When Does Regular Overtime Become Contractual?

The question ‘When does regular overtime become contractual?’ is one that commonly arises within a number of different employment contexts, from whether an employer has the right to insist on an employee working additional hours to when the employee has the right to be paid extra for this. It can also arise when calculating an employee’s correct pay entitlement, based on their average weekly pay, for example, in the context of holiday pay or pay in lieu of notice.

There are various reasons why a need for overtime may arise. In some cases this may be anticipated, whilst in others it may be unexpected, for example, due to sickness-related staff shortages. In either case, it’s important for employers to be able to meet the needs of their business, but also to ensure that overtime arrangements are fair and don’t fall foul of the law.

The following guide for line managers and HR personnel, as well as those responsible for payroll, looks at the rules relating to overtime to help answer this frequently asked question.

 

Section A: UK Overtime Rules

 

Most employees are contractually required to work a fixed number of hours each week, in return for a specified rate of pay. Typically, these standard working hours and pay will be set out within a contract of employment or written statement of employment particulars. Any time worked in excess of these normal hours will usually be classed as overtime.

In the UK, the legal framework for overtime is governed by a combination of employment laws, case law, and contractual agreements:

 

1. Contract of Employment

 

The way in which overtime is treated will in most cases be determined by the specific contractual arrangements between the employer and employee, or any subsequent agreement made between the parties where the need arises. As such, the employment contract should make express provision for standard working hours, ie the agreed hours that define a full-time or part-time role, and for working additional hours, including terms covering what constitutes overtime, whether overtime is expected or voluntary, whether the employee is contractually obliged to undertake overtime, when an employer can request overtime or an employee can refuse this, and how any overtime pay will be calculated.

 

2. Employment Rights Act 1996

 

This Act provides the foundational rights for employees in the UK, including the basic terms of employment and the requirement for written statements of employment particulars. It does not specifically address overtime, but it establishes the principle that terms of employment, including overtime arrangements, should be clear and agreed upon.

 

3. ACAS Code of Practice

 

The Advisory, Conciliation and Arbitration Service (ACAS) provides guidance on employment practices, including managing overtime. Although the ACAS Code does not have the force of law, it is a useful reference for best practices in handling overtime and disputes.

 

4. Case Law

 

Legal cases have established precedents regarding overtime. Key case law includes Williams v. Leeds United Football Club Ltd (2005), which highlighted how consistent and regular overtime can be considered part of an employee’s contractual terms if it becomes an established part of their role. In Bear v. Leeds City Council (2005), the Court of Appeal addressed how regular overtime payments could form part of an employee’s contractual pay if it is consistently expected and forms part of the employee’s regular duties.

 

5. Minimum Wage Regulations

 

The National Minimum Wage Act 1998 and subsequent regulations set out minimum wage rates, including how overtime pay should comply with these rates. Employers must ensure that overtime pay meets at least the minimum wage requirements.

 

 

Section B: Types of Overtime

 

Where the contract of employment incorporates overtime arrangements, this can be done in one of three ways: on a voluntary basis; compulsory and guaranteed; or compulsory and non-guaranteed.

Voluntary overtime is where there is no contractual obligation on an employer to offer additional hours, nor any obligation on the employee to work those hours if offered. However, the contract will allow the employee to work extra hours, if and when overtime is available, for example, to cover any sudden and unplanned staff shortages.

In relation to compulsory overtime, there are two different types: guaranteed and non-guaranteed. Guaranteed overtime refers to extra work that an employer is contractually obliged to offer and an employee is obliged to accept. This is often used, for example, where the need for extra staff is anticipated in advance of a regular increase in orders from a client.

In contrast, non-guaranteed overtime is where the employer may or may not offer overtime but, if offered, the employee is obliged to undertake these extra hours. In these circumstances the contract may make provision for the employee to do ‘a reasonable amount of overtime from time to time’ either according to the needs of the business, or whatever hours are necessary to complete a particular task after their shift has ended.

However, in the case of compulsory overtime, even though this is a legitimate way of requiring employees to work extra hours, employers must be careful not to discriminate against those with a protected characteristic, for example, women with caring responsibilities or anyone suffering from a disability that prevents them from working long hours.

