An overtime policy template is a structured document that defines when, how, and how much extra work employees can perform beyond their standard hours — including eligibility, pay rates, approval processes, maximum limits, and record-keeping requirements. Without a clear overtime policy, organisations face wage underpayments, employee burnout, and compliance violations that can result in significant penalties.
This guide provides a section-by-section template that works across jurisdictions, explains the legal framework you need to comply with, and includes a downloadable compliance checklist.
Key takeaways
- A complete overtime policy covers eligibility, overtime rates, approval processes, maximum hours, record-keeping, and exemptions.
- Overtime rules vary dramatically by jurisdiction — the UK has no mandatory overtime rate, while the US requires 1.5x pay under the FLSA for hours over 40 per week.
- The policy must distinguish between voluntary and mandatory overtime and set clear limits on each.
- Record-keeping is a legal requirement in most jurisdictions — track hours or face the consequences of non-compliance.
- Exempt vs non-exempt classifications (US) and working time rules (UK) must be understood before setting overtime terms.
Section 1: Purpose and scope
Template language:
This policy sets out [Company Name]’s framework for overtime work. It defines who may work overtime, how overtime is approved, how it is compensated, and the limits on overtime hours. The policy applies to all employees except those specifically classified as exempt under [Applicable Act].
Section 2: Overtime definition
Define exactly what constitutes overtime in your organisation.
Template language:
Overtime is any work performed beyond the employee’s standard contracted hours. Standard hours are:
- [X] hours per week, worked over [X] days
- Between [start time] and [end time] on working days
Overtime does not include:
- Time spent travelling to and from work
- On-call time where the employee is not actively working
- Meal breaks (paid or unpaid)
Section 3: Eligibility and exemptions
Template language:
All non-exempt employees are eligible for overtime pay. Exempt employees — those classified as exempt under [FLSA / Applicable Act] due to their role, salary level, or duties — are not eligible for overtime pay but are expected to manage their workload within standard hours wherever possible.
Managers must not routinely require exempt employees to work excessive hours. Where exempt employees regularly work beyond [X] hours per week, this will be reviewed as a workload issue.
Section 4: Overtime rates
Template language:
Overtime is compensated as follows:
- Weekday overtime (first [X] hours): [1.5x / time and a half] of normal hourly rate
- Weekend overtime: [2x / double time] of normal hourly rate
- Public holiday overtime: [2x / double time] of normal hourly rate, plus [alternative day off / TOIL]
- Night shift overtime: [1.5x / time and a half] of normal hourly rate
Hourly rate for overtime calculation = annual salary ÷ [52 weeks] ÷ [standard weekly hours].
Jurisdiction notes:
- US (FLSA): Non-exempt employees must receive at least 1.5x pay for hours over 40 per week. States like California add daily overtime rules (over 8 hours/day).
- UK: No statutory overtime rate unless the employment contract specifies one. The Working Time Regulations cap average working time at 48 hours/week (opt-out available).
- Australia: Modern Awards specify overtime rates (typically 1.5x for first 2 hours, 2x after). Check the applicable Award.
Section 5: Approval process
Template language:
All overtime must be pre-approved by the employee’s line manager. The approval process:
- Employee submits overtime request with the reason, expected hours, and duration
- Manager approves or denies within [X] working days
- Approved overtime is logged in [HR system / time tracking tool]
- Emergency or unplanned overtime may be approved after the fact within [24] hours
Managers may approve up to [X] hours of overtime per employee per [week/month]. Overtime beyond this limit requires [senior manager / HR] approval.
Section 6: Maximum overtime limits
Template language:
Maximum overtime:
- No employee may work more than [X] hours of overtime per [week/month] without senior approval
- Average working time (including overtime) must not exceed [48] hours per week over the reference period, unless the employee has signed a written opt-out
- Employees must receive a minimum of [11] consecutive hours rest per 24-hour period and [24] consecutive hours rest per 7-day period
UK-specific: The Working Time Regulations 1998 cap average working time at 48 hours/week over a 17-week reference period. Employees can opt out in writing, but the employer cannot pressure them to do so.
Section 7: Time off in lieu (TOIL)
Template language:
Where overtime is worked, the employee may elect to take time off in lieu (TOIL) instead of overtime pay, subject to manager approval. TOIL must be taken within [3] months of the overtime being worked. TOIL accrues at a rate of [1:1 / 1.5:1] for hours of overtime worked.
Section 8: Record-keeping
Template language:
HR maintains records of overtime hours worked and overtime pay for every non-exempt employee. Records include:
- Date and hours of overtime worked
- Manager approval (or after-the-fact approval)
- Overtime pay or TOIL granted
Records are retained for [3/6] years in accordance with [Applicable Act] requirements. Employees are responsible for accurately recording their working hours.
Section 9: Compliance and enforcement
Template language:
Managers must not:
- Require or encourage employees to work unrecorded overtime
- Pressure employees to forgo overtime pay or TOIL
- Retaliate against employees who raise concerns about overtime practices
Violations of this policy may result in disciplinary action. Employees who believe they have been denied overtime entitlements should raise the matter with HR or through the grievance procedure.
Downloadable overtime policy checklist
- Purpose and scope defined
- Overtime definition clear and specific
- Eligibility and exemption criteria documented
- Overtime rates specified for each category (weekday, weekend, holiday)
- Approval process with escalation thresholds
- Maximum overtime limits set and legally compliant
- TOIL provisions included
- Record-keeping requirements defined and retention periods specified
- Compliance and enforcement provisions included
- Policy owner and review cadence established
Leave Balance tracks overtime alongside regular hours — calculating pay rates automatically, enforcing approval workflows, and maintaining the records you need for compliance — so overtime never becomes a payroll or legal problem.
Frequently asked questions
Is overtime mandatory or voluntary?
It depends on the policy and the jurisdiction. Many overtime policies make overtime voluntary with manager approval, but some roles or situations may require mandatory overtime. If overtime is mandatory, the policy must state this clearly and comply with maximum working time regulations.
Do salaried employees get overtime?
It depends on their classification. In the US, employees classified as “exempt” under the FLSA (based on salary level and job duties) are not entitled to overtime. In the UK, salaried employees may be entitled to overtime pay if their contract provides for it. Check your employment contracts and local law.
What is the overtime rate in the UK?
The UK has no statutory overtime rate. Overtime pay is determined by the employment contract or collective agreement. Many employers offer 1.5x or 2x time, but there is no legal requirement to do so. The Working Time Regulations cap average hours at 48/week.
Can an employee refuse to work overtime?
In most cases, yes — unless the employment contract specifies that overtime is a requirement. Even where overtime is contractually required, the Working Time Regulations (UK) or state laws (US) impose maximum hours and rest requirements that limit how much overtime can be mandated.
How do I handle overtime for remote workers?
Remote workers should record their hours in the same way as office-based workers. The approval process applies equally, and managers should be mindful that remote workers may find it harder to “switch off” — creating a culture where overtime is genuinely optional is essential.
This article is general information, not legal advice. Consult qualified employment counsel for jurisdiction-specific guidance.