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Trading cash for taking time off in lieu

Peter Done

Q: “Do I need rules in place to govern overtime? My employees often work longer hours, and while this helps the business, it would be easier and more economical if employees took this as time off owed. Can I change the rules in place? At present, there is nothing stipulated within workers’ terms and conditions. Please can you advise?”

A: An employee’s written contract of employment must include certain pieces of information as prescribed by the Employment Rights Act 1996, and one of these elements is information on the employee’s hours of work. Therefore, if you expect your staff to work overtime, this should be set out in the contract. If this is not included, you may have some resistance from staff who only want to work their normal hours.

You are generally free to assign any rules you wish to the working of overtime and its payment. You can make it a contractual obligation that overtime is worked, and set specific hours. You could be a little more flexible and state that staff may be required to work overtime as and when directed. All new staff that you employ from now onwards can be brought on under new terms you wish to operate in relation to overtime. The situation may be a little trickier with existing staff.

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Even though you currently have no written rules in place about the working of overtime, it could be argued that the way you currently deal with the payment has become an implied term of the employees’ contract. Whether the payment has become an implied term or not will depend on several factors, including the period of time and any discretion you have exercised.

This could mean that if you are currently paying your staff for the overtime that they work, it would be a change to their terms and conditions if you wanted to stop payment and, instead, give time off in lieu. You cannot change terms and conditions without agreement from your staff – that is, you cannot just make the change to their contracts without consulting them.

You should first canvass opinion from your staff on the suggested change. Some might be quite happy to have the time off instead of pay, because of their family responsibilities. Others may not be so keen if they have come to rely on the extra money they earn from working additional hours. If they do not agree, and you have a business need to make the change, and can show that it is reasonable, then there are other ways to enforce the change. These include dismissal on current terms and re-engagement on new terms, but they can be risky. This move should not be taken lightly and specialist advice is required.

Peter Done is managing director of Peninsula