What is Overtime Pay in the UK? PayFit Explains

Rachel Greenway
Last updated on February 05, 2024

Every employment contract should specify the number of hours an employee is expected to work; overtime pay is simply the additional compensation employees can get for working beyond those hours.

UK overtime law, pay rates, and the latest rulings can get a little complicated to untangle. But it’s crucial that HR leaders, finance managers, and small to medium-sized business owners understand these. 

Let’s debunk these elements so you’ve got all the insights and practical guidance you need to apply them to your workforce.

What is Overtime Pay in the UK?

In the UK, this refers to the additional compensation employees receive for hours worked beyond their standard contractual hours. It's not just about extra money; it's about recognising and rewarding the additional effort employees put into their work. Reasonable overtime pay rates could make all the difference in attracting and retaining key talent, so they’re not to be sniffed at. 

Can You Force an Employee to Work Overtime?

Not really. Whether you can make overtime mandatory or not for an employee all hinges on their employment contract. 

If the contract specifies that overtime is compulsory, then yes, you can require an employee to work overtime. Though remember, this needs to fall within the legal working hours limit (48 hours per week over a 17-week period, as per the Working Time Regulations 1998, if we’re getting super payroll-nerdy about it). If not, an employee is entirely within their rights to deny this request, that is, unless they’ve chosen to opt out of the working time directive

Different Types of Overtime

Overtime in the UK can be categorised into:

Voluntary Overtime

This is where employees choose to work extra hours at their discretion;

Mandatory Overtime

When employees are required to work extra hours as per their contract;

Time off in Lieu (TOIL)

Instead of receiving extra pay, employees get the equivalent in time off.

You can also get holiday overtime, when employees are paid a different amount on certain days or are given that day off on another day of the year.

How Much is Overtime Pay in the UK?

There are no set overtime pay rates in the UK. In fact, overtime rates vary widely and will largely depend on the employment contract or collective agreements in place. While there's no statutory obligation to pay workers more than their standard rate for overtime, many employers offer enhanced rates (like time and a half or double time) to incentivise employees to work longer. 

The only thing you’ll want to ensure is that your employees are always paid above minimum wage for the hours they have worked.

Do Employers Have to Pay Overtime Rates in the UK?

No. Legally, employers don’t have to pay for overtime work unless the employment contract stipulates it. But as we’ve just touched on, it's important that overall pay for all hours worked doesn’t fall below the National Minimum Wage. That’s a real payroll faux-pas you’ll want to avoid.

What Are the Rules for Overtime in the UK?

There are only a few key rules that govern overtime. The primary one is that total hours worked should not exceed 48 hours per week on average unless the worker has opted out of this limit. In addition to this, any specifications around overtime pay rates, compulsory overtime, and TOIL need to be clearly outlined within the employment contract. 

You’ll also want to make sure that in the case of emergency overtime, you’ve notified the employee in advance and made clear how it will impact them. People generally don’t like last-minute surprises (especially if this encroaches on their free time), so you’ll want to be clear and upfront about any overtime you’re asking them to provide. 

How Do You Calculate Overtime Pay?

Calculating overtime pay in the UK requires a clear understanding of the agreed overtime rates and the number of overtime hours worked. 

This is where an overtime pay calculator might come in handy, but you don’t have to build one or go scouring across the internet to find one that will give you straightforward answers. High-quality payroll software, like PayFit, can do this for you, ensuring overtime pay remains compliant and is calculated accurately every time. 

overtime pay & rates

How Does Overtime Pay Work With Annual Leave?

A million-dollar question. A landmark ruling by the Employment Appeal Tribunal highlighted that overtime should indeed be considered when calculating holiday pay. This means that employees earning regular overtime should receive holiday pay reflecting their average earnings, including overtime, rather than just their basic salary.

What is Time Off in Lieu (TOIL)?

TOIL stands for Time Off in Lieu, an arrangement where, instead of receiving overtime pay, employees are given equivalent time off. This can be a flexible option for both you, the employer and your employees, allowing for additional leave in exchange for extra hours worked. The amount of time accrued is usually based on an agreed-upon rate. 

Yes, there are several. For example, unpaid overtime must still comply with the National Minimum Wage regulations under UK law. Additionally, denied overtime discrimination can occur if some employees are unfairly excluded from overtime opportunities based on protected characteristics, such as those under the Equality Act. Given this, employers must ensure their overtime policies are fair, transparent, and non-discriminatory.

Make overtime pay calculations a doddle 

Understanding overtime pay in the UK, from overtime law to calculating overtime pay rates, is essential for employers to manage their workforce effectively while ensuring compliance with employment regulations. PayFit is designed to help businesses streamline this and other payroll-related processes, including accurately calculating overtime and holiday pay. For more insights into managing your payroll efficiently, check out our other related blog posts.

Navigating the complexities of overtime in the UK can be challenging, but with the right knowledge and tools, you can ensure you’re rewarding your employees fairly, all while sticking to the law. Whether it's leveraging technology like ours to be your own overtime pay calculator, or understanding the latest ruling on overtime and holiday pay, staying informed and prepared is key to successful payroll management.

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