Overtime Pay in Australia: A Complete Employers' Guide
The Australian government has various legal frameworks to ensure fair and equitable employee treatment. One such labor law is overtime pay, which is outlined in the National Employment Standards (NES) and regulated through the Fair Work Act 2009.
In this guide, we’ll explore the overtime laws in Australia. We’ll discuss how overtime works, who is eligible for overtime pay, and how to calculate it. We’ll also highlight how overtime differs from penalty rates and ‘time in lieu’ to eliminate any confusion.
We’ll also reveal the best time tracking app you can use to compute overtime pay for fair employee remuneration and unwavering compliance. Let’s dive in.
What Is Overtime Work in Australia?
Overtime work in Australia refers to the extra hours an employee works over the regular work hours in a day or week. Generally, the overtime work for full-time employees covered by an award means anything over 38 hours per week or 7.6 hours (7 hours and 36 minutes) per day.
However, overtime entitlements may change depending on an employee's modern award or enterprise agreement. For example, part-time and casual employees in social, community, homecare, and disability services award are entitled to overtime pay when they work:
- Over 38 hours per week or 76 hours per fortnight
- More than 10 continuous hours in a day or shift
Whether overtime is calculated daily or weekly depends solely on conditions set out in the employee’s award. For example, the General Retail Industry Award 2010 (GRIA) requires employers to pay overtime daily, which means each regular workday stands alone.
Check the employee award or agreement to confirm how to apply overtime, as exceptions may exist. For starters, a modern award is a legal document that sets out the terms and conditions of employment. The document outlines when overtime applies as well as minimum wage rates.
The Fair Work Act 2009 gives employees in Australia the right to refuse to work overtime. According to section 62 of the act, employers must not require or request employees to work more than the regular or ordinary hours in a week unless the extra hours are reasonable. This then begs the question, what is reasonable overtime work?
What is Reasonable Overtime Work?
Reasonable overtime work passes the 10 test of reasonableness outlined in section 62 of the Fair Work Act 2009. For overtime to qualify as ‘reasonable,’ it must take into account factors such as:
- Risk to employee health and safety
- An employee’s family responsibilities and personal situation
- Nature of an employee’s role and level of responsibility
- Overtime work notice – you must provide reasonable notice for overtime requests
- Terms outlined in the employee’s modern award or enterprise agreement.
Who is Eligible For Overtime Pay?
Generally, an employee covered by an award who works more than the stipulated ordinary hours of work is entitled to overtime pay. However, the eligibility may vary based on the employee’s industry, modern award, and employment contract.
How To Calculate Overtime Pay in Australia
To calculate overtime in Australia, multiply the employee's overtime hours by their minimum hourly pay and overtime rate (which can be 1.5, 2, or 2.5), depending on the situation. In this section, we’ll disclose the overtime rates for different situations and use real-world examples to help you compute overtime pay.
Overtime Pay For A Regular Work Day
According to the Fair Work Ombudsman, the overtime rate for a regular workday is:
- 150% or 1.5x the minimum hourly rate for the first 2 hours of overtime.
- 200% or 2x the minimum hourly rate for hours worked after that in a day.
The law typically defines “regular work days” as Monday through Friday. But, keep in mind that the overtime rates mentioned above apply to the hours of overtime an employee accumulates from Monday through Saturday.
If an employee’s overtime extends past midnight into the next day, it resets to 150% at midnight. In other words, an employee can work more than 40 hours a week or 9.6 hours a day and still miss out on double-time pay.
However, there are two situations when overtime doesn’t reset to 150% at midnight. The first is when overtime extends past midnight into Sunday or a public holiday. The second is when an employer agrees to pay employees 200% of their regular pay rate for overtime, which extends past midnight.
Overtime Pay On Sunday and a Public Holiday
If an employee works overtime on Sunday or a public holiday, their overtime rate will be:
- 200% or 2x their minimum hourly rate for all hours worked on Sunday.
- 250% or 2.5x their minimum hourly rate for hours worked on a public holiday.
If an employee’s overtime continues after midnight into Sunday or public holiday, the overtime rate will not reset to 150% after midnight. Instead, the employee will earn the relevant overtime rate for Sundays or public holidays.
If a public holiday falls on a rest day or regular work day, employees will still get 250% of their minimum hourly rate for working overtime.
Overtime Pay For Piece Rate-Based Employees
The Fair Work Commission amended the horticulture award, clarifying that pieceworkers aren’t entitled to overtime pay. Pieceworkers are subject to overtime provisions only when paid by the hour.
Overtime For Permanent Salaried Employees
Some awards and registered agreements allow permanent salaried employees to take time off in lieu (TOIL) of overtime pay. In a TOIL agreement, the employee receives a paid time off instead of an overtime pay. The Fair Work Commission has various requirements for TOIL agreements, which include:
- The employer and employee must mutually agree on the time to take TOIL.
- The employee must take accrued TOIL within six weeks of working overtime.
