employee is out of the workplace for a number of hours in compensation for the additional hours he/she worked and thus TOIL can be contrary to the need for additional work hours in the first place.
The obligation to record working hours arises under the Organisation of Working Time Act. When additional hours are worked, it is important that these are recorded in order that the employer can ensure compliance with the law (for example the maximum weekly working hours) and that the employer is ready for a potential inspection by Workplace Relations Commission (WRC) labour inspectors. Employers should have a system in place that records weekly working hours (contracted hours and additional hours) as well as rest breaks. Regular training for staff and managers to ensure adherence to the systems in place to record working hours is recommended.
Overtime is a common feature of many workplaces and it arises for many reasons including unexpected staff absences, busy periods and a necessity to meet client deadlines. In certain employments (e.g. retail, manufacturing) there is typically a detailed overtime policy in place. In other employments (e.g. professional services) there may be an expectation that reasonable overtime is worked and that staff members are flexible in this regard. In either case, it is advisable that staff are clear on when and how overtime arises. This can be outlined at the employment offer stage or covered in induction. It can be detailed in the employment contract or overtime policy. In any event, it is advisable that staff are clear on the expectations.
On a day to day basis, the management of overtime requires that employers have systems in place to ensure oversight of the communication, records and levels of overtime worked. Whether overtime arises on a sporadic or a regular basis, employees have an entitlement to be notified in advance if the employer requires them to work additional hours. This entitlement arises under the Organisation of Working Time Act. The Act provides that employees are entitled to a minimum of 24 hours’ notice of the required start and finish times. This minimum notice requirement must be given before the first day or, as the case may be, the day, in that week on which the employer proposes to require the employee to work additional hours. The Act does recognise that there may be instances where the employer may give a shorter notice period where it could not have reasonably been known to the employer that the requirement for additional hours would arise. In practice, where overtime is a regular occurrence and/or where there is a degree of foreseeability, most employers will give more than 24 hours’ notice. This enables staff to make necessary plans and it assists with ensuring staff cooperation and goodwill in relation to overtime. Overtime hours may appear in the weekly or monthly roster in some businesses.
Prior approval for overtime is a common requirement in companies where overtime accrues an entitlement to payment and/or time in lieu. It is important in such businesses that employers have a degree of control over the level of overtime worked and thus the associated cost. Where an employer makes prior approval a mandatory step, the approval system needs to be very clear. Where there is any ambiguity in relation to how prior approval is obtained, what prior approval looks like, who prior approval must come from, how far in advance prior approval must be sought or a pattern of cases where the absence of prior approval was not addressed by management, then the employer’s application of a prior approval process will be undermined and increasingly difficult to apply.
Prior approval is especially important in businesses where employees have a degree of discretion over how their own work is completed and may claim for overtime where they did not complete a project or piece of work within their standard working hours. While many employers foster a culture where employees have a significant degree of control in terms of how they do their work, there is a potential for heightened claims for overtime payments where an employee can slow their pace in order to increase overtime hours. It is thus common to see a clause in the overtime policy that states that overtime should only be worked where necessary and where it was genuinely not possible to complete work assignments within the standard business hours.
Where the management and payment of overtime has been problematic, a company policy can provide that the employer reserves the right to review and reject any claim for overtime payment where it is not apparent that there was a need for additional hours and/or where a pattern of claiming overtime hours has exceeded the norm. It is important to note that employers should monitor levels of overtime worked to ensure legal compliance with the working time legislation and to ensure that staff are not working excessive hours that could be damaging to their health and welfare.
Public holidays are an entitlement provided for under the working time legislation. Where a public holiday coincides with overtime hours, the employer will have to compensate for both. The entitlement for working (any number of hours) on a public holiday is one of the following: a paid day off within a month or an extra day’s annual leave or an extra day’s pay. Thus, where the employer opts for the latter of these options, the employee who works overtime on a public holiday will receive basic hourly pay and overtime payments for the hours actually worked and in addition the employee will receive an extra day’s pay (to compensate for the public holiday).
It is worth noting here that where employees are receiving overtime payment on a consistent basis that this may need to be factored in to payment for annual leave. This is not strictly required under the working time legislation, however when audits are carried out by WRC inspectors, they have advised employers to do this.
Further information in relation to the Organisation of Working Time act and other employment legislation mentioned in this article can be found in the Ibec HRM guide www.hrmguide.ie
Data in relation to overtime premia paid to employees was collected on the Ibec conditions of employment survey 2016. The survey report details information on the total number of companies with overtime in operation by sector, industry and company size, as well as details of overtime premia paid where overtime was in operation. Ibec member companies can access the report here.
Ibec HR Strategy Specialist
Monday, 20 November 2017