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I'm a software developer in the UK. My employer has made an offer to raise my salary and introduce a private health care benefit, but in turn they want to remove any paid overtime that I do. The expectation is that I still work the extra hours when needed.

I worked out that the salary increase they're giving me is about equal to the total amount of overtime I did last year.

My questions are:

  1. What could be the reason for the company doing this, is it to somehow cut costs? HR are insisting this is a good deal and I should take it.

  2. Is this generally a good deal? My worry is overtime expectation may increase in the future. Usually my overtime comes from travelling on-site, so it really does fluctuate.

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    Comments are not for extended discussion; this conversation has been moved to chat. – Neo Jan 21 at 17:49
  • How much overtime do you work right now (on avarage)? Would it be possivle to ask if this amount would be included in the new salary, but anything more would still be payed normally? – guest Feb 10 at 18:25

13 Answers 13

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What could be the reason for the company doing this, is it to somehow cut costs? HR are insisting this is a good deal and I should take it.

It sort of indirectly helps them cut costs - mainly because it reduces the admin overhead in HR/Payroll.

Is this generally a good deal? My worry is overtime expectation may increase in the future. Usually my overtime comes from travelling on-site, so it really does fluctuate.

If your additional hours are likely to remain largely static then it's not a particularly good deal - but it's not a particularly bad one either. Having the private healthcare on top is something of a sweetener, which depending on the policy and your own needs may or may not be something you value personally.

Obviously if the additional hours were to creep up over time then it would be of lower value - but there's nothing to stop you renegotiating your wage if you find the number of hours has increased to the point where you've taken an effective cut. Which also brings me to the point that at this stage this is a negotiation. You have a current compensation structure (presumably backed by your existing contract) and they are offering you a deal to get you to agree to change it, if you aren't happy with that offer you can counter with a figure that would make you happy.

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    Thanks to everyone for their answers. This has been a great help. Luckily I have a bit of time to think about my decision. I will take your feedback on board. Sounds like there is room for negotiation. – Rimski Jan 20 at 16:02
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    The increase in salary today may help you in the future, a lot of the time increases of salary are typically a percentage of your current salary. – Matthew Jan 20 at 21:45
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    And, if the current company decides to screw you over in a year or so, you can use the now-higher base salary in the negotiations for the next job. – Mast Jan 21 at 7:16
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    @motosubatsu In a company with a modern payroll solution nobody is manually tabulating overtime. There should be no reduction in overhead, unless someone (i.e. management) is manually approving overtime on a case-by-case basis. It might also be that they have a problem with the accuracy of their budgets: If over time is due to projects requiring more man hours than initially expected, the extra hours will eat into the profit margin. – TvZ Jan 21 at 11:06
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    @TvZ unless all overtime is handled through a direct clocking-to-payroll setup there's some manual overhead involved. It might not be much but it's there. Since the OP alludes to travelling on-site as being a significant factor in their overtime it's not unreasonable to assume there's a manual element to the overtime being entered. Your other point regarding budget variability is sound, not knowing what your wage bill is going to be from month to month is definitely something of a headache! – motosubatsu Jan 21 at 11:12
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As per usual - HR is not your friend. Of course, they will say the deal is good for you.
Hint: your raise is probably calculated the same way you calculated it. Amount of paid overtime last year divided by 12.

There is a trick there. The number of hours would need to be less than those you worked last year. Why less? Because the minimum wage was raised anyway, and even if the minimum wage doesn't apply, you should get a cost-of-living increase anyway. This way they avoid all of that by basing their calculations on last year's income.

And your concern is likely valid too. Such a move from HR would also indicate that they're probably planning to increase overtime as well.

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    +1 for "you should get a cost-of-living increase anyway". Then again, you should get at least a cost of living increase. – computercarguy Jan 20 at 18:54
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    If there isn't a legal regulation anyway, I'd at least have them add an "up to X overtime hours" clause. If they reject, you know what they're up to. – Fildor Jan 21 at 8:54
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    @Fildor I think they also want to get away with changing the contract as, I assume, there is amount of overtime where it's not acutal work but just travel so you might be, in some regions, entitled to additional reimbursements. – SZCZERZO KŁY Jan 21 at 9:23
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    @SZCZERZOKŁY Probably. I think I'd even have a lawyer take a glance at it. Saved my bum once. – Fildor Jan 21 at 9:30
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There are some advantages in having a high basic salary than salary + overtime and if you say money wise they work out the same lets explore those.

Mortgage application - When applying for a mortgage you will be able to borrow more with a higher basic salary than salary plus overtime as overtime is not always guaranteed whereas your basic salary is. This could work to your advantage if you are looking to move soon and would like to borrow as much as possible.

Pension contributions - Your employer will contribute a % of your salary to your pension fund. This is usually a % of the basic salary, excluding overtime. If you basic salary is raised and the % stays the same, your employer will in effect be putting more into your pension fund.