 

Section C: When Does Regular Overtime Become Contractual?

 

In UK law, regular overtime can become contractual under specific circumstances.

When overtime is explicitly detailed in an employee’s contract of employment, it becomes contractual. If the contract outlines that overtime is a requirement of the role and specifies the terms and conditions under which it is to be performed, it is considered part of the contractual obligations. Even if the contract does not mention a specific number of additional hours but establishes expectations for extra work, the overtime can be deemed contractual if it is included in the agreement.

When the employment contract specifies the rate of pay for overtime separately from regular hours, these clauses clearly establish that overtime work and its compensation are contractual duties.

Additionally, regular and expected overtime might become an implied term of the employment relationship. If an employee consistently works overtime and it becomes a regular aspect of their job, it may be regarded as a contractual term, especially if there is a clear pattern of practice. The course of employment can lead to the overtime being implied as a contractual requirement.

Case law has played a significant role in defining when regular overtime becomes contractual. In the case of Williams v. Leeds United Football Club Ltd (2005), the court clarified that consistent and expected overtime could become part of the contractual terms. The regularity and expectation of overtime are crucial factors in determining whether it constitutes a contractual obligation. Similarly, the Bear v. Leeds City Council (2005) case reinforced that regular, consistent overtime might be considered a contractual term if it forms an integral part of the employee’s role.

Employers should communicate clearly about overtime expectations and ensure these are reflected in employment contracts or company policies. Proper documentation and communication regarding overtime are essential to establish whether it has become a contractual obligation. Employees who believe their regular overtime has become contractual can seek advice from employment advisors or legal professionals, particularly in cases of disputes over overtime pay or terms. Employers must ensure they comply with legal requirements and best practices in managing overtime.

 

Section D: Employee Overtime Rights & Entitlements

 

As overtime is typically contractual, absent any express provision or agreed arrangement, employees cannot be forced to work extra hours. Equally, if they refuse to work overtime where they’re not contractually obliged to do so, they should not be subjected to any detriment. This means that any refusal should not result in unfair treatment at work.

In contrast, where overtime is contractual, on either a compulsory guaranteed or non-guaranteed basis, there may be serious consequences for an employee in refusing to work extra hours when required. This would constitute a potential breach of contract for which the employer could take disciplinary action against the employee for misconduct.

This means that it’s important to set out the type of overtime that’s in place, where the employment contract must make it clear if any overtime is compulsory, as this will impact how an employer can deal with an employee who refuses to work extra hours where required.

In the same way that there’s no legal obligation on an employee to work overtime, except where the employment contract provides otherwise, employers are not obliged to pay their staff for additional hours worked in excess of their normal working hours.

This means that any right to overtime pay must be set out within the employment contract or agreed between the employer and employee. The contract may provide for any additional hours worked to be paid at the normal rate of pay, for example, in the case of a shift overrun. However, many employers will often offer an enhanced rate, such as time and a half, either as an incentive for employees to work voluntary overtime or as a way of maintaining positive working relations where employees are required to work compulsory overtime.

For employers that choose not pay for overtime, for example, where a contract pays an annual salary and requires staff to be occasionally flexible, they must be careful that an employee’s average pay for the total number of hours worked doesn’t fall below the national minimum wage. By law, almost all workers in the UK are entitled to be paid a minimum amount per hour, depending on their age, plus a special rate for apprentices.

 

Worker Description	NMW rate from 1 April 2024
National Living Wage (21 and over)	£   11.44
18-20 Year Old Rate	£     8.60
16-17 Year Old Rate	£     6.40
Apprentice Rate	£     6.40
Accommodation Offset	£     9.99

 

 

When calculating the minimum pay per hour, the average pay for the total hours worked must not fall below the relevant minimum wage rate for the individual’s pay reference period. This period is usually set by how often a person is paid, for example, weekly or monthly.

 

Section E: Can Employers Refuse to Provide Overtime?

