Overtime¶

Overtime is the time an employee works beyond their ordinary hours — the normal hours set for their job. When someone works extra hours on top of those, those extra hours are usually overtime.

Overtime is normally paid at a higher rate than ordinary hours. How much higher, and when overtime starts, is not the same for everyone. It is set by the award or registered agreement that covers the employee. An award is a document from Fair Work that sets the minimum pay and conditions for a type of work. A registered agreement is a workplace deal approved by the Fair Work Commission.

In one line

Overtime is time worked beyond an employee's ordinary hours. The rate is set by the award or registered agreement — and super is generally not paid on it.

Why this matters¶

If you get overtime wrong, you can underpay staff or work out super on the wrong amount. Because the rules change from one award to the next, you cannot guess. Knowing what overtime is, and where the rate comes from, helps you pay it correctly.

What you will learn¶

What overtime is
Where the overtime rate comes from
Why super is generally not paid on overtime

Understanding the concept¶

Ordinary hours are the normal hours an employee works, not counting overtime. Fair Work notes that ordinary hours can be different for full-time, part-time and casual employees. Overtime is work done outside those ordinary hours.

Fair Work explains that overtime is usually paid at a higher rate, but the exact rate depends on the award or registered agreement. Different awards set different rates and set them for different situations, so there is no single overtime rate that always applies. Always check the award or agreement that covers the work.

Fair Work also notes that some awards and registered agreements let an employee take paid time off instead of overtime pay. This is often called time off in lieu or TOIL. Whether this is allowed, and how it works, again depends on the award or agreement.

For accountants & bookkeepers

The ATO states that overtime payments are not ordinary time earnings (OTE), provided the employee's ordinary hours of work are clearly identified in an award or agreement — and so they are not qualifying earnings either. If overtime amounts cannot be distinctly identified, the hours worked may be treated as ordinary hours. There is also a narrow case where an agreement requires super to be paid on all remuneration, including overtime. Confirm the award/agreement wording before deciding whether super applies.

Example¶

Sam has ordinary hours set by their award. One busy week, Sam is asked to work extra hours beyond those ordinary hours. Those extra hours are overtime. To work out Sam's overtime pay, the employer checks the award that covers Sam's job, because the award sets both when overtime starts and what rate applies. The employer pays the ordinary hours at the ordinary rate and the overtime hours at the overtime rate from the award.

Common mistakes¶

Assuming overtime is always paid at one fixed multiplier — the rate is set by the award or agreement and varies.
Guessing when overtime starts, instead of checking the award or agreement.
Working out super on overtime — overtime is generally not part of ordinary time earnings, so super generally does not apply to it.
Forgetting that some awards allow time off in lieu instead of overtime pay.

How this works in myaccountant¶

In the app — when you run a pay run, you can add an overtime pay item for an employee and enter the overtime hours and rate that apply under their award or agreement. The overtime amount is added to their gross pay and shown as its own line on the payslip, so the employee can see it separately from their ordinary pay.

Key points¶

Overtime is time worked beyond an employee's ordinary hours.
Overtime is usually paid at a higher rate than ordinary hours.
The overtime rate, and when it starts, is set by the award or registered agreement.
There is no single overtime rate that applies to everyone.
Super is generally not paid on overtime, because overtime is generally not ordinary time earnings.
Some awards allow time off in lieu instead of overtime pay.

Learn next¶

General information only — not tax, super or financial advice.

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