Reasonable overtime and your Award: when do you really need to pay?

One of the most common questions employers face is how to navigate ordinary working hours, reasonable overtime, and overtime payment obligations.

Understanding the interaction between the National Employment Standards (NES), modern awards and employment contracts is essential to ensuring compliance while maintaining operational flexibility.

In this article, we explore what the NES says about additional hours, how award provisions operate, and the role employment contracts can play.

What does the NES say?

Under the Fair Work Act 2009 (Cth), an employee must not be required to work more than 38 hours per week unless the additional hours are reasonable.

When determining whether additional hours are reasonable, a range of factors must be considered, including:

• Risks to health and safety from working additional hours
• Employee’s personal circumstances including family responsibility
• Needs of the workplace or enterprise agreement
• The notice provided to the employee to work additional hours
• The nature of the employee’s role and level of seniority

These factors are not exhaustive and must be assessed on a case-by-case basis. As a result, an employee may be entitled to refuse additional hours where, in the circumstances, the requirement is unreasonable.

Importantly, the NES does not create an automatic entitlement to overtime payments for reasonable additional hours. Rather, payment obligations will depend on the employee’s award, enterprise agreement or employment contract.

What does the Award say?

The Building and Construction General On-site Award 2020 (“the Award”) stipulates that ordinary working hours will be 38 hours per week, worked between 7am and 6pm.

While an employer may require an employee to work reasonable overtime, the Award also requires that overtime must be paid at the applicable overtime rates.

As with the NES, an employee may refuse to work overtime where the requirement is unreasonable. Whether a refusal is reasonable will depend on the circumstances, including the factors identified in the NES.

For this reason, determining whether an employee is covered by an award is a critical first step in assessing overtime payment obligations and applicable penalty rates.

The Employment Contract

Employment contracts can provide flexibility in relation to working arrangements, including hours of work and remuneration.

However, where an employee is covered by a modern award, contractual terms cannot undercut minimum award entitlements. Any arrangement that varies award provisions must leave the employee better off overall than they would be under the award.

To minimise risk, any agreed variation should be:

• Documented in writing;
• Clearly expressed and easy to understand; and
• Genuinely agreed to by both parties.

Employers should exercise particular caution when implementing contractual arrangements intended to compensate for overtime or penalty rate entitlements as failures may result in significant penalties.

Key Takeaway for employers

• Start by determining whether the employee is covered by a modern award, as this will often dictate overtime and penalty rate obligations.
• The NES permits employees to work reasonable additional hours, but it does not automatically determine how those hours must be paid.
• Award-covered employees are generally entitled to overtime payments in accordance with the relevant award provisions.
• Employment contracts can provide flexibility, but they cannot exclude or reduce minimum award entitlements.
• Any variation to award conditions should be carefully documented and ensure the employee is better off overall.

By understanding the relationship between the NES, modern awards and employment contracts, employers can better manage overtime requirements while remaining compliant with workplace laws.

If you have any questions about your workplace obligations or employee descriptions, please contact the Workplace Relations Team:

📞 (02) 6175 5900
📧 workplace@mba.org.au