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Overtime pay

Wage & Pay

7 May 2025 (Last updated 3 Dec 2025)

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There is no legislation governing overtime pay in New Zealand. However, working overtime is a part of many employment arrangements.

Overtime pay is additional compensation paid to employees for working time beyond their regular working hours. Overtime rates are typically higher than an employee’s regular pay rate. Overtime pay is often calculated based on the employee’s normal hourly rate and is frequently expressed as ‘time-and-a-half’ or ‘double time’. However, there is no obligation on an employer to pay ‘time-and-a-half’ or ‘double time’. An employer can pay the employee their normal pay rate for overtime hours worked.

Overtime pay application

As there is no law enforcing overtime pay, paying employees an increased rate of pay for working overtime hours is normally optional. An employer and an employee can agree on a fixed overtime rate – for example, time and a half.

Many employers choose to pay overtime pay rates, mostly because it helps with attracting, motivating, and retaining staff.  

Overtime pay rates normally apply when employees who earn a wage work more than the hours of a standard work week (e.g. 40 hours per week). Employees often receive overtime pay for working unsociable hours (evenings, nights, and early mornings), as well as for working on Saturdays and Sundays. 

It is rare for highly paid salaried employees to receive an overtime pay rate.

The Holidays Act 2003 provides for an increased rate for working on public holidays when employees are entitled to be paid at least time-and-a-half of the ordinary wage for every hour worked. Employers are free to agree to a higher public holiday overtime pay rate with their staff, but never less than the statutory minimum.

Calculating overtime rates

The calculation of overtime rates depends on the pay structure of the employee. Below are some ways that the employer can calculate overtime rates:

  • Hourly: Hourly workers are paid an overtime rate agreed in the employment agreement (e.g. 1.5 times their regular hourly rate) for hours worked beyond their contracted hours. The exact multiplier can vary based on the terms outlined in the employment agreement.

  • Salaried: It can be challenging to calculate overtime rates for salaried employees as it requires determining an equivalent hourly rate. Once this rate is calculated, the overtime is paid at the agreed rate (eg 1.5 times this hourly rate) for each hour worked over the standard threshold, if applicable and agreed upon in the employment contract.

  • Piecework: Workers who are paid based on the quantity of work they complete are entitled to overtime pay based on a calculated hourly rate derived from their average earnings over a defined period. Overtime rates apply similarly once these hours exceed the normal working hours stated in their contracts.

  • Commission: Employees earning commissions have unique arrangements with their employers. Their overtime pay will depend on an hourly conversion of their earnings, unless specified otherwise in their agreement.

Understanding work hours

The Minimum wage Act 1983 (the Act) requires that the employment agreement sets the maximum ordinary weekly hours at 40 hours per week. However, the Act allows the employer and employee to vary the maximum weekly hours to more than 40 hours per week, with no obligation to pay overtime or penalty rates. However, working hours must be reasonable.

The following factors should be taken into account when evaluating whether it is reasonable to require an employee to work overtime: 

  • The employee’s workload
  • The employee’s health and safety
  • The employee’s family and social commitments
  • The needs of the business
  • Industry specific rules – e.g. driving and logistics

In general, it is considered reasonable for employers to require salaried employees to work some overtime, particularly if it is necessary to meet deadlines or to deal with unexpected events. However, employers should not expect salaried employees to work excessive overtime regularly, without compensation.

How can employers compensate salaried employees for overtime? 

Salaried employees often have it written into their employment agreement that they may be expected to perform a reasonable amount of overtime without any extra pay. However, there are a few ways to compensate salaried employees for overtime work. 

One option is to pay salaried employees a “straight-time” overtime rate. This means they would be paid their regular hourly rate for any overtime worked. 

Another option is to pay salaried employees a time-and-a-half overtime rate. This means that they would be paid one and a half times their regular hourly rate for any overtime hours worked. 

Finally, employers can also agree to compensate salaried employees for overtime by granting them additional time off.

Employer obligations around overtime pay

Employers’ obligations regarding overtime pay include:

  • Keeping accurate records of the hours worked by each employee to ensure proper calculation of overtime.
  • Adhering strictly to the terms of employment contracts and collective agreements.
  • Providing employees with timely and correct payment.

Tips for managing overtime pay 

Here are a few tips for managing overtime pay:

  • Keep track of employee hours worked: This will help ensure employees are paid correctly for their overtime work. 
  • Have a clear overtime policy in place: This policy should outline the company’s overtime rates and how overtime pay is calculated. 
  • Communicate the overtime policy to all employees: This will help to avoid any misunderstandings or disputes down the road. 
  • Monitor overtime costs: This will help to identify areas where overtime costs can be reduced. 
  • Offer employees time off in lieu of overtime pay: This can be a good way to reward employees for their hard work.

Employment agreements and collective agreements

Overtime rates agreed between employees and employers must be written into an employment agreement. When signed by both parties, employment agreements become legally binding, meaning overtime pay must be paid at the agreed rate each time the employee works applicable hours. Failure on the part of an employer to pay these agreed overtime rates can lead to a claim with the Employment Relations Authority.   

Overtime rates can also be agreed in a collective employment agreement

Manage overtime pay with Peninsula

Having clarity on overtime pay, penal rates, or time and a half will support your relationship with your employees. If you need help in understanding how to implement overtime pay or create efficient contracts, reach out to Peninsula.

This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.

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