 

Where an employer isn’t contractually obliged to provide overtime, they can refuse to offer additional hours over an employee’s standard hours. Similarly, unless the employment contract guarantees overtime, an employer can stop an employee from working it.

However, employers should exercise caution when preventing an employee from working overtime whilst allowing others to do so, as this could be construed as discriminatory. For example, part-time employees must not be treated less favourably than full-time employees.

 

Section F: Can the Amount of Overtime be Capped?

 

By law, there’s a limit on the number of hours that an employee can work each week, including overtime, although these hours are calculated on an average basis. Under the working time directive, an employee cannot usually work more than an average of 48 hours per week, typically taken over a 17-week period, unless they’ve opted out of these provisions.

This means that provided written agreement has been reached for the employee to opt-out of the 48-hour weekly limit, any overtime won’t need to be capped. Otherwise, the employee can still work more than 48 hours in a single week, but only where it’s possible to reduce their average working hours to the statutory maximum within the 17-week reference period.

When calculating an employee’s average working hours, this will include paid overtime and any unpaid overtime that the employee has been asked to do, but doesn’t include any unpaid overtime that the employee has volunteered for, such as staying late to finish something off.

 

Section G: Implications of Overtime on Pay & Entitlements

 

The question ‘When does overtime become contractual?’ is especially pertinent when it comes to pay and entitlements. This is because the average number of hours that an employee has worked within any given pay reference period can significantly impact their entitlement to holiday pay and pay in lieu of notice.

 

1. Holiday Pay

 

In the context of holiday pay, compulsory overtime must be included for the first 4 weeks of any statutory annual leave entitlement as an absolute minimum.

If overtime is a regular and expected part of the employee’s role, it should be included in the calculation of holiday pay. This means that if overtime is regularly worked and forms part of the employee’s usual earnings, it should be factored into their holiday pay.

As such, most employers will take into account overtime that the employee was contractually bound to undertake when calculating pay entitlement. Equally, in accordance with recent court rulings, any regular but voluntary overtime should also be factored in, provided any pattern of work is sufficiently regular to be considered part of the employee’s normal weekly remuneration. As holiday pay and pay in lieu must be calculated on the basis of the employee’s normal pay, if an employee usually works overtime, this ought be included in the calculation.

 

2. Overtime & Time Off In Lieu

 

Instead of paying for any overtime worked, the employment contract or any subsequent agreement between the parties can instead allow for any overtime worked to be taken back at a later date, as time off in lieu (TOIL). This is in addition to any annual leave entitlement.

It’s up to the employer whether TOIL is available. The contract of employment should therefore make provision for the circumstances in which TOIL will be offered, how much TOIL can be accrued, when TOIL can be taken and what happens to any TOIL when employment comes to an end. There should also be a procedure for recording overtime hours.

 

Section H: Summary

 

Employers must ensure that their overtime policies are fair and comply with UK employment laws, especially those concerning the national minimum wage and average working hours. The importance of making clear contractual provision for overtime cannot be underestimated. In this way, staff will fully understand what’s expected of them when it comes to working overtime, on either a compulsory or voluntary basis, and the incentive for so doing.

Absent any express contractual overtime provisions, arrangements can still be agreed to work and be rewarded for overtime, either by way of overtime pay or time off in lieu, but having this clearly set out in writing from the outset can help to minimise any potential for dispute.

 

Section I: Need assistance?

 

As employment law specialists, we can assist if you have any queries relating to overtime, working hours and contractual terms. Speak to our experts today for advice.

 

Section J: Overtime FAQs

 

Can overtime be contractual?

There is no strict legal requirement for employees to work more than their normal working hours. This means that overtime must usually be contractual, either by way of written or verbal agreement, for an employee to be required to work additional hours.

 

What is the law on overtime in the UK?

By law, there is no legal obligation on an employee to work overtime unless there is a specific provision within the employment contract which permits this. This means that an employer cannot insist on an employee working late or longer hours, on either an ad hoc or regular basis, unless the contract of employment states this. Equally, there is no general legal obligation on an employer to offer any overtime, unless the employment contract requires this.

 

Can I refuse overtime UK?

