Free Overtime Policy Template for Employees in India

The following company overtime policy template outlines the procedures for compensating employees who work beyond their standard schedule. This template serves as a reference for setting up your own policy.

Policy Brief and Purpose

This employee overtime pay policy clearly states guidelines on how the organization manages and compensates overtime work.

Objectives of this Policy

• Provide accurate and timely compensation to employees for overtime.
• Prevent misuse of overtime that could result in reduced productivity, workplace fatigue, health and safety risks, or operational inefficiencies.
• Meet all labor laws and regulations concerning OT work and compensation.

This policy is designed to aid, not contradict, existing labor legislation. The organization will follow relevant legislation when managing OT hours.

Scope

This policy applies to all eligible employees of the organization, unless specifically exempted under applicable overtime regulations.

Policy Elements

The organization considers standard working hours to be those specified in each employee’s contract of employment, subject to the legal limits on daily or weekly working time.

Overtime refers to any hours worked beyond the employee’s standard schedule that qualify for compensation under applicable laws and organizational rules.

General Rules

1. Employees will be classified as exempt or non-exempt according to the overtime legislation.
2. Non-exempt employees, who work for more hours than their standard hours, are eligible for OT pay.
3. An employee is eligible for overtime pay irrespective of the place of work, provided the duties performed are recognized and accepted by the organization.

Excessive Overtime

Overtime may be required to meet urgent deadlines, handle emergencies, or manage peak workloads. The organization recognizes that excessive overtime harms health and performance. To prevent this, the organization will:

• Keep accurate records of overtime hours.
• Limit overtime to urgent or essential tasks.
• Provide resources and planning to reduce repeated OT.
• Track work quality, health, and performance to identify risks from long hours.
• Set a cap of [2 hours per day / 8 hours per week].
• Pay applies beyond this limit as per law, but employees must follow the cap.

The organization will not:

• Require employees to work beyond the statutory maximum daily or weekly hours permitted by law.
• Apply unfair or discriminatory practices in assigning overtime work or determining compensation.

Shift-Based System

The following rules apply to employees working in shifts in compliance with the labor standards:

• Night shift employees may not work more than 2 hours of overtime, except in emergencies.
• The Employees on 12-hour shifts may not exceed 2 hours of overtime.
• Employees on 8–10-hour shifts may not exceed 4 hours of overtime.
• The Employees on shifts longer than 8 hours may not work double shifts.

Exempt Employees

Specific categories of employees are exempt from overtime pay under the law. For these employees:

• The organization may choose to provide overtime pay at its discretion.
• Rules on excessive overtime, health, and safety will still be applied.

Abuse of Overtime

To preserve fairness and prevent misuse of the system, the organization expects:

• Managers must not assign or encourage excessive or unnecessary overtime.
• Employees must not work overtime for additional pay, especially if it lowers work quality.

The organization will:

• Pay all eligible overtime at the correct rate within the payroll cycle.
• Keep accurate and reliable timekeeping and attendance records.

Procedure for OT Approval and Compensation

To ensure compliance with record-keeping obligations and timely payment, the following procedure will be followed:

1. Overtime Request and Approval

• Employees must obtain approval from the manager before overtime, except in emergencies.
• The manager and employee must agree on the need and duration.

2. Classification and Communication

• Managers must confirm employee classification as exempt or non-exempt.
• Employees must know their eligibility for overtime pay.

3. Record-Keeping

• Employees must log overtime hours in the timekeeping system.
• The organization will audit records regularly.

4. Compensation

• HR or Finance will calculate overtime pay based on the applicable laws and company pay scales.
• Employees will receive OT pay in the next payroll cycle.