Overtime: Definition & When It's Payable

Overtime is any work performed by an employee beyond their standard or contracted working hours. Whether overtime must be paid, and at what rate, depends on your employment contract, applicable labour laws, and the employee’s classification. In the UK, there is generally no statutory right to overtime pay unless it would bring total hours below the National Minimum Wage — the obligation is contractual (ACAS, Overtime). In the US, the Fair Labor Standards Act (FLSA) requires overtime pay at 1.5× the regular rate for non-exempt employees working more than 40 hours per week (US DOL, Overtime Pay).

Understanding overtime rules prevents disputes, protects you from legal liability, and ensures you treat employees fairly across different countries and job types.

Key Takeaways

• Overtime is work beyond contracted hours, but whether it must be paid depends on employment contracts and local law — not all overtime is legally payable.
• In the US, non-exempt employees are entitled to 1.5× their regular rate for hours worked over 40 in a week.
• In the UK, there is no statutory right to overtime pay — the obligation arises from employment contracts, collective agreements, or workplace customs.
• Many countries cap weekly working hours and require premium pay when those caps are exceeded.
• Clear overtime policies, documented in contracts and handbooks, prevent disputes and legal exposure.

What Counts as Overtime?

Overtime is any work an employee performs outside their normal contracted hours. This includes:

• Working before or after a scheduled shift
• Working during unpaid lunch breaks to complete tasks
• Working on scheduled days off or public holidays
• Working additional shifts beyond the agreed weekly schedule

Overtime is distinct from on-call time (where the employee must be available but may not perform actual work) and time in lieu (where an employee takes compensatory time off instead of overtime pay). The distinction matters because different legal rules apply to each.

Salaried vs Hourly Employees

Overtime rules differ based on how an employee is paid:

• Hourly (non-exempt) employees: Overtime is triggered when hours worked exceed the legal threshold (e.g., 40 hours per week in the US). Pay is typically at 1.5× the hourly rate or higher.
• Salaried employees: Whether salaried employees receive overtime depends on whether they are classified as exempt or non-exempt. In the US, employees earning above $684 per week ($35,568 per year) in certain roles may be classified as exempt from overtime. In the UK, most salaried employees are not contractually entitled to overtime pay unless their contract specifies otherwise.

Overtime Rules by Country

United Kingdom

The UK does not have a statutory right to overtime pay. Key rules:

• Working Time Regulations 1998: Cap average working hours at 48 per week (employees can opt out in writing)
• National Minimum Wage: If total pay divided by total hours falls below the NMW (currently £11.44/hour for workers aged 21+), the employer must make up the difference
• Contractual entitlement: Overtime pay is determined by the employment contract, collective agreement, or established workplace practice
• Bank holidays: There is no statutory right to premium pay for working bank holidays, though many contracts include enhanced rates

The UK approach is heavily contract-dependent. If your contract does not mention overtime pay, there may be no legal obligation — but a tribunal may infer a contractual entitlement based on established practice.

United States

The FLSA sets clear overtime rules for non-exempt employees:

• Weekly threshold: 40 hours per week triggers overtime
• Rate: At least 1.5× the regular rate of pay
• No daily threshold: Federal law does not require overtime for daily hours exceeding 8 (unlike some states)
• State laws: California requires 1.5× for hours over 8 in a day and 2× for hours over 12 in a day. Several states (Alaska, Colorado, Nevada) have similar daily overtime rules

European Union

The EU Working Time Directive (2003/88/EC) establishes:

• Maximum average working week of 48 hours (including overtime)
• Minimum daily rest of 11 consecutive hours
• Minimum weekly rest of 24 uninterrupted hours
• Overtime pay and rates are set by individual member states and collective agreements

Australia

Australia uses a “penalty rate” system rather than traditional overtime:

• Weekend and public holiday work: Award rates typically include penalty rates of 1.5× to 2.5× the base rate
• Overtime: Defined by Modern Awards and varies by industry. General overtime rates start at 1.5× for the first 2–3 hours and increase thereafter
• Casual loading: Casual employees receive a 25% loading in lieu of leave entitlements, and overtime rates apply on top of this

