For many enterprises, the wage bill represents a significant expense, often the most considerable single monthly expense. The affordability of the expense can be debilitating for many smaller companies. The situation may further be compounded by the need to pay overtime; as many employers know, overtime is a costly exercise.

Although overtime should be an extraordinary circumstance, the need to have employees work beyond their contracted working hours may be unavoidable. Frequently, employers attempt to offset the additional costs incurred from overtime work by negotiating arrangements with their employees, and others simply don’t pay overtime.

The law provides the framework for employers and employees to agree on when and how overtime must be paid and the mechanism whereby overtime needs not be paid in money.

Overtime is regulated by the Basic Conditions of Employment Act and, in essence, provides that any hours worked in excess of ordinary hours of work by an employee must be paid at a rate of one and a half times the employee’s wage. Ordinary hours of work amount to either 8 or 9 hours per day, depending on the number of days worked per week or 45 hours per week. Depending on the Industry or Sector of employment, this number may be slightly different.

There are several overtime agreements that can be concluded between employers and their employees, which regulate the working of overtime and the payment thereof.

Firstly, overtime can only be implemented in terms of an agreement between the employer and the specific employee – parties need to agree to the overtime. Employers may not unilaterally implement overtime.

Secondly, an agreement may be concluded between parties in terms of which payment for overtime may be substituted with paid time off. Additional overtime agreements do exist which regulate when overtime work may be compensated as well as the limit on the amount of overtime worked.

The former agreement may be contained in a provision in the employment contract or may take the form of an ad-hoc agreement, as and when required by the employer. In the case of a contractual provision, the agreement lapses after a period of twelve (12) months and must be renewed. This agreement is compulsory.

The second agreement permits the parties to arrange how the overtime worked will be compensated amongst themselves. Payment for overtime worked attracts a value of at least one and a half times the employee’s ordinary wage. The provisions of the BCEA, however, provide that an employer may, in terms of an agreement, grant an employee who works overtime paid time off in lieu of having worked the overtime. In terms of this agreement, the employee will work the overtime and be paid at his ordinary rate and be granted 30 minutes’ paid time off for every hour of overtime worked. Alternatively, the employer must grant the employee 90 minutes’ paid time off in lieu of every hour of overtime worked. The paid time off must be granted to the employee within one (1) month of the employee becoming entitled thereto.

It is this second agreement that causes some confusion amongst employers. Many employers will request their employees to work overtime, eight hours on a Saturday, for example, and afford that employee an eight-hour day off later that same week. This is unlawful. The overtime never loses its value of one and a half times the employee’s ordinary rate; therefore, if an employee agrees to work eight (8) hours overtime on a Saturday, they must either be paid for the Saturday at the premium rate, be paid their ordinary wage for the day and, in addition, be given four (4) hours paid time off within one (1) month of having worked the overtime or be given twelve hours paid time off in lieu of the overtime worked, within one month of having worked the overtime. The last two options must be in terms of an agreement between employer and employee.

The law, therefore, makes provisions for employers and employees to agree to various overtime arrangements in which the employer may not have to pay the additional costs relating to the overtime. These arrangements, however, require co-operation from the employees.

It is recommended that employers engage actively with their employees to negotiate suitable overtime arrangements. It is advisable to reduce all agreements to writing; however, the employee’s signature on a time sheet confirming his agreement to work overtime will suffice.

If there is any uncertainty regarding overtime arrangements, kindly contact one of the CEO offices, where an official will be happy to advise.

Article By: Stephen Kirsten
Provincial Manager – CEO Cape Town