Reasonable Additional Hours vs Paid Overtime: The Compliance Nuance Every Australian Executive Must Master

Feb 13
5 min read

Updated: May 17

What if your employment contracts still quietly assume a "standard" 40-hour week while the law caps ordinary hours at 38? In Australia right now, that two-hour gap isn't trivial — it can turn routine flexibility into a Fair Work breach, backpay exposure or penalties. For executives and business owners juggling client demands, peaks and growth around-the-clock to survive today's working and business world, understanding the distinction between reasonable additional hours and paid overtime is absolutely essential.

The good news? When managed properly, reasonable additional hours provide a compliant, cost-effective way to maintain operational agility without the escalating expense of paid overtime — especially in today's economic environment. Let’s break it down with clear legislative references, a fairly recent case where the employer's position was upheld, and actionable steps to strengthen your approach this year.

The NES Foundation: 38 Hours Is the Legal Line

Under section 62(1) of the Fair Work Act 2009 (Cth), the National Employment Standards (NES) cap ordinary hours at 38 per week for full-time employees (or the agreed ordinary hours for part-timers, even casual work, up to 38). Employers must not request or require an employee to work more than these ordinary hours unless the additional hours are reasonable.[1]

Employees have a protected right to refuse additional hours if they are unreasonable, per section 62(2).[2] This applies to almost every national system employee —your core team.

Action Item for Executives: Organise an audit your employment contracts, position descriptions and rosters today —highlight any references to a "standard" or "ordinary" week of 40 hours and flag them for review to align with the NES.

Reasonable Additional Hours: No Automatic Extra Pay — Legislative Proof

Section 62(1) of the Fair Work Act explicitly allows employers to require reasonable additional hours beyond the 38-hour ordinary cap, but these do not automatically entitle the employee to overtime pay, penalty rates or loadings.[3] Payment for ANY EXTRA TIME depends on:

Employer Pre-Approval first and foremost;
the modern Award or Enterprise Agreement (EA);
the Employment Contract; or
whether the overall remuneration package already reflects expected flexibility (very common in Executive, Senior Managerial and Professional roles).

This framework gives employers flexibility to meet genuine business needs without automatic premium costs — provided the hours meet the 'reasonableness' test.

Action Item for Executives: Arrange a review of remuneration for higher-responsibility roles within your organisation —ensure packages clearly reflect reasonable flexibility to support the demands of your own position and responsibility.

The 'Reasonableness' Test: Your Decision-Making Framework from the Act

Section 62(3) of the Fair Work Act lists the exhaustive factors to determine whether additional hours are reasonable [4] :

Any risk to the employee’s health and safety from working the additional hours (including fatigue or psychosocial risks);
The employee’s personal circumstances (family or caring responsibilities, health);
The needs of the workplace or enterprise (client demands, peak periods, emergencies, business continuity);
Whether the employee receives overtime payments, penalty rates, other compensation, or if the remuneration reflects an expectation of additional hours;
The notice given by the employer;
The notice given if the employee refuses;
The usual patterns of work in the industry;
The nature of the employee’s role and level of responsibility;
Any averaging arrangements under an Award or Agreement; and
Any other relevant matter.

By proactively addressing these factors as a starting point, employers can confidently request and require reasonable additional hours where needed.

Action Item for Executives: Develop a one-page checklist for needing to request reasonable additional hours —prioritise notice, workplace needs and safety risks for your employees.

Recent Case Spotlight: Employer Position Upheld — Evidence from the Courts

A practical example where the employer's approach was successful is Reynolds v Harrier Group Pty Ltd [2023] FedCFamC2G 930. In this case, the employee claimed she had been required to work excessive hours (up to 70 hours per week). The Federal Circuit and Family Court dismissed the claim, finding that the additional hours were not unreasonable under section 62.

Key reasons the employer's position prevailed:

The employee had significant autonomy and control over her work schedule;
There was no evidence of direct direction or requirement by the employer for the employee to work the claimed excessive hours;
The hours were largely self-directed in line with the role's nature and responsibilities; and
The court determined the employer did not contravene section 62 because the additional hours were not imposed in a way that made them unreasonable.

This outcome demonstrates that when additional hours arise from role expectations, autonomy, and proper management of the section 62(3) factors (particularly role nature, workplace needs, and lack of compulsion), employers can successfully defend their position.[5]

Important clarification on related tests: The Better Off Overall Test (BOOT) was not relevant here. BOOT (under section 193) APPLIES ONLY when the Fair Work Commission APPROVES an Enterprise Agreement (EA), comparing it to the relevant Modern Award to ensure employees are better off overall. The Reynolds and similar NES cases focus solely on section 62 reasonableness — not agreement approval or BOOT.

Action Item for Executives: Document role expectations, autonomy and evidence of reasonableness (e.g. notice, compensation alignment) to support your position if challenged.

Paid Overtime (OT): Pre-Approval is a Non-Negotiable — And Why OT is Becoming Unsustainable for Businesses of Today

Overtime is distinct: it means work that attracts premium rates (e.g. 150% or 200%) under the relevant Award, Agreement or Contract.[6] Paid overtime should only be undertaken, claimed and processed when pre-approved by the employer (or per the relevant instrument’s process). Pre-approval ensures cost control, responsible business financial management, accurate records, proof hours were required for the business success, and alignment with reasonableness factors.

Relying heavily on paid overtime is increasingly unsustainable. Wage growth is forecast at 3.25% for 2025–26 and 2026–27, but inflation means real wages decline in 2025–26, squeezing margins.[7] Labour costs remain the top growth inhibitor, with 40% of industry leaders expecting weaker conditions in 2026.[8] Systemic overwork without compensation already costs the economy billions annually.[9] In a low-growth environment (GDP at 2.25% for 2025-26), reasonable additional hours — when properly managed under the NES — offer a more viable, compliant path for flexibility without premium pay escalation.

Action Item for Executives: Mandate digital pre-approval for potential overtime —trial for three months and measure payroll impact in your business.

Turning Insight into Advantage: The Executive Playbook

Put this into practice:

Update contracts to clearly separate reasonable additional hours from paid overtime, requiring pre-approval for the latter.
Embed notice and consultation protocols to build team buy-in.
Track fatigue risks, especially with the recent and new right-to-disconnect rules.
Maintain records of requests, approvals and 'reasonableness' evidence.

These steps position payroll compliance as a strategic strength.

Power Your Payroll Decisions with RUNPAY™️

At RUNPAY™️ we help Australian executives and business owners master workforce compliance and efficiency. Curious how modern payroll platforms can track hours against the 38-hour NES cap, manage pre-approval workflows, flag risks and enforce award-compliant payments?

RUNPAY™️ Compare gives 5-day access to 240+ payroll solutions for a one-off $101 fee—perfect for comparing tools that can help solve and monitor these challenges within your business.[10]

Need executive-level advice on contracts, Award interpretation or real strategy integration? RUNPAY™️ Advice delivers targeted support right by your side at $169 per hour.[11]

Act today. Learn more about RUNPAY™️ Compare to find systems designed for NES compliance and flexibility, or book RUNPAY Advice™️ for bespoke guidance. Go to www.runpay.com.au/service-page/runpay-compare or www.runpay.com.au/service-page/runpay-advice now—secure your true workforce edge.