Overtime and TOIL

When an employee works beyond the usual number of hours that they are expected to work for their salary, this is known as overtime. A worker who works overtime may be eligible to be paid penalty rates for the extra hours worked, or they may be entitled to take time off in lieu of overtime. This page outlines the entitlements of employees who work overtime and the laws that govern when an employee can be required to work overtime.

What is overtime?

Overtime is work that is performed outside of an employee’s usual hours of work under the award, enterprise agreement or employment contract that applies. It may be work that is more than the maximum number of hours for a fulltime worker; work that is more than the agreed number of hours for a parttime worker; or work that is outside of the usual spread of a person’s hours of work. Awards, enterprise agreement and employment contracts may set out when a worker is required to work overtime and when overtimes rates apply.

Overtime must be reasonable

A person can only be required to perform overtime when the additional hours are reasonable. If an employee is asked to work overtime hours that are unreasonable, they may refuse to comply with the request.

Factors that will be taken into account when assessing whether proposed overtime is reasonable include operational requirements and work patterns, the amount of notice the worker was given, the worker’s personal circumstances, and whether the worker has informed the employer that they cannot work overtime. When workers are working overtime, the employer must consider and manage health and safety issues such as fatigue.

Calculating overtime

Overtime is usually calculated as a multiple of the worker’s usual hourly pay rate. Some awards and enterprise agreements will set out the overtime rates the apply.

Otherwise, overtime is usually calculated as follows:

• Time and a half (150% of the worker’s hourly rate of pay) for the first two to three hours
• Double time (200% of the worker’s hourly rate of pay) after the first two to three hours.

TOIL

Some employers will offer a system of time off in lieu (TOIL) instead of awarding overtime pay. TOIL policies usually include features such as:

• TOIL can be taken by agreement
• TOIL can be taken at an agreed time
• TOIL must be taken within a set timeframe
• Employee entitlements to TOIL must be paid out when their employment ends.

A TOIL system allows employers to ask their staff to work extra during busy periods, and grant TOIL during slower periods and thus avoid the additional expense of paying overtime.  

Accidental underpayment of an employee

If an employer accidentally underpays a worker, it should immediately seek to rectify this by audited its records to ascertain he amount of the underpayment, and paying it to the employee as soon as possible. The employee should be informed of the underpayment and the reasons it occurred.

It may also be necessary to make additional superannuation and tax payments to rectify the underpayment.   

Intentional underpayment of an employee

If an employer intentionally underpays an employee, they are guilty of an offence under the Fair Work Act 2009. Section 327 of that Act states that if an employer intentionally engages in conduct that results in an employer receiving less than they are owed by the date that payment is due, they are guilty of an offence. This offence is punishable by up to ten years imprisonment or a fine of up to $1,565 million for an individual, or a fine of $7,825 million for a company plus three times the amount of the underpayment if it is known.

State and territory offences

Some Australian states and territories also have legislation that makes it an offence to intentionally underpay an employee.

In Victoria, this is an offence under the Wage Theft Act 2020 and is punishable by a maximum penalty of 10 years imprisonment.

In Queensland, this is an offence under the Criminal Code 1899 and is punishable by a maximum penalty of 10 years imprisonment.  Underpayment of an employee may also be prosecuted as stealing in Queensland.

If you require legal advice or representation in any legal matter, please contact Go To Court Lawyers.