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Time-for-time arrangement: pay attention to the minimum wage

You may compensate overtime with a time-for-time arrangement. Since 1 January 2019, employees must receive at least the minimum wage for their hours worked. This means that you must keep a good record of the total number of hours worked per pay period per employee. What should you keep an eye on?

Minimum wage limit:

Compensation of overtime with time, however, is no longer always possible since 1 January 2019. Employees are not allowed to fall below the minimum wage under time-for-time arrangements, unless a collective labor agreement indicates this. Article 13a paragraph 2 of the Minimum Wage and Holiday Allowance Act (WML) stipulates that the hourly wage in a wage period may never be less than the statutory minimum hourly wage. The minimum hourly wage to be paid is based on the number of hours actually worked in the pay period and the gross hourly wage of the employee.

Example

Take, for example, a 30-year-old employee with a gross hourly wage of 14 euros with a normal working time of 36 hours per week (504 euros per week, with the week as the pay period). With 15 hours of overtime, he worked 51 hours a week. 504 euros divided by those 51 hours means a gross hourly wage of 9.88 euros. This means that this wage is below the minimum hourly wage of 10.91 euros gross for a working week of 36 hours for 21 years and older. This is not allowed, except in exceptional circumstances. As a result, you have to compensate the overtime in money.

Collective labor agreements

You do not have to comply with the minimum wage rule if the collective labor agreement for your sector contains agreements about a time-for-time arrangement. In addition, you and the employee must have made written agreements about compensation for overtime. If a collective labor agreement regulates the time-for-time, employees must always take the free hours before 1 July of the following year. If they don’t, you still have to pay out the remaining time. Compensation in time is also allowed without a collective labor agreement for overtime within the pay period (usually the month) in which the overtime was incurred. The condition remains that the employee does not fall below the minimum wage per hour.

Time-for-time compensation possible

If an employee clearly receives more than the minimum wage per hour, then time-for-time compensation is certainly possible. For example, if an employee earns 25 percent more than the minimum wage, he (or she) can work a maximum of 25 percent more than the agreed working hours per pay period. However, you may also have to deal with the restrictions of the WML for employees with a wage that is well above the minimum wage. Take, for example, an employee who normally works 22 hours and makes a 38-hour workweek for a change. This employee could then be less than the minimum hourly wage for those 38 hours.

Adjust working hours

In the case of structural overtime, you can also discuss with the employee whether he wants to adjust his working hours. This is of course only possible if the employee does not work more than the maximum working hours that apply within your organization or sector.

Avoid fines

Violation of the rules regarding the minimum wage can lead to a considerable fine from the Inspectorate SZW. It is therefore important that you adhere to the rules and that the administration of your time-for-time arrangement is well organized.