Running a business in Australia means balancing team productivity with compliance – that’s especially true when it comes to overtime. As an employer, you likely want to reward your hardworking staff but also keep your business on the right side of the law. Australian overtime laws can be surprisingly complex, with different rules applying based on industry awards, types of employment, state rules (like overtime laws in NSW), and whether an employee is salaried or paid hourly.

Overtime is one of the most common topics we help employers and small business owners navigate. Get this area wrong, and you could risk costly disputes with staff or even exposure to Fair Work claims. But, when you understand your obligations and set up your overtime systems properly, you’ll foster a fair, productive workplace and avoid common pitfalls.

If you’re unsure about overtime obligations, unpaid overtime, or whether “reasonable” overtime can be required, keep reading – this guide will walk you through what you need to know about Australian overtime laws and how to be compliant.

What Is Overtime in Australia?

Let’s start with the basics. Overtime refers to hours worked by an employee that are beyond their ordinary hours of work. Usually, “ordinary hours” are set out by the National Employment Standards (NES) and detailed in applicable modern awards, enterprise agreements, or employment contracts.

For most full-time employees in Australia, ordinary hours are up to 38 hours per week (plus “reasonable” additional hours). When someone works more than their ordinary hours, or outside their usual span of working days and times, those extra hours are usually considered overtime.

However, “overtime” isn’t the same in every workplace. Whether overtime is paid, how it’s calculated, and your obligations as an employer will depend on:

  • The employee’s award or enterprise agreement (if any)
  • The type of employment (full-time, part-time, or casual)
  • What’s in the employment contract
  • Your state or territory (for example, there are special overtime laws in NSW for certain industries)

If you’re just starting out, understanding these layers will help ensure you remain compliant – and support your staff’s wellbeing and rights.

Fair Work Australia and Overtime: What Are the Rules?

Overtime in Australia is primarily governed by the Fair Work Act 2009, National Employment Standards (NES), and any applicable modern award or enterprise agreement.

Here are the key points every employer should know:

Ordinary Hours vs. Overtime Hours Australia

  • Ordinary hours: For most full-time employees, this is a maximum of 38 hours per week, or the lesser number stated in the award or agreement.
  • Reasonable additional hours: Under the NES, full-time employees can be asked to work extra hours – if they are “reasonable.” There are criteria (like health, family, and operational needs) to determine if extra hours are reasonable.
  • Overtime hours: Any hours beyond ordinary or agreed hours, or worked outside the “span of hours” (specified in the award or agreement), are classed as overtime.

Do You Always Have to Pay Overtime Rates?

Generally, yes – if the award or agreement provides for it. The applicable award will outline who is entitled to overtime and at what rates (often time-and-a-half, double time, etc.).

In some cases (such as with salaried employees on an “annualised salary”), overtime may be “rolled up” into a higher base salary under specific conditions – but it’s critical to structure this correctly and ensure remuneration is at least equal to what the employee would get under the award.

Some awards or agreements allow for “time off in lieu” (TOIL) – meaning employees can take paid time off instead of receiving overtime pay, but this must be properly documented, agreed in writing, and managed.

How Do Overtime Laws Apply in Different States, like NSW?

Most rules around overtime in Australia are covered by federal law via Fair Work, but it’s important to know that state laws may also apply – especially in areas like public sector work, local government, or for certain awards.

For example, in New South Wales (NSW), state public sector employees may have different provisions regarding overtime, shift work, and after-hours callout. For private-sector businesses, most are federally covered, but always check the relevant award or agreement.

If you’re unsure which rules apply to your team, get specific legal advice to avoid underpayments or non-compliance. You can find more on Fair Work Act obligations here.

Unpaid Overtime: What Does the Law Say?

Unpaid overtime is an area many business owners struggle with. You might have salaried staff who voluntarily work late, or employees who “check emails” after hours without being asked. So, what are your obligations?

Generally speaking, if an employee is eligible for overtime (i.e., covered by an award or enterprise agreement), you must pay overtime rates or provide the agreed time off in lieu unless an alternative has been lawfully agreed to in writing.

For positions that are “award-free” or where the employee is genuinely in a senior management or professional role (often earning significantly higher salaries), there may be more flexibility – as long as the total pay is reasonably commensurate with hours worked. However, this doesn’t mean you can rely on all unpaid overtime from salaried employees. The Fair Work Ombudsman takes unpaid overtime seriously, especially if it results in underpayment compared to the minimum legal entitlements.

Regular unpaid overtime can be a red flag – especially if it becomes “systematic” and leads to employees earning less than their minimum entitlement under the relevant instrument. To avoid disputes or Fair Work claims, it’s a good idea to:

  • Record all hours worked, including overtime and breaks
  • Ensure employment contracts clearly state hours, overtime expectations, and how overtime will be compensated
  • Limit “out of hours” work and set a good workplace culture around overtime

If you’re unsure if your current salaried contracts or overtime practices are compliant, get a legal review of your employment contracts to prevent issues down the line.

