Modern Award changes – Fact Sheet 5 – Time off instead of payment for overtime

Frequently asked questions regarding overtime payments

Who can enter into a time off instead of payment for overtime arrangement?

You and your employee must individually enter into such arrangements. 

The ‘time off instead of payment for overtime’ arrangements can only be entered into by full-time and part-time employees – they do not apply to casual or daily hire employees. 

As an employer you are not to exert undue influence or undue pressure on an employee in relation to decisions to make or not to make an agreement for time in lieu. This means the agreement must be ‘freely’ entered into.

How do I implement a time off instead of payment for overtime arrangement?

There are strict criteria that must be met if you are implementing a ‘time off instead of payment for overtime’ arrangement. A written agreement must be entered into with the employee.

Any amount of overtime that has been worked by an employee in a particular pay period, which is to be taken as time in lieu, must be subject to a separate agreement (i.e. an agreement needs to occur as each situation arises).

The agreement can be made in writing with an employee or by electronic means (e.g. SMS), it needs to be documented.

What must the time off instead of payment for overtime agreement contain?

The agreement must outline:

• the number of overtime hours, and when those hours were worked
• that the employer and employee agree that the employee may take time off instead of being paid for the overtime
• that if the employee requests, at any time the employer must pay the employee, for overtime covered by the agreement, at the overtime rate applicable when the overtime was worked and
• such payment will be made in the next pay period.

How long am I meant to keep a copy of the agreement for?

You are required to keep records of any time in lieu agreements, as an employee record. This means you must keep a record of the agreement for up to 7 years.

At what rates does the time off accrue?

The period of time off that the employee is entitled to is the same as the number of overtime hours worked (e.g. additional 2 hours of overtime, is 2 hours of time in lieu).

However, an employee can request at any time to be paid for accrued hours, and must be paid at the applicable overtime rates which would have been paid at the time of working. 

When is the time off taken?

The time off must be taken:

• within the period of six months after the overtime is worked and
• at any time or times within the six-month period agreed by the employee and employer.

If time off is not taken within the six months or employees employment is terminated, the employee is to be paid for the overtime at the rate applicable for the overtime when worked.

This information is part of a series of updates on the Modern Award changes aimed at assisting members understand the requirements. More information can be found in the articles in the ‘What to read next’ section.