Company Overtime Policy Template

An overtime policy is essential for ensuring clarity, consistency, and legal compliance when it comes to managing employee work hours beyond their regularly scheduled shifts. Whether employees are eligible for overtime pay or not — and how it’s calculated — can vary by role, location, and company size, making a clear, comprehensive policy key to preventing misunderstandings and potential disputes.

This guide will walk you through everything you need to know to create an effective company overtime policy — including what it should include, why it matters, and a detailed sample policy you can use or adapt for your organization.

What the Overtime Policy Should Include

A strong company overtime policy should include:

• Policy purpose and scope: Who the policy applies to and why it exists.
• Definitions of key terms (e.g., nonexempt vs. exempt, overtime, compensatory time).
• Eligibility criteria: Clarification on which roles are eligible for overtime.
• Overtime approval process: How and when overtime must be approved (and by whom).
• Calculation of overtime pay: Including rates, applicable laws (e.g., Fair Labor Standards Act or FLSA), and any relevant thresholds.
• Daily and weekly hour thresholds that trigger overtime pay.
• Recordkeeping requirements: How hours must be tracked and documented.
• Unauthorized overtime: How unauthorized work beyond scheduled hours is handled.
• Compensatory time off (if applicable): Whether employees can opt for time off instead of pay.
• Remote or after-hours work expectations: How off-site or “invisible” overtime is treated.
• Legal compliance statement: A reminder that the policy complies with all federal, state, and local labor laws.
• Manager responsibilities: Guidelines for supervisors approving and monitoring overtime.
• Disciplinary consequences for violating the policy.

Purpose of the Overtime Policy

The primary goals of a company overtime policy are to:

• Ensure fair and consistent compensation for employees working extra hours.
• Promote transparency and legal compliance under applicable wage and hour laws, including the FLSA and relevant state labor codes.
• Help managers track, budget, and approve overtime in alignment with operational needs.
• Prevent burnout by discouraging unnecessary or unapproved overtime.
• Provide clear expectations for employees on how to request, record, and report overtime.

An effective overtime policy benefits both employers and employees — it reduces the risk of wage disputes, aligns labor costs with company goals, and ensures staff feel compensated for the extra effort they put in.

Sample Company Overtime Policy

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Effective Date: [Insert Date]
Policy Owner: People Team / HR Department
Last Reviewed: [Insert Date]

1. Policy Overview

This policy outlines the guidelines for the approval, compensation, and tracking of overtime hours worked by employees at [Company Name]. It is designed to ensure compliance with the Fair Labor Standards Act (FLSA) and all applicable state and local labor laws, while also supporting fair and equitable treatment of employees.

2. Scope

This policy applies to all [Company Name] employees based in the United States. Overtime rules and eligibility may vary for international employees, who should consult local labor laws and their employment contracts.

3. Definitions

• Nonexempt Employee: An employee entitled to overtime pay under the FLSA.
• Exempt Employee: An employee who is exempt from overtime pay based on job duties and salary thresholds.
• Overtime: Hours worked beyond 40 hours in a workweek (or in some jurisdictions, beyond 8 hours in a workday).
• Workweek: A fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods — defined as [insert start and end days, e.g., Sunday at 12:00 AM to Saturday at 11:59 PM].

4. Eligibility for Overtime

Only employees classified as nonexempt are eligible to receive overtime pay. Employees will be notified of their exemption status upon hire or when there is a change in role or classification.

5. Overtime Approval

All overtime must be approved in advance by the employee’s manager. Employees who work overtime without prior authorization may be subject to disciplinary action — though all worked hours must still be paid if the employee is nonexempt.

To request overtime, employees must:

1. Notify their manager as early as possible.
2. Submit a formal request through [insert timekeeping system, e.g., Lattice HRIS].
3. Wait for written or verbal confirmation before beginning work beyond scheduled hours.

6. Overtime Pay

Per federal law, overtime pay is calculated at 1.5 times an employee’s regular rate of pay for all hours worked beyond 40 in a workweek. In some states or cities, additional rules apply:

• In California, overtime is also due for hours worked over 8 in a day.
• Double-time may apply for hours worked over 12 in a day or on the seventh consecutive day.

Overtime pay is included in the paycheck for the pay period in which the overtime was worked.

7. Time Tracking and Documentation

All nonexempt employees must accurately record their hours using [insert time-tracking tool]. Employees are responsible for:

• Clocking in and out at the beginning and end of their workday.
• Recording meal and rest breaks.
• Logging all overtime hours worked.

Managers are responsible for reviewing and approving timesheets before payroll is processed.

8. Unauthorized Overtime

[Company Name] is committed to paying employees for all hours worked. However, unauthorized overtime is a policy violation. Employees who repeatedly work overtime without prior approval may face progressive discipline, up to and including termination.

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9. Compensatory Time Off

At this time, [Company Name] does not offer compensatory (comp) time in lieu of overtime pay for nonexempt employees. All eligible overtime hours will be paid according to the rates specified in Section 6.

Note: Public sector employers may have different rules under the FLSA.

10. Remote and After-Hours Work

Nonexempt employees must receive prior approval to perform work-related duties outside of their normal schedule, including:

• Responding to work emails after hours.
• Attending virtual meetings during non-scheduled time.
• Completing tasks remotely over the weekend.

If such work is performed, it must be recorded and paid, even if it was not pre-approved. Employees are encouraged to communicate with managers about expectations around after-hours availability.

11. Manager Responsibilities

Managers are expected to:

• Monitor and manage overtime requests proactively.
• Ensure staffing levels and scheduling minimize unnecessary overtime.
• Review time records for accuracy and compliance.
• Address any unauthorized overtime with appropriate follow-up.

12. Legal Compliance

This policy complies with the Fair Labor Standards Act and applicable state and local laws. In the event of a conflict between this policy and applicable law, the law will govern.

[Company Name] reserves the right to update or revise this policy at any time to reflect operational needs or changes in labor laws.

Frequently Asked Questions

Do exempt employees ever receive overtime?
No. Exempt employees are salaried and not eligible for overtime pay under the FLSA. However, in rare cases, a company may choose to offer additional compensation for extra hours — but this is not required.

Can I earn overtime if I work on the weekend?
Only if working on the weekend results in more than 40 total hours in the workweek (or more than 8 hours in a single day in some states). Simply working on a Saturday or Sunday does not automatically qualify as overtime.

What if I forget to record my overtime hours?
Notify your manager immediately. Corrections must be submitted before payroll processing. Delayed reporting may cause your overtime pay to be included in the next pay period.

Will I be paid for unauthorized overtime?
Yes — if you are nonexempt, [Company Name] is legally required to pay you for all hours worked. However, repeated instances of unauthorized overtime may result in disciplinary action.

Can I choose comp time instead of overtime pay?
No. Federal law prohibits private employers from substituting comp time for overtime pay. All overtime must be compensated with additional wages.

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