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How Do You Use An Overtime Calculator For Employee Overtime In The UK?

overtime calculator

Do you really need an overtime calculator? When it comes to employee overtime, specifically in the UK, this is a complex question that varies by organization.

In this article, we address the various issues surrounding overtime calculation. We also explain the letter of the law in regards to overtime in the UK, and how to make overtime calculators a cinch.

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What Is Overtime In The UK?

Overtime is a fairly self-explanatory term. Let’s break it down a bit: “over” + “time” is when an employee works extra time, over and above their expected number of hours. This can include work completed outside of normal working hours or when an employee does more hours of work than required or agreed upon.

When Should You Rely On an Overtime Calculator?

An overtime calculator is the tool, device, or mechanism that calculates how much overtime has occurred during a certain period. It is used to help employees and employers calculate what overtime is paid, and at what rate, so everyone is clear about overtime pay.

What Does UK Law Say About Overtime?

“An employer may offer overtime to cope with an increase in demand for their products or services”, says acas, however, according to NIDirect, employers in the UK have no legal responsibility to pay for working extra hours (unless this is documented in the employee contract).

There is also no minimum statutory level of overtime pay, as long as an employee’s average pay rate doesn’t fall below the National Minimum Wage. However, the rules on working overtime in the UK are slightly different to the rest of the world.

As SmallBusiness.co.uk explains, “This contrasts markedly with other labour markets in the west. For example in Germany, employees accrue overtime as time in lieu. In the United States, employees working more than 40 hours must receive overtime payments in line with the Fair Labour Standards Act”.

Is Tracking Working Hours A Priority?

You can easily stay on top of how many hours your employees have worked using Personio. Click here to start using Personio today, for fourteen days, completely for free.

Beware, though… the law, sometimes known as the working time directive or the working time regulations does stipulate that employees cannot work more than 48 hours a week on average (unless they opt out). You can find an example of the opt-out agreement by clicking this helpful link.

Signing an opt-out clause does not require employees to work more than 48 hours a week forever, though. The Citizens Advice Bureau says that if they’re having mental or physical health problems because of overwork, or are being asked to do more than is realistic to achieve in their normal hours they can cancel their opt-out agreement by giving at least 7 days’ notice in writing.

As an employer, you can ask them for a longer notice period to cancel this opt-out clause (up to 3 months). That is, if you have put that clause in their contract. And, you might actually be able to reduce their pay in some circumstances if they have opted-out and then choose to cancel it.

Why Is Calculating Overtime Important for HR Leaders?

Consider this: Are your employees working a fair number of hours each week?

In May 2020, Metro reported on research commissioned by LinkedIn in partnership with The Mental Health Foundation. It revealed that 25% of the 2,000 UK adults working from home since Covid-19 felt pressured to respond more quickly and remain available online for longer than they normally would, with one in eight (12%) now signing in before 7 am and 18% still working after 7 pm.

As an HR leader, it is critical to take care of your people. Working too many hours can lead to stress, mental health issues and even burnout. After all, there is a good reason why the working time directive is in place.

Not All Overtime Is Bad Overtime

However, not all overtime is bad overtime. Some industries expect and require employees to work overtime. The Covid-19 heroes, NHS heroes, do work a lot of compulsory overtime. And, many employees volunteer to work overtime to boost their own income.

As is the case with most employment-related activities: It’s all about what’s in their contract. HR leaders may very well require employees to work overtime, and that is perfectly acceptable.

HR Tips for Documenting Legally-Worked Overtime

The most important things for HR to consider with regards to employee overtime is documenting whatever is agreed on.

Here’s an example: Employees choosing to work more than the legally allowed 48 hours. Make sure the opt-out agreement is in every relevant employee’s contract. Don’t forget, though, that it is not a requirement to sign this.

In essence, it is important to ensure that every relevant employee’s contract includes details of:

  • Overtime pay rates
  • How they’re worked out
  • The documentation process
  • When/how they are paid

What About Time Off in Lieu (TOIL)?

Some companies choose to offer ‘time off in lieu’ (TOIL) instead of overtime. Rocketlawyer says, “This means that the employee will not get paid for the extra work they do, but they can take hours off in addition to their annual leave instead”.

According to NIDirect, employers and employees agree the time when individuals take TOIL. In general, it is normally at a time that suits the employer.

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What About Holiday Allowance and Overtime?

In short, holiday pay calculation is much wider than basic pay. According to acas, “recent court decisions have indicated that all overtime worked should be included when calculating a worker’s statutory holiday pay entitlement”.

This is a topic we have covered in great detail already. You can find out more by clicking this link.

What About Furlough Pay and Overtime?

For a thorough overview on this subject, take a look at the Thomson Reuters Practical Law article on calculating furlough pay under the Coronavirus Job Retention Scheme. In it, you can see the inclusion of overtime for the purposes of calculating an employee’s regular salary or wages. This also addresses issues related to overtime and fixed-rate employees.

Calculating Overtime Pay With An Overtime Calculator

Once HR has dealt with the ins and outs of contracts, opt-ins/opt-outs, TOIL, and other overtime pay-related issues, calculating overtime pay comes next. Actually, working it out is quite simple: Add up the number of overtime hours worked and multiply that by the overtime pay rate.

Some advanced HR solutions make it really easy to calculate employees’ overtime pay within the same system you already use to track employee-related documents or payroll.

For example, Personio allows you not only to track attendances but to record and compensate for any overtime worked by your employees. Regardless of whether your business pays for overtime or not if it’s important for you to track when attendees are working sooner or later it’s wise to invest in a simple, effective, and reliable attendance tracking tool.

If you would like any help on making your core HR processes easier be sure to check out the Personio HR expert hub. It can serve as a helpful resource to learn more about industry best practices.

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