Overtime, shifts and enhanced pay

Extra hours are the fastest way most employees can raise their income, and the most commonly misunderstood line on a payslip.

How enhanced pay is built

Overtime is usually paid at an enhanced rate - time and a half (1.5x) or double time (2x) - though plain time is legal in many places unless your contract says otherwise. Shift work adds its own layers: night premiums, weekend uplifts, bank holiday rates, on-call retainers and call-out payments.

Read your contract once and write down the actual multipliers. Almost nobody does, and it is the only way to check a payslip properly.

Why the extra feels smaller than it looks

Overtime is taxed at your marginal rate, not your average rate. If a slice of your income falls in a higher band, every extra hour in that slice is taxed at that higher band plus social contributions. Working a shift worth 200 gross and receiving 128 net is not an error - it is your marginal rate doing exactly what it does.

The practical consequence: value overtime in net terms, not gross. A shift that costs you a Saturday should be judged on the money that reaches your account.

The month-boundary trap

Overtime is usually paid a month in arrears, and if two months of extra hours land in one pay period the payroll system may briefly tax you as though you earn that much every month. In cumulative systems this corrects itself automatically over the following periods. It is worth knowing so you do not panic.

Overtime and holiday pay

In many jurisdictions regular overtime must be included when calculating holiday pay, using an averaging period. If your holiday pay is always exactly basic pay but you work overtime every month, that is a question worth asking HR.