Paying out overtime

If your organisation pays employees for overtime rather than allowing them to take it as additional leave, Leave Dates can be used to track overtime worked and record when it has been paid.

The process involves:

1. Setting up a dedicated overtime allowance.
2. Configuring TOIL (Time Off In Lieu) to use that allowance.
3. Recording overtime through TOIL requests.
4. Reducing the employee's overtime balance after payroll has paid the overtime.

1. Create an Overtime Allowance 

Create a new allowance in Settings > Allowances specifically for paid overtime.

Give it a clear name and description, such as TOIL (paid) or Paid Overtime.

We then suggest you create a new policy for this allowance for each pay period (e.g. monthly) as this will enable you to track exactly overtime worked versus overtime paid out and make sure the two balance. You can either do this in advance for all pay periods within the calendar year (e.g. all 12 months), or add a new policy to the allowance each month as part of your payroll process:

• Select Add New Policy.
• Select Set Amount Per Year under Policy Type.
• Give this policy a unique name - e.g. Paid Overtime June.
• Set the default annual amount to 0 days.
• Select Reset to default allowance for new years.
• Repeat to create a new policy for each pay period within the calendar year (as required).

2. Prevent the Allowance Being Used for Leave 

Do not link any leave types to this allowance (none will be linked by default so there’s no action required to ensure this).

With no deducting leave types, employees cannot use accrued overtime to book additional leave. The allowance acts only as a record of overtime owed and paid.

3. Configure Overtime to Use the Allowance 

Go to Settings > Overtime and select the overtime allowance you created from the drop-down menu.

The title defaults to Earned Time Off in Lieu - this is how it’ll be described in leave requests and on the wall chart - but you can edit the title to your own wording if you wish to explain more clearly that it’s paid overtime. 

Once configured, approved TOIL requests will increase the employee's overtime balance.

4. Pay Overtime Through Payroll 

Throughout the month, approved TOIL requests accumulate in the employee's overtime balance.

When payroll is being processed:

1. Run an allowance report for the relevant pay period to see how much TOIL each employee has earned in that period. Set the report date as the final day of the payroll period, and select TOIL (paid) under the Allowances dropdown.

2. Determine the amount of overtime that needs to be paid to each employee. This is the figure in the Remaining to Book column, which shows you the total approved overtime as yet unpaid to each employee.
3. Once confirmed, open the employee's record and navigate to their allowance tab.
4. Select EDIT next to the TOIL/overtime allowance and add a negative adjustment in the policy for that pay period equal to the overtime that has just been paid out.

Example: An employee accrues 3 days of overtime during May-June. They were paid for 1 day of overtime in the May payroll and 2 days in the June payroll. So a figure of -1 is put into the May policy allowance and -2 against the June policy allowance. This returns the balance to zero and prevents the same overtime being paid again.

For organisations with a large number of employees, these allowance adjustments can be made using a bulk import instead of updating employees individually. 

5. Verify the Updated Balance 

After the adjustment has been applied, the employee's overtime balance should show only the remaining unpaid overtime.

To confirm the updated balance, you can either:

• Check the employee's My Year page to verify an individual employee's balance;

• Run the Allowance Report to review (TOIL) overtime balances for all employees in one place. By setting the report date as the last day of the payroll period, you can make sure that the Annual Allowance column equals the TOIL column - and if it does, there should be 0 days showing in the Remaining to Book column.

This process can be repeated each payroll period to ensure overtime is accurately tracked, paid, and cleared from employee balances.