Unpaid Overtime: Key risks for employers and how to avoid them

Earlier this year, the TUC reported that UK workers put in £31 billion worth of unpaid overtime, with 3.8 million employees averaging 7.2 extra hours a week. What these figures tell us is that unpaid overtime – working over and above your agreed hours of work for no additional pay – is a clear feature of working life in the UK. While this may appear to benefit businesses, it carries real legal and practical risks for employers.

1. Working Time Limits

Employees must not work more than 48 hours a week on average (over 17 weeks) unless they’ve signed an opt-out. Failure to comply could lead to tribunal claims or even criminal penalties.

Action: Ask employees likely to work overtime to sign a working time opt-out. They can’t be treated unfairly for refusing and have the right to opt back in.

2. Rest Breaks

Action: Encourage breaks and limit out-of-hours communications. Flexible working is fine but if rest rules are breached, employees may claim compensation.

Most workers must have:

• A 20-minute break if working more than six hours,
• 11 consecutive hours’ rest in every 24-hour period,
• One day off per week (or two in 14 days).

3. National Minimum Wage Compliance

Unpaid overtime can reduce an employee’s average hourly pay below the NMW – especially if combined with salary sacrifice or other deductions.

Action: Track actual hours worked and check annually that pay complies with NMW. HMRC can issue penalties of up to 200% of any underpayment.

4. Constructive Dismissal

If employees are pushed too hard, excessive overtime expectations may breach trust and confidence, leading to constructive dismissal claims.

Action: Use any overtime clause reasonably and avoid normalising long hours.

5. Discrimination Risk

Requiring excessive overtime may indirectly discriminate – for example, against disabled staff or women with caring responsibilities – unless it’s objectively justified.

Action: Apply overtime expectations flexibly and consider reasonable adjustments where needed.

6. Stress and Wellbeing

Long hours can lead to burnout, sickness, poor performance and legal claims. You also have duties under health and safety law to prevent work-related stress.

Action:

• Communicate clearly that unpaid overtime should be limited.
• Encourage staff to speak up if their workload is unmanageable.
• Train managers to lead by example and monitor hours worked.
• Consider setting caps on paid overtime where appropriate.

Unpaid overtime might feel like a productivity boost – but unmanaged, it could cost your business far more than it saves.

Speak to Jon Dunkley

Jon is a Partner at Wollens and can advise you. Contact Jon via email jon.dunkley@wollens.co.uk or call 01271 341021.

View Jon’s Profile

You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.