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    Does the UK still have pensions? The US generally doesn't anymore, being replaced by 401k, which it shouldn't have, but that's a different topic. With a 401k, an employer match is based on the employee's input into the fund, so it won't matter how much the base pay is. FYI, I'm not arguing your answer, just clarifying that it's different for future US readers of this thread. – computercarguy Jan 20 at 18:58
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    @computercarguy My company contributes to my 401(k) the same amount no matter what I do. My previous company had a static amount and a matched amount. I've also had annual profit sharing and nothing else for one. 401(k) is just a tax-qualified plan, and there's no specific structure for employee/employer contributions, so long as they fall within the IRS limits. – Bloodgain Jan 20 at 20:57
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    @Bloodgain, rereading my comment, I should have specified better that I was specifically talking about employer matching, if that's what a company offered, not that all companies offer employer matching on 401k's.. – computercarguy Jan 20 at 21:01
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    @computercarguy Most people in the UK are offered a "Defined Contribution" pension by their employer or can set up a private pension plan. As far as I understand it, the structure is similar to a 401K (not like the old "Defined Benefit" pension, that offers X% of your final salary). Employer contributions are normally a certain percentage of base salary (e.g. 4%); some employers offer additional contributions based on matching (e.g. 3% default contribution (legal minimum) or will match your contribution up to 6%). – anotherdave Jan 21 at 13:53
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    @RyanfaeScotland yes it is counted but is usually counted separately than the main salary and weighted less than the main salary simply because it could be stopped in the future – David Lindon Jan 23 at 10:58
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To answer the first one, if the company requires a lot of overtime from you then it is a very good deal for them. You could potentially work even more hours, and they then get that free.

Is it a good deal for you? That is open to opinion and you need to weigh up different factors. It will partially depend on the contract, are there any clauses outlining a maximum level of overtime? Is the level of overtime you did last year acceptable to you in the future? Do you have a good work life balance? Can you refuse to do overtime or is it mandatory when requested?

It's worth noting that if you're not being paid for the overtime then you're most probably opting out of any holiday pay you might be entitled to for that work. *

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12

I don't know laws in UK, but in Germany there's one huge difference between overtime being paid hourly instead of generally more salary: you can decide if you take money or additional holidays.

With my previous employer I always worked overtime, and prolonged my holidays with that. There was also the possibility to take "bridging days" with overtime, when the company was closed but I didn't want to take a holiday. I was able to travel three times a year abroad, at least three weeks each.

Those with a higher salary, but no paid overtime didn't have that possibility. Company closed meant one day off less, whether they wanted or not.

Side note: with my current employer I agreed on terms like yours, though. But for him, I can work from outside Germany, so I can prolong my time abroad like that. This was agreed on in the interview already.

Another side note: Brexit still haunting, there are new EU laws, requiring gapless protocols of overtime work. Too much overtime should be prevented like that (which I'm doubting will work, but that's another topic...)

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    As for general rules in Germany .. starting from mid-level management you are expected to earn enough to cover all necessary overtime without those being paid extra.. But lower level most work falls into 2 categories ... either you have a work time account, that allows you to be shorter at work and cover the rest with time from your work time account - or you get additional overtime paid. – eagle275 Jan 21 at 8:37
  • @eagle275 in industry, you're most, but not all times, right. I've seen "normal" workers with no work time account, too. Outside big companies there are lots more possible rules. I'm in a small software company now, and here's no "tariflich" and "außertarfilich" - so it's simply what we negotiated. My husband in craftsmanship had to do overtime almost always - and got (involuntary) leisure time when there were less orders, which may or may not be what lawmakers intended, for sure. – Jessica Jan 21 at 12:50
  • Good point. In the UK there aren't laws on what you do with your overtime, so it's down to your individual contract. So this may be applicable to the OP, or it may not. – AndyT Jan 23 at 11:51
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There is one easily overlooked advantage to changing from hourly overtime to a salary that is equal to what you would get before. Which is your pay when on leave.

If on leave you don't work the overtime, but are still paid your regular pay.

This means if overtime is making up a significant portion of your pay, and you take extended leave, you are down a fair bit of your pay packet for that period. Normal leave in the UK is only 4 weeks per year, so may or may not be significant. But there are longer leaves such as long-service leave, parental leave, or medical leave. For the last, in the UK medical leave over a certain length might be not covered by your employer but rather by short-term disability insurance, in which case you should check your policy too see if pays out based on your regular pay packet, or your pay assuming standard hours.

You should weight that up of-course. You probably know how likely you are to need any of the longer leave periods.

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7

Just wanted to add a single aspect: it is generally a good idea to increase base salary as opposed to bonus or overtime pay as it is much harder to take that back.

It is also better for negotiations in the next job or if you want to convince bank or landlords.

If this is worth it, that's another question. But I would think that the monetary value of a company health plan might be big? (And also adds to those "hard to take away" basics).

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7

The new conditions you describe are standard practice in the UK for software engineers and the tech industry generally. In fact, I'm amazed there is anywhere that actually pays overtime at all!

So to answer question 1 they may just want to realign their terms and conditions to the industry standard. It's also a more predictable cost (for accounting purposes) than an indeterminate amount of overtime each week. Is it also cheaper for them? Yes possibly, if you currently do a lot of overtime.

