What is overtime?
Overtime is work performed outside an employee’s ordinary hours under the applicable award, enterprise agreement or employment arrangement. In Australia, the rules for when overtime starts and how it is paid can differ significantly between industries.
For payroll teams, calculating overtime correctly means more than multiplying extra hours by 1.5. You need to identify the employee’s classification, ordinary hours, applicable award or agreement, day and time worked, employment type and any relevant overtime provisions.
How is overtime calculated in Australia?
A basic overtime calculation is:
Overtime pay = overtime hours × applicable overtime rate
For example, if an employee’s ordinary hourly rate is $30 and their applicable overtime rate is 150%, one hour of overtime would be:
$30 × 150% = $45
However, the applicable rate may change after a certain number of hours, or depending on whether the work is performed on a weekend or public holiday.
Fair Work states that overtime rules differ between awards and registered agreements, so employers should check the specific instrument covering each employee rather than applying one company-wide overtime rule.
What are the overtime rates by industry?
There is no single overtime rate that applies to every Australian employee. Modern awards establish different rules depending on the industry and employee classification.
| Industry | Example overtime structure |
| Hospitality | Often 150% for the first 2 hours Monday-Friday, then 200%; weekend rules can differ |
| Construction | 150% for the first 2 hours Monday-Friday, then 200% |
| Manufacturing | 150% for the first 3 hours, then 200% |
| Healthcare | 150% for the first 2 hours Monday-Saturday, then 200%; higher rates can apply Sundays and public holidays |
| Retail | Different overtime thresholds and rates apply, including higher rates for Sundays and public holidays |
These are examples rather than universal rules. The relevant award, classification and employment type should always be checked with Fair Work’s latest guide.
Hospitality overtime rates
Under the Hospitality Industry (General) Award, adult full-time and part-time employees generally receive 150% for the first two hours of overtime Monday to Friday and 200% after two hours. Overtime worked from midnight Friday to midnight Sunday and on rostered days off is generally paid at 200%.
Hospitality payroll is particularly sensitive to employee classification, casual status, ordinary hours, penalty rates and roster changes.
Construction overtime rates
The Building and Construction General On-site Award provides 150% of the ordinary hourly rate for the first two hours of overtime Monday to Friday and 200% thereafter. Different rules can apply to casual employees, shiftworkers, Saturdays and recalls to work.
Manufacturing overtime rates
Under the Manufacturing and Associated Industries and Occupations Award, overtime is generally paid at 150% for the first three hours and 200% thereafter for employees covered by the standard overtime provision. Additional rules apply to shiftworkers and particular working arrangements.
Healthcare overtime rates
The Health Professionals and Support Services Award provides 150% for the first two hours Monday to Saturday and 200% after two hours for full-time and part-time employees. Sunday overtime is 200% and public holiday overtime is 250%. Casual overtime rates are higher because of the applicable casual loading at 25%.
Is overtime paid at 150% or 200%?
It can be either, depending on the applicable award or agreement and how much overtime has been worked.
A common structure is 150% for an initial period followed by 200%, but this is not an Australia-wide rule. For example, construction generally uses a two-hour threshold, while manufacturing uses a three-hour threshold under its relevant award provisions.
This is why payroll systems should interpret the applicable employment conditions rather than simply applying a standard overtime multiplier.
Is super paid on overtime?
Traditionally, overtime payments are generally excluded from ordinary time earnings (OTE), which means they have generally not attracted compulsory superannuation under the ordinary SG calculation. The ATO describes OTE as earnings for ordinary hours and states that overtime payments are not OTE.
However, 2026 requires additional care because Payday Super commenced from 1 July 2026. The new framework uses the concept of qualifying earnings, with super calculated at 12% of qualifying earnings and contributions made much closer to payday.
For this reason, employers should not rely on a blanket “overtime is exempt from super” assumption when configuring a current payroll system. Payroll treatment should reflect the applicable 2026 rules and the way the payment is classified.
How can employers avoid overtime calculation errors?
1. Identify the applicable award
Confirm the modern award, enterprise agreement or employment contract covering the employee.
2. Confirm ordinary hours
Determine when ordinary hours end and overtime begins for that employee.
3. Check employment type
Full-time, part-time and casual employees can have different overtime calculations.
4. Separate overtime from penalty rates
Weekend, public holiday and shiftwork penalties should not automatically be treated as overtime.
5. Keep accurate time records
Actual hours worked should flow into payroll so overtime can be calculated from reliable attendance data.
6. Review payroll rules regularly
Award rates and employment conditions can change. Payroll configurations should be reviewed whenever relevant awards or workplace arrangements change.
How Workstem helps with overtime pay
Managing overtime across different employees, awards and working patterns can quickly become complicated. Workstem connects rostering, attendance and payroll to help track hours and automate overtime calculations based on configured pay rules.
Explore Workstem’s payroll and overtime management tools.
Frequently asked questions
Q1: How does payroll software calculate overtime from attendance records?
A1: Payroll software can use recorded working hours and overtime data as inputs for payroll calculations. Workstem can reference attendance data such as total working hours and overtime worked on weekdays, rest days and public holidays.
Q2: What types of overtime hours can be included in payroll calculations?
A2: Different overtime conditions can be handled through payroll formulas. In Workstem, formulas can reference overtime worked on weekdays, rest days and statutory holidays to support different pay conditions.
Q3: How do you set up an overtime pay formula in payroll software?
A3: Payroll teams can configure a pay item and use attendance data as inputs for the calculation. Workstem allows formulas to be added, reviewed and validated before they are saved for payroll use.
Q4: What happens to overtime calculations when attendance data is incorrect?
A4: If working hours or overtime records are inaccurate, those errors can flow into payroll calculations. Reviewing attendance records before payroll helps ensure the correct overtime data is used.
Q5: How can payroll teams verify an overtime calculation before running payroll?
A5: The pay item’s formula and calculation settings can be reviewed before the item is used. Workstem allows payroll teams to validate formulas during configuration, making it easier to check whether the calculation is working as intended.
Q6: Does overtime affect superannuation calculations?
A6: It depends on how the pay item is configured. Workstem allows payroll teams to specify whether individual pay items are included in Super and Tax calculations.
Read More
