Leave, overtime, compensation, and time off in lieu: are you aware of your obligations?

How businesses use and engage staff changes all the time depending on the time of year, trade levels, and other external factors. While business owners might be able to predict when business levels peak, they might also require their staff to work additional hours, over and above their contracted hours in order to meet a specific project requirement or to fill in labour gaps. Where this is the case, employers must ensure they meet their employer obligations around additional hours.

The National Employment Standards (NES) is a key component of the Fair Work Act (Cth) 2009 (FW Act) and outlines the maximum working hours in a week for an employee. This is:

• 38 hours for a full-time employee; and
• The lesser of 38 hours or the agreed maximum weekly hours for other employees.

So, what do employers need to be aware of when it comes to exceeding these conditions?

There are several things to consider when employees are exceeding their maximum weekly hours. These include overtime, leave accruals, accurate compensation, and time off in lieu (TOIL) entitlements.

1. Overtime

When asking employees to work beyond 38 hours or their agreed maximum weekly hours, we are asking them to work reasonable additional hours or overtime. You can only request employees work additional hours if they’re reasonable – it’s not the employer’s right to direct employees to work overtime.

Reasonableness depends on several factors, including:

• Any risk to health and safety;
• The employee’s personal circumstances;
• The level of remuneration an employee receives;
• The amount of notice given; and
• The usual patterns of work in the industry.

If such a request is unreasonable, then the employee has the right to refuse work.

2. Taking paid or unpaid leave

The FW Act provides that authorised and approved hours of leave are to be included when counting hours of work. However, it’s a matter currently being decided in the Federal Court whether leave hours will result in someone being paid overtime. Some modern awards and enterprise agreements are drafted in such a way that overtime will need to be paid, but others aren’t. You should carefully consider what instrument you are covered by, and what the relevant overtime provisions say.

3. Accurate compensation

Employees who work overtime are entitled to be compensated for it. If the employee is covered by an award or enterprise agreement, the applicable overtime rates will be set out in those instruments. Depending on the award, the overtime rates can be 150 per cent or even 200 per cent, and can increase after the first two or three hours, and can be different on weekends and public holidays. While this is usually the standard, it’s important to check the instrument your employees are under as there are often many rules and regulations concerning different days of the week, employment classifications, and employment status.

4. Time off in lieu entitlements

It’s common for employers to favour offering the option of time off in lieu (TOIL) rather than paying overtime rates. And while this can have several benefits to both the business and the employee in terms of cost and flexibility, it isn’t an automatically available option.

If you’re planning to offer this entitlement to your employees, you need to be aware of the rules that govern the practice:

• Do you need the employee’s agreement to choose TOIL rather than overtime rates? Generally, payment for overtime will be the default option and an employee must agree to take TOIL instead.
• Do you need a written agreement?
• Is TOIL offered at the equivalent time (i.e., an hour off for an hour worked) or the equivalent rate (i.e., two hours off for an hour worked, if at the 200 per cent overtime rate)?
• Can it be offered to all employees or just a particular employment classification or stream?

Asking your employees to work overtime is a common situation, and it’s important to make sure you’re getting it right. If any of this information has raised questions about these employer obligations or you have another workplace matter, please reach out to our workplace relations experts via our 24/7 HR Advice Line.

About our author

Zaynab Aly is a Senior Workplace Relations Consultant at Citation HR. She has a particular interest in the retail industry and regularly provides advice on workplace matters to find solutions for clients.