What is overtime?
The term overtime doesn't have a legal definition. Overtime hours are the extra hours your employees work, in addition to their usual full-time working hours (as stipulated in their employment contract, the personnel handbook or the collective labor agreement). For example, a standard working week of 40 hours and an actual working week of 44 hours, leads to four hours of overtime. If the employee works part-time, the extra work is considered as additional hours. For part-time employees, overtime only applies if these extra hours exceed the usual full-time working hours per week.
Can you require your employees to work overtime?
You can only require employees to work overtime, if you have made agreements about this in the employment contract, the personnel handbook, the collective labor agreement, or if it is reasonable. If the employee works more hours than stated in their contract and you have not specifically requested this, then these hours do not always have to be considered as overtime. However, if the employee consistently works longer hours than stated in their contract, and you either implicitly expect this or accept it, then it may be considered as overtime.
How can you compensate overtime?
The employment contract, personnel handbook or collective labor agreement often contains provisions on how overtime should be compensated. Overtime can be compensated for either money or time off. Here is how it works:
- Do you compensate in money?
Besides the regular pay for the additional hours worked, the employee may be entitled to an overtime allowance. Whether an overtime allowance should be paid depends on the employment contract, personnel handbook, or collective labor agreement. However, this doesn't apply to additional hours; for this you pay the regular wages. When to pay for these hours, is based on agreements with the employees. Usually, overtime payment coincides with the regular salary at the end of the month.
- Do you compensate in time off?
Overtime hours can also be registered as time off. It's often stipulated that employees must take this time off within six months after the calendar year in which the overtime was accrued, (before July 1st). Any hours not taken by that time, still have to be paid. Please note: if no collective labor agreement applies to your company, you can only compensate in time off if the total wage for all hours worked does not fall below the statutory minimum wage.
In individual employment contracts for roles with high salary levels, there is often an agreement that 'compensation for any overtime is deemed to be included in the salary.' Case law suggests that this agreement is only valid if an employee doesn't work more than ten percent above their contractual hours.
Ensure proper recording of overtime!
If the employee works overtime, you are legally obligated to record this properly. Failure to do so may result in a fine from the Dutch Labor Inspectorate. However, this obligation to register doesn't apply to employees who annually earn more than three times the minimum wage.
When should you adjust the working hours?
Do you instruct the employee to work overtime for a period of (at least) three months? Then this may lead to an adjustment of their working hours. The employee must be able to prove that the overtime is structural. Temporary peaks or occasional overtime do not require an adjustment of the employee's working hours.
Always make clear agreements!
Prevent incorrect compensation for overtime, by making clear agreements with your employees. Do you have any questions? The employment lawyers at Grant Thornton are happy to help!
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