What About Unpaid Overtime for Salaried Employees in Australia?

Salaried employees can be one of the trickiest areas. Many employers believe that a set annual salary covers all hours an employee works. That’s not always true – especially for employees covered by an award or enterprise agreement, or where the hours become excessive.

If your salaried staff would have received more pay under the relevant award (including for overtime, penalties, allowances), you may still need to provide additional payment – even if their annual salary appears high.

To avoid breaching Australian overtime laws, you should:

  • Ensure the annual salary is at least equal to (or better than) the total the employee would have earned for their hours, under the relevant award or agreement
  • Regularly check and document hours worked – especially if employees work unpredictable hours or have busy periods
  • Consider whether you need to pay extra for regular, significant overtime or restructure the role or compensation to avoid contraventions (and potential back pay).

You can find out more about ensuring fair payment, awards, and best practices in our guide to employment contracts.

What Are Your Legal Responsibilities as an Employer?

Australian overtime laws are there to ensure employees are compensated fairly, but also to strike a balance with business needs. As an employer, your main obligations are to:

  • Understand the awards, enterprise agreements, or contracts that cover your team
  • Track and record all hours worked, especially overtime
  • Pay overtime rates or provide lawful TOIL where required
  • Comply with the NES regarding ordinary and “reasonable” additional hours
  • Reassess annual salaries regularly to avoid underpayment, especially if your salaried staff work overtime
  • Provide clear employment contracts and policies around overtime
  • Foster a workplace culture that respects work/life balance and discourages excessive unpaid overtime

Having the right workplace policies and agreements in place can make a huge difference in setting expectations, managing overtime, and staying compliant.

What Legal Documents Will I Need to Manage Overtime?

Putting the right legal documents and agreements in place is essential when it comes to overtime. Here’s what you should have as part of your business’s employment toolkit:

  • Employment Agreement: Clearly details ordinary hours, overtime expectations, rates of pay, and what counts as “reasonable” additional hours.
  • Workplace Policy (Overtime & Time-Off): Sets out the process for authorising overtime and how TOIL is managed.
  • Time-Off in Lieu (TOIL) Agreement: Where your award allows TOIL as an alternative to overtime pay, this needs to be agreed in writing and records kept to ensure compliance.
  • Annualised Salary Agreement (if applicable): If you use annualised salary arrangements under an award, you must follow special documentation and audit requirements – seek advice here as mistakes are common.
  • Record Keeping Systems: Systems (digital or manual) to track hours worked and ensure accurate calculations for overtime and TOIL.

Having tailored, compliant documents is the best way to protect your business from disputes or penalties. If you need help drafting or reviewing your policies, see our fixed-fee Employment Agreement and Workplace Policy services.

How Can I Avoid Common Overtime Mistakes?

It’s easy to be tripped up by overtime, especially for new or growing businesses. Here are a few practical tips for staying on the front foot:

  • Regularly check for updates to awards or the Fair Work Act – overtime rules can change over time.
  • Conduct an annual review of your salary arrangements to make sure you’re not underpaying anyone (this is critical for compliance with new Fair Work “loophole” laws).
  • Communicate expectations around overtime up front – good documentation and early conversations can prevent problems.
  • Encourage staff to record their hours and educate them about their rights under their award or agreement.
  • If in doubt, get legal advice early – fixing a problem later is much harder than getting it right from the start.

Frequently Asked Questions About Overtime Laws

Can I Ask My Staff to Work Overtime?

You can require “reasonable” additional hours, but there are legal tests for what’s reasonable, including health and safety, operational requirements, and the employee’s life circumstances. Anything beyond this should be voluntary and compensated per the applicable industrial instrument.

Do I Have to Pay Overtime if My Employee “Chooses” to Stay Late?

If overtime is worked at an employee’s discretion (without approval), you may dispute the obligation – but most awards require payment for any overtime worked with reasonable knowledge of or acquiescence by the employer. Set a clear process for overtime approval in your policy.

What Counts as “Unpaid Overtime” and Is It Legal?

Unpaid overtime refers to additional hours an employee works without receiving overtime rates or TOIL. This is generally unlawful if the extra hours are beyond their contract, award, or the “reasonable” limits set by law. Seek advice if this is happening regularly in your workplace.

Key Takeaways

  • Australian overtime laws require most employers to pay overtime (or grant TOIL) for hours worked outside ordinary hours, as set by awards, agreements, or contracts.
  • Salaried employees are not automatically excluded – regular check-ins and reviews are required to make sure annual salaries cover all entitlements, including any overtime worked.
  • Unpaid overtime can expose your business to risk – always compensate according to the award, agreement, or contract, and keep clear records.
  • Having the right legal documents – like contracts, policies, and TOIL agreements – protects both you and your employees.
  • Regular reviews, clear communication, and early legal advice will help keep your business compliant as laws and workplace needs evolve.

If you’d like a consultation on overtime, employment contracts, or workplace compliance for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

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