If you pay different rates for different shifts, or pay higher rates for working unsociable hours, you will need to check that these payments do not favour, for example, men over women, or white employees over those from ethnic minority groups.
As with any other aspect of the pay system it is important to find out ‘who is receiving what’. You need to look at the allocation and level of payments to, for example, men and women over the past year or so. If you find differences, then you need to find out why this is happening and whether it can be justified. As well as looking at differences in working time payments between women and men, you should also look at other aspects of equality such as race, disability and age.
Employers tend to restrict overtime payments to those at supervisory level and below. In many managerial posts employees work an all hours’ contract subject to the Working Time Directive. (Working Time Regulations 1998 set a maximum number of hours people can work.)
Payments of overtime can vary from 'time and a half' to 'four times' usual rates for working Christmas Day for some essential public sector workers.
It is important that the access to overtime is equally available by gender and to other protected groups and that the rate at which it is paid applies equally to employees doing equal work.
Confusion often arises in respect of part-time workers and overtime payments. There needs to be a clear policy whether or not overtime rates are paid over usual hours, over a full time worker's hours or just on weekend or public holidays.
Part-time employees should receive the same hourly rate as full time employees (i.e. pro rata pay) for equal work unless there is a reason for paying them less, which is objectively justified and unrelated to factors such as sex. This also applies to other aspects of pay such as bonus payments, shift allowances and unsocial hours payments.
It is sometimes argued that, as the purpose of an overtime payment is to compensate people for having to work additional hours, part-time staff should receive overtime payments whenever they exceed their normal weekly or daily hours. While the law states that it is not discriminatory to refuse to pay overtime payments to part-time employees in such circumstances you will need to be clear about company policy to avoid confusion, as you may wish to pay overtime over their usual hours to part-time employees, but this may be seen as discriminatory by full-time employees. It is important to distinguish between overtime payments and payments for working unsocial hours; anyone working unsocial hours should receive the appropriate unsocial hours payment irrespective of the total numbers hours worked.
Company R had carried out an equal pay review. They found that their overtime payment costs were high and were being received mainly by a group of predominantly male employees. Company R knew they had to balance the needs of the business and the workers who received the overtime with the need to establish a pay system free from discrimination.
The human resources department conducted a review of the overtime working, involving the union representing the workers in that section. As there were highs and lows in demands for the work, it was agreed to keep using overtime.
However, as there was sex bias in those doing overtime it was agreed that, when there was a need for overtime working, to open up access to it to all employees doing that type of work. They also considered employing more staff in peak periods. They agreed to monitor the situation both for the benefit of the business and its workforce.
Payment for working outside 'normal working hours' is a useful means of coping with changing demands and appropriately rewarding employees. As with any other aspect of the pay system it needs to be kept under review. Consult with the employees to find out what they want when looking at alternatives.
Payments need to be compared, and the value of each type of payment calculated and monitored. This is particularly important if you have more than one pay structure and unsocial hours payments are different between the different structures. Access and take up of each need to be broken down by gender, race, disability and age. Consideration needs to be given to whether the payment is meeting the objectives it was originally designed for.
Are the payments that you are making still relevant and necessary? Or are you rewarding people for a practice that died out some while ago? Are there a few individuals enjoying overtime rates and why? When looking at pay, think about access to the payments not just who receives it. You may wish to consider flexitime arrangements or 'annual hours working' where employees work a specific number of hours a year to cover peaks and troughs in hours required to be worked.
Organisations may have different ways of rewarding different groups of employees, manual/non-manual, for example, or collective agreements covering different groups. It is sometimes hard to compare different groups, clerical staff with production workers, for example.
If you need to protect the pay of an employee due to a change of circumstances then 'red-circling' is the usual method. This means holding the pay at the higher level until the new rate of pay has caught up or for an agreed period of time, whichever is sooner. This may apply if changes are made to particular ways of paying for working unsociable hours.
It makes good business sense for employees to understand why they receive benefits, but if you should ever be challenged in an Employment Tribunal, documentation will be essential. Properly documented decisions will enable you to explain your reasoning.
A transparent pay system is one where employees understand not only their rate of pay but also the components of their individual pay packets, including working time payments. A transparent pay system avoids uncertainty and perceptions of unfairness and reduces the possibility of individual claims.
Whilst every effort has been made to ensure that the advice given in this note is accurate, only the courts or tribunals can give authoritative interpretations of the law.
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