Nepal

Nepal’s Labour Act 2074 (2017) establishes:

• Maximum 8-hour working day, 48-hour working week
• Overtime permitted only in specific circumstances (urgency, natural disaster, essential services)
• Overtime rate: 1.5× the normal hourly rate
• Total working hours (including overtime) must not exceed 60 hours per week

How to Calculate Overtime Pay

UK Example

An employee earns £30,000 per year (approximately £577/week) and works a 37.5-hour week. If they work 5 additional overtime hours in a week:

• Hourly rate: £577 ÷ 37.5 = £15.39/hour
• If contract specifies 1.5× overtime rate: £15.39 × 1.5 = £23.09/hour
• Overtime pay: 5 hours × £23.09 = £115.45
• Total weekly pay: £577 + £115.45 = £692.45

US Example

A non-exempt employee earns $20/hour and works 45 hours in a week:

• Regular pay: 40 hours × $20 = $800
• Overtime rate: $20 × 1.5 = $30/hour
• Overtime pay: 5 hours × $30 = $150
• Total weekly pay: $800 + $150 = $950

California Example

An employee earns $18/hour and works a 12-hour shift:

• First 8 hours: 8 × $18 = $144
• Hours 9–10 (1.5×): 2 × $27 = $54
• Hours 11–12 (2×): 2 × $36 = $72
• Total daily pay: $144 + $54 + $72 = $270

Overtime Rate Summary by Country

Country	Weekly Threshold	Standard Overtime Rate	Daily Threshold	Notes
UK	48 hours (avg)	Contract-dependent	None	No statutory overtime pay
US (Federal)	40 hours	1.5× regular rate	None	Some states add daily thresholds
US (California)	40 hours	1.5× (8–12 hrs), 2× (12+ hrs)	8 hours	Stricter than federal law
Germany	48 hours	Per collective agreement	8–10 hours	Working Time Act caps at 10 hrs/day
Australia	Per award	1.5×–2.5× (penalty rates)	Per award	Casual loading of 25% applies
France	35 hours	1.25× first 8 hrs, 1.5× after	7 hours	10-hour daily cap

Common Overtime Mistakes Employers Make

• Assuming salaried employees are exempt — classification depends on duties and pay, not job title alone
• Failing to track off-the-clock work — if employees check emails or take calls outside hours, that time may be compensable
• Offering time off in lieu without clear agreements — TOIL must be agreed in advance and documented
• Ignoring state or country-specific rules — federal minimums do not override stricter state, sector, or collective agreement requirements
• Rounding hours against employees — time rounding must be neutral; rounding down systematically can result in underpayment

Frequently Asked Questions

Is overtime pay mandatory?

It depends on your jurisdiction and the employee’s classification. In the US, overtime pay at 1.5× is mandatory for non-exempt employees working over 40 hours per week. In the UK, there is no statutory right to overtime pay unless it is in the employment contract or the employee’s total pay falls below the National Minimum Wage.

Can I refuse to pay overtime?

If an employee is legally entitled to overtime pay (as in the US for non-exempt workers), refusing to pay violates the FLSA and can result in back-pay awards, liquidated damages, and penalties. In the UK, if your contract or established practice provides for overtime pay, withholding it may constitute an unlawful deduction from wages.

What is the difference between overtime and TOIL?

Overtime is additional work paid at a premium rate. Time off in lieu (TOIL) is an arrangement where an employee takes compensatory time off instead of overtime pay. TOIL must be agreed in advance, documented, and taken within a reasonable timeframe. Some jurisdictions require TOIL to be offered at 1.5 hours off for every 1 hour of overtime.

Do contractors get overtime pay?

Independent contractors are not employees and are not covered by overtime laws. Overtime obligations apply only to employees classified as non-exempt. If you misclassify employees as contractors to avoid overtime obligations, you risk penalties for misclassification.

Does working through lunch count as overtime?

If an employee is required or permitted to work during their unpaid lunch break, that time is generally compensable and counts toward total working hours. In the US, if working through lunch pushes total hours over 40 in a week, those hours trigger overtime. In the UK, the Working Time Regulations may treat uninterrupted work during a break as a breach of rest-break entitlements.