What do you mean by Overtime Policy?

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When the employees work above the scheduled working hours allotted to them and get minimum wages, it becomes essential to pay them for the overtime work done as per the pro-rate basis. The configuration and designing of attributes like how much amount to be paid, how much maximum overtime hours to be counted, compensation against worked overtime, etc. build up the overtime policy. This policy is designed to ensure that employees benefit from working overtime as per the government declared laws. This law also states punishment to be charged against employers not adhering to the law. Our overtime policy template will provide sample policy and insights about what key components to be kept in mind when designing the policy.

This sample policy will help you know

  • It ensures that the employees are compensated impartially for the additional hours worked.
  • Such additional time is considered as overtime only when the employee has received the permission for the same from the employer/superior.
  • The overtime is granted keeping in mind the goals of the employee and their need. This may vary from case to case.
  • The company can also provide mandatory overtime which means the employee has to work extra for the allotted hours. Failure to do so without prior notice can lead to severe consequences.
  • An overtime cap or limit needs to be set by the company.
  • Overtime hours should be recorded precisely and the payment should be calculated accurately.

Overtime Policy Template Sample

“Name of the Company’s” Overtime Policy aims at reducing labor expenses for employees who spend extra hours to meet deadlines by offering them respective monetary benefits. In necessity, employees are required to work more time to ensure that the essential projects are finished on time.

As a business, we commit to compensating extra efforts and time given by our subordinates with fair pay rates.


This policy is required to gather details of remuneration for more time put into work. This ensures that an employee is regularly and correctly paid for their excess time.

It helps to tackle misuse of working extra, decreased productivity, and ill employee health.

It is designed considering critical factors such as days and departments to be excluded from the benefits.

For example, holidays or sick leave are not considered official hours. Employees and consultants on probation are not eligible and hence can be excluded from these benefits.


This policy is usually applied to all the confirmed employees of the organization.

Overtime remuneration is met if an employee works higher than the hours prescribed by company norms. i.e., hours spent beyond the workweek.

An employee is expected to receive permission from a supervisor to be eligible for payment.

Overtime can not be compensated as extra hours are put in without prior agreement. Factors such as coming early, staying late, or working during breaks are not deemed as working extra.

Overtime approval

Employees must take their supervisors’ approval before applying for overtime. However, it is only allowed when an employee is uncertain about completing their allotted tasks.

Mandatory overtime

Often an organization may require their employees to work extra due to peak hours. Working extra hours is seen as a requirement when the need arises. Declining the proposal after the fair notice can trigger disciplinary actions such as termination or elongation of probation.

Limitations to overtime

A few limitations to consider while considering extra working are:

  • Employees should always try to complete a given task within regular working hours.
  • Overtime should only be used under emergencies or urgent situations where work exceeds regular official hours; hence, the tasks given are generally designed to keep a standard workweek in mind.
  • Employees are not encouraged to view the availability of working extra as extra income, meaning it should be looked at as a last alternative for the overload of work and tight deadlines, etc.

Healthy overtime arrangements

After-hours working is not a promotable option. Safety measures around the use of overtime are necessary as no organization would like loss of morale and productivity or other overwork accidents.

  • Accurate logs of overtime worked must be recorded and maintained.
  • Strongly advise the employees to view this option as a last resort in times of emergency.
  • It is mandatory to offer the provisions to complete work during office hours.
  • In case of observing low productivity or problems concerning increased office hours, it is suggested to decrease this facility.
  • A limit should be kept in place to promote a proper work-life balance and an employee’s mental health concerns. However, if an employee exceeds the specified overtime cap, then that will be paid considering legal rules.

Consequences of unauthorized overtime

Employees found violating overtime guidelines such as unapproved hours or slacking productivity during standard company hours purposefully to avail benefits can face the consequences. It can be prolonged probation or even termination, whichever suits the offense.


Both employer and employee must save accurate records to ensure overtime pay. In addition, there are specific protocols to follow for a smooth process, such as:

  • The manager and their team must come to an agreement on time restrictions. The manager must also guarantee that the agreed-upon limit does not conflict with legal limits and that the employees do not work excessively long hours.
  • The manager has to make employees aware of their eligibility. They are also required to know details regarding benefits, processes, limits, credits, etc.
  • Precise recording of overtime is necessary from both the manager’s end and the employee’s end; this is then reviewed by the HR team.
  • HR has to calculate the employee’s pay in accordance with legal overtime pay rates and deploy the same with the next scheduled payday.

Download Overtime Policy Template

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