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Should employers be concerned by unpaid overtime shaming?
As employees strive for success, the issue of unpaid overtime under UK law often emerges, prompting the question: ‘Is working for free a legitimate practice?’
In this blog, we dive into the realm of unpaid overtime and explore the UK legal framework surrounding this contentious issue, shedding light on the rights of employees and your responsibilities as an employer.
Analysis by the Trades Union Congress (TUC) has revealed that UK workers put in more than £35 billion in unpaid overtime each year. On an individual level, this equates to more than 5 million workers doing an additional 7.6 hours’ unpaid overtime each week.
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Faced with these statistics, the TUC is calling for the government to “crack down on Britain’s long hours culture”, saying “too many bosses are getting away with stealing their workers’ time”. In fact, at the same time that these statistics emerged, popular restaurant chain Nando’s came under the spotlight after workers claimed they were expected to scrub cookers and disinfect toilets, unpaid, after they had clocked out. While Nando’s has denied that it would ever expect its employees to work for free, the headlines have naturally prompted criticism from the general public.
But it’s not just the chicken chain that has been basted over underpayment concerns. Back in 2017, Sports Direct was accused of “exploiting” staff to the tune of £1 million through practices such as docking 15 minutes’ pay from workers’ wages for clocking in as little as one minute late – even if they had arrived on time – as well as making staff wait unpaid for a security check at the end of their shift. Cut-price clothing giant Primark was also found to have underpaid nearly 10,000 workers by expecting them to foot the bill for uniforms, while Costa received criticism after reports surfaced that the coffeehouse chain docked wages for training and lateness. Unpaid overtime, however, is perhaps the most common form of underpayment.
So should employers be concerned? Should you abandon unpaid overtime altogether?
The law on unpaid overtime
While employers may be concerned by the recent naming and shaming, unless the employee’s contract entitles them to be paid for overtime, unpaid overtime is not illegal. In fact, in many cases, working after hours or through lunch breaks comes with the territory.
The issue in the above cases is that the employer’s practices effectively mean that staff earn below National Minimum Wage, which is a criminal offence. Employers who fail to pay staff the legal minimum, whether through unpaid overtime or otherwise, may face investigation by HMRC, and this may result in a fine and a requirement to pay back what you owe in arrears.
Alternatively, depending on the terms of their contract, workers may also be able to argue that failure to pay them for the actual number of hours worked amounts to unlawful deduction from wages, which may give grounds for an Employment Tribunal claim. The amount of unpaid overtime that can be claimed by employees is limited to two years; however, if this affects a large number of employees and the amount of overtime worked is considerable, back pay can be significant.
So, do I need to pay staff for overtime?
Whether employees are entitled to paid overtime – and whether employees should be expected to put in overtime when required – will depend on the terms of their contract. Employers are, generally, free to set their own policy on overtime and the payment for such work. For example, if you may occasionally need staff to work outside of their normal hours to complete a project, fulfil a big order or meet seasonal fluctuations in demand, you may wish to state in your contracts:
“We may require you to work additional hours (overtime) on a temporary or regular basis. If you work overtime, we will pay you at your normal basic hourly rate.
All overtime that you carry out must be expressly approved in advance by management, failing which you will not be paid for any work that you do in addition to your normal hours of work.”
Again, you must ensure an employee’s average pay for the total hours worked does not fall below minimum wage; however, provided minimum pay levels are met, whether overtime is paid or not is a contractual matter.
What if employees refuse?
Employees can only be required to work overtime, paid or unpaid, if provided for in their contact. In the absence of any such provision, staff will be within their right to refuse to work outside of their contracted hours.
It’s important to note that even if employees have agreed to overtime in their contract, the Working Time Regulations 1998 dictate that staff cannot legally be forced to work more than an average of 48 hours per week over a 17-week period. If employees wish to work more than an average of 48 hours a week, they can ‘opt out’ of this weekly limit by signing a separate written agreement.
If overtime is purely voluntary, then there’s little an employer can do other than try to find a solution that works for both parties, such as paying the employee for the additional hours or allowing them to take time off in lieu. However, if there is a contractual clause relating to compulsory overtime, and an employee refuses to work, the employer may view this as a breach of contract and choose to deal with it as a disciplinary matter.
What about salaried staff?
Unpaid overtime is less likely to be an issue for salaried employees, as their pay should, in theory, be sufficient enough to soak up any additional hours they put in. This is especially true of more senior staff, where the expectation to work overtime is reflected in higher salaries. In fact, despite recent reports focusing on low-paid workers in the retail and hospitality industry, analysis by TUC found that it is chief executives who put in the most unpaid hours, at an average of 12.5 hours per week.
Although there are varying opinions regarding the culture of salaried staff working unpaid overtime, from an employment law standpoint, the position is clear: unless otherwise stated in their contract or expressly agreed ahead of time, salaried employees will not be entitled to pay. Nevertheless, for the sake of transparency, it is a good idea to state within your contracts that staff are expected to be flexible. Keep in mind, too, that more junior members of staff who are also on salary may be at risk of being paid below minimum wage if required to do regular overtime.
Top tips for avoiding unpaid overtime slip-ups
Keep detailed records. The best way to ensure you don’t fall foul of minimum wage rules is to put systems in place to track employees’ hours along with any overtime worked. As well as helping to prevent situations where staff are overworked and underpaid, measuring working time in detail is now a legal requirement following a decision by the Court of Justice of the European Union.
Review your contracts. Your contractual documentation should clearly set out your policy on overtime, including whether this is paid or unpaid and at what rate. This will help to ensure everyone is on the same page and will give you more leverage should issues arise.
Take care with holiday pay. If payment for voluntary overtime is “sufficiently regular and settled” for it to amount to normal remuneration, it should be factored into holiday pay calculations. Overtime is likely to be considered “sufficiently regular” if it is worked more often than not and in a set pattern.
Need a helping hand?
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To find out how our fixed-fee service can give you confidence in your employment practices, reduce workforce disruption, and allow you to focus on what you really want to be doing, call 0345 226 8393 or request your free consultation using the button below.
