Overtime Policy
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Overtime Policy
Overtime Policy Company Name: Effective Date: Policy Owner: Approved By: Standard Work Hours: PURPOSE & SCOPE - This policy governs the authorisation, recording, and compensation of overtime work performed by eligible employees. It ensures compliance with applicable wage and hour legislation while maintaining operational efficiency. - All overtime must be pre-approved by the employee's direct supervisor and recorded accurately in the Organization's time-tracking system. Unauthorised overtime shall not be compensated and may result in disciplinary action. OVERTIME ELIGIBILITY & CLASSIFICATION - Overtime eligibility is determined by the employee's classification as exempt or non-exempt under applicable labor law. The HR department shall maintain current classification records for all positions and shall review classifications whenever a role undergoes a material change in duties or compensation. - The standard work week is defined as 40 hours. Hours worked in excess of 40 hours in a single work week shall constitute overtime and shall be compensated at the applicable premium rate. OVERTIME COMPENSATION RATES - Overtime shall be compensated at 1.5 times the employee's regular hourly rate for hours worked in excess of the standard threshold. Work performed on designated rest days or public holidays shall be compensated at 2.0 times the regular rate. - Where permitted by applicable law and agreed upon by the employee, the Organization may offer compensatory time off in lieu of overtime pay at a rate of 1.5 hours of time off for each overtime hour worked. Compensatory time must be utilized within 60 days of accrual. OVERTIME LIMITS & EMPLOYEE WELL-BEING - No employee shall work more than 12 hours in any single day or more than 60 hours in any single work week, except in cases of documented operational emergency approved by the Department Head and the HR department. - Managers shall ensure equitable distribution of overtime opportunities among qualified employees within their teams. Overtime shall not be used as a substitute for adequate staffing, and departments with consistently high overtime levels shall be subject to a staffing review. RECORD KEEPING & COMPLIANCE - All overtime records, including authorisation requests, time entries, and compensation calculations, shall be retained for a minimum of 3 years as required by applicable wage and hour legislation. The HR department shall conduct semi-annual audits of overtime practices. - This policy shall be reviewed at least annually to ensure continued compliance with applicable legislation and alignment with the Organization's operational needs and workforce strategy.
Everything you need to know
01What Is an Overtime Policy?
An overtime policy sets the rules for work performed beyond an employee's standard hours and how that extra time is paid or compensated. It defines what counts as overtime, who is eligible, the rate applied, and the approval process required before extra hours are worked. A good policy keeps overtime intentional and authorized rather than something employees log at will, protecting both budgets and legal compliance.
02Why Companies Need an Overtime Policy
Overtime is one of the most common sources of wage disputes and labor law penalties. A written policy ensures you pay the correct rate, capture only pre-approved hours, and avoid unexpected payroll spikes. It also protects employee wellbeing by discouraging excessive hours and burnout. When rules are documented, managers apply overtime consistently across teams and can defend pay decisions if a complaint or audit ever arises.
03What an Overtime Policy Should Include
Define standard working hours and the threshold at which overtime begins. State which roles are eligible and which are exempt, the overtime rate or multiplier, and how it applies on weekends or holidays. Require prior written approval before overtime is worked, and explain how hours are recorded and verified. Add any weekly or monthly caps, the option of compensatory time off where permitted, and reference the wage laws you comply with.
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