Most companies have nonexempt employees, which means they can work overtime. Therefore, companies have to regulate overtime and pay for any hours worked over the mandatory weekly amount. The overtime policy is the intern document that outlines the company's rules and procedures regarding working overtime. For some businesses, it isn't an optional document; in many cases, the labor legislation requires your business to have 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:
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:
[Date] [Version] [Person in charge]
[Approved by] [Legal visa]
[Company name] defines "overtime" as any additional hours worked over the mandatory working schedule.
[Company name] acknowledges that employees may require working overtime to complete projects and meet deadlines. The overtime policy outlines when employees are eligible for overtime, the authorization procedure, overtime limitations, and the company's compensation procedure. In addition, the document explains the disciplinary action procedures followed in case of violation of this policy.
The eligibility criteria
All non-exempt employees, including part-time, full-time, and/or seasonal employees working for the company for more than one year, are eligible for overtime.
An employee classifies as exempt or nonexempt according to the labor law [number/from].[details]
e.g., exempt employees – executives, employees with administrative responsibilities, minors
The authorization procedure
Each team's supervisor is responsible for determining if overtime is needed and approving overtime requests received from the team members. The requests will be sent [via email] with at least [X days] before overtime taking place. The request will include the number of hours needed, the project for which overtime is necessary, the duration of overtime, and a schedule proposal.
The approved request will be sent to Finance Department, HR Department, and Legal Department.
The overtime procedure
Overtime will take place in the same workplace as regular working hours. The employees will mark their hours in the web-based attendance system provided by the company. Overtime can be done only outside the regular working hours. The employees will send weekly reports to their supervisors describing the work done during overtime.
Communication will be maintained through the collaborative tools used by the company.
Employees cannot work overtime for more than half of their mandatory working hours. Overtime has to be done during weekdays between 5 AM and 11 PM. An employee is allowed to request overtime one time per month with a minimum of three requests per year.
Overtime will be paid starting with the following pay cycle. Overtime will be paid using the same payment methods as for the salaries. The withheld taxes, according to law [number from section number] are [tax percentage].
Violations of this overtime policy are subject to disciplinary action, up to and including termination. Employees suspected of violating the policy must undergo a thorough investigation. The circumstances of each violation will determine the severity of each scenario.
Unintentional violations may warrant a verbal and/or written warning.
Intentional violations may lead to suspension and/or termination.
Download our free overtime policy template in Word format.