In terms of increasing the amount of 'expected' overtime as time goes by: it's not really in the company's interest to do that. Yes, they will get more out of you in the short term, but in the long term you are more likely to either burn out or quit.

You mentioned that this time is often accrued during travel, so the key thing for you will be how much extra time that typically is, and whether the new contract has provision for some other compensation if your overtime is excessive (say, TOIL).

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  • I agree with the alignment asumption, it's really seldom to pay overtime (besides bonus for emergency on-call readiness) in IT. (Even getting days off might not be an option, only flexible work hours) – eckes Jan 21 at 12:55
  • "...it's not really in the company's interest to do that." Sure, but people in companies all the time do things not beneficial to the company in the long-term. Just because the company would suffer if they did something shouldn't be taken as an indication that they won't do it. – cjs Jan 21 at 16:20
  • "are standard practice in the UK for software engineers and the tech industry generally" Can you provide a source for this please? – mattumotu Jan 22 at 12:28
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    I don't have a written source for this, because most companies do not publish or publicise their employment contracts (and if they did, it seems a lot of SE Workplace questions would be redundant). I am answering based on my 15+ years in the software industry, as an employee and hiring manager. – K. Morgan Jan 22 at 12:45
  • I'd suggest it's fairly standard practice across most office-based roles in the UK (but like you I have no written source). Manual labour tends to get paid overtime, office-based at a very junior level may or may not (may vary by industry), office-based at a mid-senior level tends not to. – AndyT Jan 23 at 11:46
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This sounds like a bad deal, unless some safeguards are in place. The why of it does not concern you, as long as you realize should know that you are solving a problem for someone else by accepting this offer. Somebody wins by selling you on the idea.

You express a worry that overtime may increase. That makes me suspect that there are not enough controls that ensure that projects are planned and scheduled so that overtime is minimized. If your employer is not doing everything they can to minimize overtime, then removing their only incentive won't do you any good.

It also makes me worry about the amount of control you have over extra hours. Can you decline? Check what your (new) contract says about that and consider the company culture. If you could be pressured to work overtime, expect that you will be. Your work-life balance will be at risk.

If overtime is not controlled, then they are essentially asking you to work an unlimited number of hours in return for a slight pay increase.

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    +1 for the last sentence. In the US, there's a special class of IT workers that get salary, but don't get the protections of being salary. It's essentially hourly without being paid appropriately for overtime. It's a bad deal and the OP sounds like they are getting roped into a similar deal. It also sounds like they aren't actually getting a raise, just a format change for their paycheck. – computercarguy Jan 20 at 19:02
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Yes, this would be a very good deal for you, if you can manage your overtime in the future.

Salaries normally never go down. Increases in salary pay off year after year until you leave the company. Sure, you can hit a ceiling where you simply do not get more, but they won't take it away from you (in a sane company).

So: your goal is to take the increase, and then avoid overtime in any manner you can. Not only to make more money per hour, but also to avoid burnout, and to get into a working mode where you can churn out the same time year after year without detrimental effects on your health.

As far as I'm concerned, if an employee is not allowed to convert overtime into money or time off at higher levels, that does not mean that he or she should work without limit. The silent understanding is that mature employees are able to handle their time, for example by being experienced and fast; or by being experienced and able to estimate the needed time to achieve a task relatively accurately; or by having good time management.

If it were otherwise in your company, I'd suggest looking for a new company rather sooner than later. You're a brain worker, and you can only pull off 50+ hours per week for so long. You may feel invincible now, but believe me, constant overtime gets everybody. Burnout is not fun.

TLDR: Do get the increased salary; but do make sure to avoid regular overtime by all measures necessary.

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HR wants to do this as it removes the overhead of managing overtime,and the danger of you deciding to stop working it. In return they are consolidating your pay and adding additional benefits which is good, as others have pointed out e.g. mortgage applications, sick pay etc.

It's definitely a win win as long as you are happy with current levels of overtime and have a way of managing expectations going forward. You need to make sure the documentation reflects an average of X hours per week overtime so that if it gets excessive in future you have the ammunition for further discussions.

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  • I don't follow the point about removing the danger the OP will decide to stop working overtime. It seems that if the OP is paid hourly for their overtime, they have an incentive to work it, as they'll get paid more. If the OP has a higher base salary but doesn't get paid anything more for overtime, they have every incentive to work as little overtime as possible. – Nuclear Wang Jan 21 at 14:04
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IMO this is fine so long as you consider and mitigate the 2 big potential risks:

1) Seeing as Overtime is now "expected" as part of your base salary, what rights do you have to decide not to work overtime when it's asked of you?

2) What guarantees, if any, do you have on how many hours of overtime you're expected to work?

You should ask HR to clarify the details on both, and get the process/hours incorporated into your new contract.

Also, be sure to check the entire contract for any other changes they might put in there while they're editing it.

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You also may want to check if the overtime hours are taxed like the standard ones.

In France for instance, the first 5000€ from overtime are free from taxes.

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  • In the UK overtime is taxed the same as normal pay. – AndyT Jan 23 at 11:44

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