How to Write an Overtime Policy for Your Company (with Template)

The benefits of having an overtime policy

Optional or not, an overtime policy should exist in any company that has employees working overtime. Furthermore, the employees should be aware of it and notified each time the document is modified. The overtime policy is an official document that establishes whether an employee can work overtime, in what conditions, and how much they will be paid for the work.

The overtime policy allows you to control the labor costs and manage overtime fairly. It also helps you prevent conflicts and reduce overtime abuse. The document should be easy to understand, support equity and fair chances, and be available to anyone interested. The overtime policy has other benefits as well:

• It establishes the ground rules of working overtime
• It provides transparency
• It establishes disciplinary actions for abuses and increases employees' responsibility
• It reduces HR workflows by giving employees access to information
• It outlines clear eligibility criteria.

What to include in the overtime policy

The overtime policy should be a comprehensive document in which the employees find answers to all their questions regarding overtime. It should be concise and easy to understand. If your employees have different native languages, make sure you translate the document and avoid any misunderstanding.

Include in your company's overtime policy the following chapters:

• The general approach of your company over overtime – It's essential to outline from the beginning whether your company authorizes overtime or not. In some companies, overtime is mandatory, while in others, it's completely prohibited. Ensure the employees know whether they must accept working overtime, refuse it, or notify the HR department if they receive overtime proposals.
• The eligibility criteria – Outline which categories of employees are eligible to work overtime. Exempt employees aren't allowed to work overtime. They usually have executive, administrative, or professional job duties, receive a salary and have high-level responsibilities. Check the labor legislation in your country and make sure you update the overtime policy if the legislation changes. For example, in some countries, minors aren't allowed to work overtime. In others, computer workers are considered exempt employees but may be authorized to work overtime in special conditions.
• The authorization procedure – In companies where overtime isn't mandatory, employees may need authorization for working overtime. Explain the process of requesting approval in detail, from how to send the request to persons authorized to approve overtime. Don't forget to mention when the employee should send the request and how long the authorization procedure takes.
• The overtime procedure – The overtime policy should include a step-by-step process for working overtime, security issues, and everything needed for a healthy work environment. The employees should understand how overtime is tracked, how to report their progress, and how often they can work overtime. The document should also outline extended working hours and procedures for approving flexible schedules.
• Overtime limitations – Make clear all the limitations, whether imposed by law or by your company. For example, the number of overtime hours may be limited by law. Or you may want to limit the number of overtime hours to reduce costs. You may also have a rotation system that splits up overtime among employees of the same department. Some companies limit overtime over weekends or nights.
• Payment – Employees should know how much they will be paid for overtime, the withheld taxes that come with the payment, and when they will receive the payment. Employers shall also advise employees to notify the authorities if they aren't fairly paid for overtime. Most companies use an HR software solution to track overtime and make sure employees are paid according to their worked hours.
• Disciplinary actions – Outline in the document the corrective actions taken in case of overtime abuse, errors in tracking overtime or payment, or violations of the overtime policy of any kind. Include the disciplinary procedure, people in charge, and timelines.
• The date and version of the document – Ensure you date the document and update it when necessary. All employees should be notified when a new version of the overtime policy appears. Also, check with the legal department that your document is compliant with labor legislation, GDPR, and other regulations available in your company.

Overtime Policy - Free Template

Download our free overtime policy template in Word format.