Employee Overtime

[nannynick]

What happens when an employee does overtime but a pay rate is not agreed in advance?

See Mumsnet: How much would you pay your nanny to look after children for the weekend for more info on the situation.

Would it fall back to the per-hour rate as agreed in the contract?

If there is an overtime rate in the contract, would all hours over the contracted hours be done at that rate?

Is there any requirement to pay a higher rate for working on Sundays? (I don't think there is, unless it's stated in the contract)

If there's nothing agreed in advance then legally only the normal pay rate is due but to be honest if someone was helping me out, I'd add a little bit on top and then agree a future overtime rate. It's the kind of contentious issue that can ruin an otherwise good working relationship.

Misunderstandings and the potential for bad feeling occurs. Solution: agree a proper contract of employment / pay scale.

Anyone know if there is any guidance re how you are supposed to calculate an overtime rate based on a normal monthly salary?

Other than the minimum wage there are no requirements as to how much someone must be paid, so the contract is what's important, and if the contract is silent, it's up for negotiation. Goes without saying that negotiations should obviously take place before the event rather than afterwards, but either way, some evidence of what is normal practice would be helpful in negotiating.

If there is an overtime rate in the contract, the contract would normally specify when that rate applies.

In terms of calculating an hourly rate, you'd start off with the annual salary rather than monthly, as months are not all the same. Divide the annual salary by 52 to find the weekly salary, then divide that by how many hours a week the person is contracted to work, to find the hourly rate.

Thanks. The mumsnetter concerned has found their contract and remember that weekend working has happened before, so armed with that they hope to be able to come to an agreement with regard to what they will pay.

Does amaze me how people will not agree things before actually doing the work, seems strange to me.

Flowery, an hourly rate for overtime should work out the hours actually worked in a year and divide annual salary by that number of hours to calculate the hourly rate. So paid holiday entitlement should be left out of the calculation.

Therefore, if your contract provides for the stat minimum of 5.6 weeks holiday, your working weels would be 52 weeks less 5.6 weeks = 46.4 weeks.

Then multiply by the number of contracted hours to be worked in a week to get the total working hours in the year.

This is the method I was taught way back and have used it in all the firms I have worked for. There is also ACAS guidance requiring this method to be used.

Class - that is a good method if you want to work out overtime, but there's no statutory rule that says you should do it like that. That's just a way of working out hourly rate if you want to pay at normal hourly rate (other option would be 'time and a half' or a specific rate). Flowery is actually right that there are no requirements. As I said, yours is a helpful practical calculation though.

I prefer to keep things simple myself! If someone asks me what their monthly rate is, I divide their salary by 12 because that's how many months they are paid for. I wouldn't work out a monthly salary by dividing their annual salary by 10.5 or whatever.

If someone asks me what their weekly salary is, I divide by 52 because that's how many weeks they are paid for.

If someone works 5 days a week and wants to know their daily rate, then I divide their salary by 260 as that's how many working days they are paid for. That's what most payroll people use when working out holiday pay etc ime.

So on that basis if someone asks me their hourly rate, I divide their salary by however many hours they are paid for each year. If someone works 35 hours a week that would be 35 x 52 = 1820 hours. So if someone's on £20000 I'd say they are paid £10.99 an hour.

I've never worked anywhere where people were paid for overtime so obviously places that do pay for overtime may well use various different calculations. Class your calculation does mean people actually get paid more per hour when working overtime than they do when at work normally or on holiday, but of course that might be the point!

Sorry, Flowery, your method is wrong and is resulting in your employees being underpaid.

eh?

First of all, what employees?

Second of all, how is my way of working out someone's hourly rate 'wrong'? Says who?

Third of all, the only legal requirement when it comes to pay is the minimum wage, everything else is contractual/up for negotiation. As I'm fairly sure is made clear in earlier posts.

So even if I did currently have employees, and even if I had ever had to work out overtime, (neither of which are the case, had you read my posts properly) these fictitious employees would have only been 'underpaid' if their contract had said one way of working it out and I had used another way.

Sorry but I am baffled by your post tbh.

Oh, so I take it you have never had to work out an overtime rate for anyone if the employees are fictitious.

So you have no experience of it.

If the contract does not specifically state how an overtime rate is to be worked out a fair method should be used. That method should work out the cost of a working hour.

Look at the ACAS guidance for working out an hourly rate for paying holiday pay due for holidays not taken. It states that non working days (ie paid holidays and bank holidays) should not be factored into the calculation.

Read my post of 15:32:03

No. I don't work in payroll anyway and as I have said a couple of times, have never worked anywhere where employees were paid for their overtime.

The employees you say I am underpaying are fictitious because I personally don't employ anyone, I am self-employed.

You are the one who asked the question iirc. In an attempt to help you I gave you the method I personally use to calculate an hourly rate for someone, consistent with calculating a daily, weekly or monthly rate. I didn't say 'this is the standard way of working out overtime.'

Either you find the information I posted useful or you do not. Either is fine but I resent being accused of underpaying people. My professional credibility is important to me, that's a pretty serious accusation and you have absolutely no foundation for making it.

As you are not involved in payroll, how can you be underpaying anyone, Flowery?

But if you are not involved in payroll why are you telling how you calculate an overtime rate?

I am confused - are you involved in calculating pay or are you not?

do you mean to use this calculation mauve so that the overtime rate effectively includes holiday pay? and to do otherwise would be 'underpaying' as the employee wouldn't be getting holiday pay for the additional hours?

where i am we don't pay an overtime rate. however additional holiday is accrued automatically. so we would work out a pay rate as flowery says but the system adds extra holiday entitlement on where needed.

fwiw, i believe flowery is in HR rather than payroll. i'm a line manager, not payroll, not HR, but i do aspects of both so may i be permitted to comment?

Mauve - that's very aggressive.

Holiday pay is different from overtime and, as Flowery says, overtime can be worked out any way agreed between employee and employer. Your way is generous, but neither are underpaying employees (unless the contract or union agreement says one way and the employer does another).

ACAS guidance is just that for FWIW, Flowery is a very experienced HR person. I'm not sure it's helpful to attack her like that.

I have payroll experience and have employed up to 50 people in total at one time. These are sales, admin and production staff generally.
They have an hourly rate and an overtime rate on their contracts.
The annual salary is calculated as number of hours worked per week x 52 weeks per year.
Holiday as agreed in their contract is paid at normal rate. They receive 1/12th of their annual salary each month, plus overtime as worked. This is standard in business.

I have also employed a nanny, getting back to the original question (and I was reading the other thread yesterday) I would suggest that in the absence of an overtime rate or a Sunday rate or an overnight rate in the contract then working out the normal hourly rate and paying it would seem reasonable. However whereas with normal employees I am always fair but strict, it is different with a nanny because you are entrusting your child to them and you need to have an excellent relationship with them so I would be discussing and negotiating with the nanny. Obviously in advance would be better! (off to read other thread now)

Ooh, didn't know working overtime gets you extra holiday entitlement. I do lots of regular overtime - must take this up with my boss.

No agreed overtime rate in my contract.

hippo i don't think it has to entitle you to extra holiday. you are entitled to your statuatory entitlement IYSWIM, then anything else depends on your contract.

What if contract says nothing at all about overtime?