Overtime: what are your rights?

New ruling bumps up holiday pay

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How many hours a week do you work? The chances are that it's more than the number specified in your contract.

A new survey from employment agency Reed has found that four out of five British workers are working some sort of overtime. Almost half do an extra four hours per week, and nearly a quarter are putting in an extra full eight-hour day every week.

Most say it's a question of getting everything done, with one in five citing staff shortages and 11% experiencing financial pressures.

"This is yet more evidence of how hard the UK works," says Mark Rhodes, marketing director at reed.co.uk. "The extent to which people are prepared to work extra hours to get the job done is a positive reflection of our attitude to work and testament to how much we value our jobs."

But what are your rights when it comes to doing overtime? In the Reed survey, half the people saying they work extra hours also say they don't get paid, with six out of ten saying that their professional responsibilities prompted them to work late.

Employers don't have to pay overtime - although they do have to make sure that what they pay you for the total number of hours you work doesn't fall below the minimum wage. And, paid or not, employees can't usually be expected to work more than 48 hours a week.

But the rules around overtime have had something of a shakeup recently, thanks to a new ruling from the Employment Appeal Tribunal that overtime should be take into account when calculating holiday pay. The idea is that what you receive while you're on holiday should be the same as you get the rest of the time; currently, for many workers, it's a lot less.

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Overtime Should Count in Holiday Pay

Workers are entitled to 20 days' paid holiday a year, on top of eight paid bank holidays. In the past, however, the government has interpreted the EU Working Time Directive in such a way that the rate of pay for these holidays was calculated without taking overtime into account.

The new ruling, however, has changed all this, so that holiday pay should reflect what an employee generally earns overall. As a result, as many as 6.6 million people may be able to claim more from their employers.

So who will be affected?

It's not just people working paid overtime that should see a pay rise - the ruling applies to anyone getting regular extra payments such as commission payments, bonuses, unsociable hours payments or anything else. And, in theory, the change is being backdated to 1998, potentially allowing claims of thousands of pounds. But it's not yet clear how a worker's 'usual' rate of pay will be calculated - whether on the basis of the previous year or the previous three months' average earnings.

What's the catch?

The rules on claiming back payments mean that few workers will be able to claim the entire shortfall for the last six years. Workers can't make a claim if more than three months has passed since their last period of leave.

Workers can go back further with their claims in three-month chunks, but only if they have taken a holiday in that three-month period and been underpaid for it - which means that most workers won't be able to claim back all that far.

It's been suggested, though, that workers may be able to claim for money from further back by citing breach of contract, potentially recouping six years' worth of underpayments.

And how do you claim?

Unions are encouraging workers who believe they may be affected to get in touch. Non-union members should simply ask their employer, or get help from a claimants form or from conciliation service Acas. However, companies can appeal.

How will businesses respond?

Unsurprisingly, employers' organisations aren't happy about the change.

"It is not an exaggeration to say that some small businesses could end up being wiped out if employers who have acted compliantly and in good faith face underpayment claims backdated as far as 1998," says Simon Walker, director general of the Institute of Directors.

"Not only do businesses face a huge spike in operating costs, but employees would also be encouraged to book holidays following bonuses or good overtime periods as it would enhance their pay. This would be an administrative nightmare on a number of fronts."

The government is now setting up a task force to assess how businesses will be affected by the ruling, and there's a possibility that businesses will challenge it. If the ruling stands, some are warning that employers will move away from offering overtime to existing full-time employees and towards using agency staff or part-timers instead.

However, TUC general secretary Frances O'Grady describes this as scaremongering: "It's worth remembering that in 1999 a change in the law meant that six million people gained more holiday entitlements, and businesses easily absorbed the increase and employment continued to rise," she says.

Read more about overtime on AOL Money:

Quarter of workers doing unpaid overtime

Unpaid overtime: your rights

Workers 'scared to reveal stress'