- You must have a separate written agreement for each occasion an employee has to take overtime as TOIL.
- You must pay an employee any accrued but not taken TOIL upon the employee’s request.
When it comes to determining the TOIL-overtime ratio, different modern awards use different formulas. The awards can be grouped into three categories:
- Employers calculate TOIL at the employee's ordinary rate. In other words, employers grant an hour of TOIL for an overtime hour worked.
- Employers calculate TOIL at the employee's overtime rate, which means time and a half for the first two hours and double time for overtime hours thereafter.
- There is no provision regulating the accrual of TOIL. The employer and employee must agree on suitable rates.
Penalty Rates in Australia
The Fair Work Ombudsman defines penalty rates as higher pay rates employees receive when they work particular days or hours. An employee may be entitled to a penalty rate for working during:
- Public holidays
- Weekends
- Overtime
- Early morning shifts
- Late night shifts
This leads to the question, what is the difference between penalty rate and overtime? The most notable difference is that employees are entitled to overtime pay for additional hours worked beyond regular work hours.
But, there is no threshold or minimum number of hours an employee must work to trigger a penalty rate payment. Instead, an employee receives the penalty rate for working during specific times or days.
Use Timeero to Streamline Overtime Compensation in Australia
Employee overtime pay is only as accurate as the recorded overtime hours. To avoid underpayment or inaccurate overtime payment, invest in a reliable time tracking app like Timeero. Read on to learn how Timeero automates time tracking to maintain compliance and accurate worker compensation.
Setting Up an Overtime Policy is Easy
Timeero makes it easy to implement the complex overtime rules in Australia. The app allows business owners to set up daily or weekly overtime rates and thresholds depending on the stipulations in the employee’s award.
Suppose you want to configure Timeero to track daily overtime on a standard workday. Go to “company settings” and open the “payroll and overtime” settings page. Select when the work week starts and set the overtime rate to 1.5 and double overtime to 2.
Unselect the “California overtime rule” button and set the overtime threshold to 7.6 hours and daily double time to 9.6 hours. Click “save” to apply the overtime policy — and that’s it.
If the employee award requires you to track weekly overtime, unselect the daily overtime and daily double overtime buttons. In the "Weekly Overtime" section, set the work week hours to 38 and click “save” to apply the weekly overtime policy.
Timeero’s Time Tracking is Accurate
Once you configure your company’s overtime policy, Timeero enforces it for you to ensure full compliance. Employees don’t have to lift a finger to track overtime. They only need to clock in at the start of their shift and clock out at the end of their work day.
Timeero tracks and segregates employee work hours into regular, overtime, or double time hours. The good thing is that Timeero offers tools to prevent timesheet fraud and improve timesheet accuracy so that your company compensates employees for hours they actually worked.
For example, you can opt for employees to use facial recognition to clock in and out to prevent buddy punching. The app also lets you create virtual boundaries (geofences) around job sites to thwart off-site punching. Additionally, you can configure clock-in and clock-out reminders to ensure each employee tracks time during the designated window.
Computing Employee Overtime is Hassle-Free
Timeero saves you numerous hours you’d have spent trying to figure out each employee’s overtime pay. The app allows managers to add an employee’s minimum hourly wage to simplify overtime pay calculation.
The intelligent engine automatically calculates an employee’s regular, overtime, and double-time pay based on approved timesheets. At the end of the pay period, the manager simply generates a payroll report and forwards it to the finance department for easy employee payment.
Alternatively, you can export the reports directly to your payroll or accounting software to expedite payment. Timeero integrates with popular accounting and payroll solutions like QuickBooks, Xero, Gusto, Paychex, ADP, Paylocity, Viventium, and Rippling.
Other Notable Timeero Features
In addition to overtime tracking features, Timeero offers tools that enable you to streamline business operations and comply with strict labor laws. Some of Timeero’s notable features include:
- Break tracking
- Mileage tracking
- Segmented tracking
- Real-time location tracking
- Employee scheduling
Navigate Complex Overtime Law with Ease
To fully comply with overtime law in Australia, you must interpret the stipulations correctly, create your company policy, and implement the right solutions to enforce provisions. Australia’s overtime law is complex, so we recommend seeking the guidance of a well-versed attorney if you have doubts about any requirements.
Keep in mind, an automatic time tracking app will help you to track overtime in accordance with the law. If you’re looking for a time tracking app that’s easy to implement and use, try Timeero.
Overtime Pay in Australia: FAQs
How Does Overtime Work in Australia?
In Australia, overtime is defined as any additional hours of work over 38 hours in a week or 7.6 hours per day. The overtime rate may vary based on the employee’s award and employment agreement.
What is the Legal Threshold for Overtime Hours in Australia?
The legal threshold for overtime in Australia is 38 hours per week or 7.6 hours per day.
Is a 40-Hour Work Week Legal in Australia?
No, Australia doesn’t have a 40-hour week. A standard work week in Australia is 38 hours.
