New research has revealed that unpaid overtime represents 17 per cent of total working hours among Australian employees. With stricter wage theft laws on the horizon, how can employers ensure their overtime policies are compliant?

A recent report has shed light on the concerning extent of unpaid overtime worked by Australian employees, with the average worker performing seven weeks’ worth of unpaid work each year. 

The report was published last month by The Centre for Future Work at the Australia Institute to mark its annual ‘Go Home on Time Day’, an initiative conceived to spotlight the prevalence of time theft. 

Its findings showed that unpaid overtime represented an average of 17 per cent of total working hours across all forms of employment, with workers performing an average 5.4 hours of unpaid work per week. This time theft equates to 281 hours per year per worker, or more than seven standard 38-hour work weeks. 

If this unpaid work were valued at median wage levels, this means the average employee is losing around $11,000 per year. At the economy-wide level, this adds up to more than $130 billion of lost income per year – more than the Commonwealth’s annual expenditure on healthcare. 

With Australians grappling with rising inflation and cost-of-living pressures, the report says the uptick in unpaid overtime is “adding insult to injury”.

The most common forms of unpaid overtime included arriving early at work, staying late, working through breaks, working from home in the evenings and on weekends, and answering calls or emails outside of working hours. 

Who is doing the most unpaid overtime?

Perhaps unsurprisingly, full-time employees reported the greatest incidence of unpaid overtime, working an average of 6.2 extra hours per week. 

Self-employed and part-time employees worked less unpaid overtime (4.7 and 4.1 hours, respectively). Even among casual workers, unpaid overtime is fairly common, with respondents reporting working 3.9 hours per week. 

For many full-time workers, employment contracts stipulate that they may be expected to work ‘reasonable’ additional hours as part of their salary package. 

According to Will Snow, Director at Snow Legal, as a general rule, ‘reasonable’ additional hours might look like around half an hour per day – beyond that, employers might be treading on dangerous ground. 

With that said, whether or not additional hours are reasonable will also depend on the employee’s salary and how it compares to the relevant award wage, he says.

“For example, [let’s say] under an award I’m to be paid $60,000, and I get paid a salary of $85,000,” he says. “For many employers, they’ll say they have a margin within that difference where they can require some overtime or additional work to be done without having to change the salary.

“While that can [sometimes] be problematic, it’s a general approach that works in many situations.”

The expectation to work additional hours, whether it’s conveyed directly or indirectly, is far more problematic in settings where staff are paid an hourly rate, he says.

“I experienced this [when I worked] in retail. Basically, the expectation was: the shop opens from nine to five. You get there at 8.30, and you leave once the till has been reconciled and the other admin is done – and that can be 20 minutes, or it can be 45 minutes. But the issue there was that I was only paid from nine to five.

“A lot of concerns regarding unpaid overtime come down to those little expectations. And they nibble away at the beginnings and ends of days.”

Younger employees can be particularly susceptible to this form of time theft, since they are less likely to be aware of their rights and speak up about them, he says. This is backed up by the report, which found that workers aged between 18-29 performed the most unpaid overtime – an average of 7.4 hours per week.

“It’s really hard for them without the support of, say, a union to safely push their concerns along. And this is why there’s a massive task for unions and other associations to raise issues on behalf of employees.”

“If you’re regularly requiring an hour here, an hour there, that compounds and compounds. And you might say, ‘We’re a great workplace, and they’d never bring a claim.’ But in reality, you’ve got this silent, ticking liability accruing.” – Will Snow, Director at Snow Legal

The impact of remote and flexible work on overtime

According to previous editions of this report, this year’s findings represent significantly higher levels of unpaid overtime than those pre-pandemic; the 2019 edition reported that the average employee worked 4.6 hours of unpaid overtime per week, or six work weeks per year.

The rise of remote work is likely to be a contributing factor to this increase, given that working from home can blur the lines between our personal and professional lives. As our homes became our workspaces during the pandemic, things like responding to work emails while sitting on the sofa in the evening began to feel normalised.

According to Snow, the increasing popularity of flexible working hours have further complicated our collective approach to overtime.

“We’ve created a lot of flexibility in the workforce, which is often a benefit for everyone. But we have a very strict and rigid approach under legislation and under awards which say, for the [exact] hours you work, you must be paid – and the two things don’t meet together very well.”

For example, an award might stipulate that any hours worked outside the nine-to-five workday will incur penalty rates. However, if an employee chooses to start and finish work a few hours early due to parenting responsibilities or personal hobbies, it makes less sense to pay them penalty rates for working before 9am – and indeed, the obligation to do so might deter employers from granting these requests.

“It’s a conflict between a rigid legal framework, [around] the Fair Work Act and awards, and a working reality where people want flexibility about when the work gets done,” says Snow.

Another challenge that arises with overtime on a flexible schedule is keeping track of the actual number of hours worked, he says.

“What this has meant is that there’s been massive take-up of time and attendance tracking for the staff that otherwise wouldn’t [have it] – in the past, that might have applied more to production employees or hospitality staff. And there’s a real focus on ensuring that employers know what the actual hours that are worked are.”

How can employers handle overtime in a fair and compliant way?

The high levels of unpaid overtime revealed by the report are particularly concerning in light of the forthcoming criminalisation of wage theft. This policy was announced earlier this year as part of the Closing Loopholes Bill, which was passed – sans controversial elements that were tabled for 2024 – last week. 

This legislation is expected to kick in early next year, meaning now is an opportune time for employers to review their policies regarding overtime and ensure their approach is compliant. 

According to Snow, there are two key aspects of a good strategy to manage additional hours and minimise the legal risks of unpaid overtime. First and foremost, employers should look at whether their culture encourages a healthy approach to overtime. 

“Some employers do this really well, with visible signals about working expectations. Things I love to see, and which I think are really good steps towards a healthier and more compliant culture, are email footers that say things like, ‘Although I might send this email out of hours, it’s not my expectation that you read it or you respond to it out of hours.’

“Or, another signal might be a leader saying, ‘See you everyone, I’m out the door now. I’m going to pick up my daughter from childcare,’ [to show] that’s our culture – we’re not workaholics. Those things are subtle, but they’re powerful.”

The other, more technical, aspect of managing overtime is to clearly communicate your expectations to employees regarding their working hours via the appropriate channels and policies.

“[Employers need] to be really clear when they’re requiring work to be done, and when they’re not requiring work to be done,” he says.

“Some people choose to get to work early. Some people choose to work late. And they do so in the [mindset], ‘That’s how I can get ahead. That’s how I can learn. That’s how I can be noticed.’

“So if people want to stay late, [you might say], ‘Look, I really appreciated that last night, but it’s not my expectation that you do that. And next time we do this, let’s plan it a bit better so you’re not feeling that pressure.”

It’s imperative that employers treat the risks of overtime seriously – not just from a wellbeing perspective, but also from a compliance standpoint.

“If you’re regularly requiring an hour here, an hour there, that compounds and compounds. And you might say, ‘We’re a great workplace, and they’d never bring a claim.’ But in reality, you’ve got this silent, ticking liability accruing,” says Snow. “And it all comes back to those expectations and requirements for work.”

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