What is overtime pay in the UK?

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

UK rules around extra hours, 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 them.

Let’s unpack these elements so you’ve got practical advice you can apply across your company.

What is the definition of overtime pay in the UK?

Overtime pay is the extra compensation staff receive for hours worked beyond their standard contractual schedule. It’s not just about extra money; it’s about recognising the additional effort employees put into their work. Competitive rates can help an employer attract and retain key workers.

Can you force an employee to work overtime?

Not really: whether overtime is mandatory depends on the employment contract.

If the contract says additional hours are compulsory, an employer can require employees to work beyond their usual schedule. But this still needs to sit within the legal working-hours limit (an average of 48 hours per week, usually measured over 17 weeks, under the Working Time Regulations 1998), unless the worker has opted out.

What are the different types of overtime?

Overtime can usually be grouped into a few common arrangements.

Voluntary overtime

This is where people choose to work additional hours at their discretion.

Mandatory overtime

This is where staff are required to work longer hours because their contract says so.

Time off in lieu (TOIL)

Instead of receiving extra pay, people get the equivalent in paid leave.

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.

Holiday or bank-holiday overtime

Some companies apply different rates on certain days, or offer an alternative day off later in the year.

What do common overtime arrangements look like in practice?

Overtime arrangements at a glance

How much is overtime pay in the UK?

There are no set rates in the UK for work done beyond contracted hours. What’s paid varies widely and will largely depend on the employment contract or collective agreements in place.

While there’s no statutory obligation to pay people more than their standard rate for these hours, many employers offer enhanced rates (like time and a half or double time) to encourage staff to stay on longer.

The main thing to check is that pay for all hours worked always sits above the national minimum wage / national living wage.

Do employers have to pay overtime rates in the UK?

No: legally, companies don’t have to pay specific overtime rates unless the employment contract says so.

But even when overtime is unpaid, overall pay for all hours worked must not fall below the national minimum wage / national living wage. That’s a payroll risk (and a potential claim) you’ll want to avoid.

What are the rules for overtime in the UK?

The core rules for additional hours are fairly limited, but they matter.

First, total hours worked shouldn’t exceed an average of 48 hours per week unless the worker has opted out of the limit.

Second, any specifications around rates for extra hours, compulsory work beyond the normal week, and TOIL should be clearly outlined within the employment contract (or a written policy the contract points to).

Finally, if you’re asking for emergency cover, it helps to notify employees in advance and be clear about the impact. People don’t love last-minute changes, and it’s often where disputes start.

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 can do this for you, ensuring overtime pay remains compliant and is calculated accurately every time. 

How does overtime pay work with annual leave?

Regular overtime can affect holiday pay.

A key ruling by the Employment Appeal Tribunal confirmed that overtime can need to be included when calculating holiday pay in some cases. In practice, if someone earns regular additional hours, their leave pay may need to reflect their average earnings (not only basic salary). Keeping clean records of hours worked is the best way to avoid a dispute later.

What is time off in lieu (TOIL)?

TOIL (time off in lieu) is an agreement where, instead of receiving extra pay, workers get equivalent paid leave.

It can be a flexible option for both employer and employees, especially in busy periods. The important bit is clarity: define how TOIL is accrued, how it’s approved, and by when it must be taken, otherwise TOIL balances can become a quiet headache over the following weeks.

Are there any other legal considerations?

Yes.

Unpaid additional hours must still comply with national minimum wage rules.

It’s also worth thinking about fairness. If access to overtime opportunities is inconsistent (or decisions aren’t explained), it can lead to complaints and, in some situations, a discrimination claim if workers are treated differently based on protected characteristics under the Equality Act.

How to make overtime pay calculations a doddle?

Understanding overtime pay in the UK, from the legal framework to calculation and record-keeping, helps employers manage their workforce fairly while staying compliant.

PayFit is designed to help companies streamline payroll processes, including calculating overtime and supporting accurate holiday pay where relevant. If you want more payroll advice, you can explore our other related guides.

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