Paying out over time: Here’s what to watch out for

Nowadays, overtime is part of everyday working life. The regulations on overtime can be found in the employment contract. Depending on the industry, the collective agreement can be consulted, or even the company agreement. But what happens to overtime if there are no contracts or agreements at all? This article clarifies and provides an overview of what to look out for.

Overtime regulations

Overtime is often a contentious issue because in most cases there is a lack of clarity as to whether it should be paid out or not. The first port of call for employees and employers is the concluded employment contract or the collective bargaining agreement, which should contain a corresponding clause. If there is no indication in either, there is another point of contact that provides clarity. Both parties will find what they are looking for in Section 612 of the German Civil Code (BGB). There, it is stipulated that “remuneration is deemed to be tacitly agreed if, according to the circumstances, the service can only be expected in return for remuneration.”

But what exactly does this passage mean? It means that the legislator states that the employer only has to pay out the overtime to the employee if he has expressly ordered it. The same applies if he has taken note of the overtime. If, on the other hand, the overtime is only worked in order to gain an advantage by paying extra, the employer is not obliged to pay for it. Employees are equally protected by a ruling of the Federal Labor Court (BAG). This is because if it is agreed in the contract that overtime is already compensated with the monthly salary, this clause is not valid.

The payment of overtime

There are two different options for the payment of overtime worked. It depends on the form in which the employee receives his monthly payment. In the case of a fixed monthly salary, a conversion to a salary per hour must first be made in order to pay out the overtime. In the case of a salary paid per hour, on the other hand, it is easier. This hourly wage is paid for overtime at the same time. In addition to overtime, a supplement of 25 percent is usually paid. This is especially true in the case of collective agreements.

To ensure that the payroll and time recording of hours worked does not get out of hand, it is worthwhile to purchase appropriate software. One tool that is an irreplaceable helper in the recording process is called Time and Attendance. This software is powerful and collects a lot of useful data.

A detailed analysis by Time and Attendance gives any business owner insight into the overtime hours of the employees and at the same time absenteeism, normal working hours, as well as vacation days, are recorded. Duty rosters can be created and balances to flexitime can be determined. With software such as Time and Attendance, tedious paperwork is a thing of the past. Resources are sustainably conserved and working time is saved.

Termination and overtime payment

In the event of termination, every employee should make a calculation as to whether it is worthwhile to pay out overtime. Since the income increases due to the additional work and payment, the annual earnings automatically increase. This leads to an increase in the tax rate and corresponding contributions to be made. This does not have to be the case if time is compensated instead of payment. Often, overtime is used in the form of time off in lieu of notice, as this appears more attractive to the employee.

However, caution is advised when a waiver of overtime payment or compensatory time is signed. The term compensatory receipt is often found in this context, which means the same thing. This means that the employee waives any compensation.