If an employee is not required to work compulsory overtime under the terms of their contract of employment, they’re entitled to refuse to work any additional hours over and above their standard working hours.

 

Can overtime become custom and practice?

If overtime is sufficiently regular, where this creates a standard pattern of working, this will become what’s known as custom and practice. This means that when calculating an employee’s holiday pay, any overtime work should be taken into account.

 

What constitutes contractual overtime in the UK?

Contractual overtime in the UK is when additional hours worked beyond the standard working hours are explicitly outlined in the employment contract. This means the contract specifies that overtime is a mandatory part of the employee’s role, including the terms and conditions for working these extra hours.

 

How can I determine if my regular overtime is contractual?

Regular overtime becomes contractual if it is consistently worked and has been acknowledged as a regular part of your duties. If your employment contract specifies overtime requirements or if there is a clear and ongoing expectation for you to work additional hours, this could indicate that the overtime is contractual.

 

Can my employer change the terms of my contractual overtime?

Yes, employers can change the terms of contractual overtime, but they must follow proper procedures. This generally involves providing notice and discussing the changes with the employee. It is important for these changes to be documented in writing to ensure clarity and avoid disputes.

 

What should I do if I think my regular overtime has become contractual without formal agreement?

If you believe that your regular overtime has become contractual without a formal agreement, review your employment contract and discuss the situation with your employer. If the matter is not resolved, seeking advice from an employment lawyer or a relevant advisory service may be beneficial.

 

What are my rights regarding overtime pay if it is considered contractual?

If overtime is deemed contractual, you are entitled to receive the agreed-upon overtime pay or time off in lieu as specified in your contract. Your employer should honour these terms, and any changes to the overtime pay should be communicated clearly and documented.

 

How can employers avoid regular overtime becoming contractual?

To avoid regular overtime becoming contractual, employers should clearly outline overtime policies in employment contracts and ensure these are regularly reviewed and updated. Documenting all overtime agreements and maintaining clear communication with employees can help manage expectations and prevent misunderstandings.

 

Section K: Glossary

 

Term	Definition
Contractual Overtime	Overtime hours that are specified within an employee’s contract, making it a mandatory part of their role.
Non-Contractual Overtime	Additional hours worked beyond the standard working hours that are not specified in the employment contract.
Employment Contract	A formal agreement between employer and employee detailing the terms of employment, including job duties and remuneration.
Implied Terms	Terms that are not explicitly stated in the contract but are considered part of the employment relationship due to consistent practice or expectation.
Compulsory Overtime	Overtime that employees are required to work as part of their job duties, typically agreed upon in writing.
Overtime Pay Rate	The specific rate of pay for overtime hours, which may differ from the regular hourly wage.
Employment Rights Act 1996	UK legislation that outlines fundamental employment rights, including the requirement for written statements of employment particulars.
National Minimum Wage	The legal minimum hourly wage that employers must pay their workers, set by UK law.
National Living Wage	The minimum wage rate for workers aged 23 and over, which is higher than the National Minimum Wage.
ACAS	Advisory, Conciliation and Arbitration Service, which provides guidance on employment issues and best practices.
Written Confirmation	Documentation provided by employers to formalise any changes or agreements regarding employment terms, including overtime.

 

 

Section L: Additional Resources

 

GOV.UK – National Minimum Wage and Living Wage
https://www.gov.uk/national-minimum-wage-rates
Access detailed information on minimum wage rates, including updates and guidelines

 

ACAS – Advisory, Conciliation and Arbitration Service
https://www.acas.org.uk
Find guidance on employment practices, including managing overtime and resolving disputes

 

Employment Rights Act 1996 – Legislation.gov.uk
https://www.legislation.gov.uk/ukpga/1996/18/contents/enacted
Review the full text of the Employment Rights Act 1996, which covers fundamental employment rights

 

The Law Society – Employment Law Resources
https://www.lawsociety.org.uk/topics/research/employment-law
Access resources and find legal advice on employment law, including issues related to overtime:

 

UK Government – Employment Standards
https://www.gov.uk/browse/employing-people
Explore information on various employment standards, including overtime regulations and employee rights