Free overtime policy templates for small business: standard, short, mandatory overtime, request form, handbook section, and a compliance self-check. DOCX.
Six free overtime policy templates for small business: a standard policy, a short plain-language version, a mandatory overtime policy, a request and approval form, a handbook section, and a compliance self-check. Written to the current federal salary threshold, with the daily overtime states flagged. Fill-in-the-blank DOCX. No signup.
An overtime policy tells your team who is eligible for overtime, when it gets paid, how to get it approved, and how to record the hours. For a business with a handful of hourly staff, it is the document that keeps a Thursday evening of extra work from turning into a pay dispute six months later. Most of what goes wrong with overtime at a small company is not deliberate; it is a manager assuming a salaried supervisor is exempt, or nobody recording the twenty minutes of closing up after clock-out.
There are six templates here: a standard policy, a short plain-language version for small teams, a mandatory overtime policy, a request and approval form, a drop-in handbook section, and a compliance self-check. Each downloads as an editable Word document, free and without an email. Because overtime sits on top of accurate time records, this pairs with the employee timesheet and the broader payroll policy.
TL;DR
An overtime policy covers eligibility, the workweek, the rate, approval, timekeeping, and comp time. Download six free templates as DOCX: standard, short, mandatory overtime, request form, handbook section, and a compliance self-check. Three rules drive most of the risk: a salary alone never makes someone exempt, the current federal threshold is $684 per week, and unapproved overtime that was worked still has to be paid. Private employers generally cannot swap comp time for overtime pay. This is general information, not legal advice.
What an Overtime Policy Is
An overtime policy is an internal document explaining how a business authorizes, records, and pays overtime. It gives employees the rules on eligibility, rate, approval, and timekeeping, and it gives managers a boundary on what they can ask for. No federal law requires you to have one.
The reason to write it anyway is that overtime disputes are almost always disputes about facts nobody wrote down: whether the hours were approved, whether the closing tasks counted, whether the assistant manager was ever properly exempt in the first place. A policy plus consistent time records answers those questions before they become expensive.
Check the Threshold Your Template Cites
Many overtime policy templates still circulating online cite a salary threshold of $43,888 or $58,656. Those figures came from a 2024 rule that was vacated nationwide in November 2024 and formally rescinded by the Department of Labor in May 2026. The current federal figure is $684 per week, or $35,568 a year, with $107,432 for certain highly compensated employees. A template built on the wrong number will misclassify people. Check the figure in any policy before you adopt it, including this one, since thresholds change. This is general information, not legal advice.
Which Template Should You Use?
Start with the standard policy if you want one complete document, or the short version if you have a small hourly team and no HR function. Add the mandatory overtime policy if you sometimes have to require extra hours, and the request form if you want an approval trail.
Standard Overtime Policy
The full version
Purpose, scope, definitions, rate, approval, timekeeping, manager duties, comp time, and acknowledgment. The complete policy for a business that wants one clear document covering everything.
Short Policy for Small Teams
One page, plain language
The same rules in plain language, sized for a business with a handful of hourly staff and no HR department. Everything essential, nothing that only matters at enterprise scale.
Mandatory Overtime Policy
When you have to require it
For businesses that sometimes must assign overtime. Covers when it can be required, how assignments are distributed, notice, fatigue limits, and what happens if an employee declines.
Overtime Request Form
The approval trail
A request and approval form with hours, reason, and manager decision, plus an after-the-fact section for overtime worked without approval, which still has to be paid.
Handbook Section
Drop-in text
A condensed version written to sit inside an employee handbook rather than stand alone, so the wording matches your timekeeping and pay sections instead of duplicating them.
Compliance Self-Check
Before you adopt it
A checklist covering classification, workweek, regular rate, timekeeping, pay practices, and records. Run it before adopting the policy and once a year afterward.
Start Short, Add Later
A one-page policy that people actually read beats a six-page policy nobody opens. If you have fewer than twenty employees and overtime is occasional, use the short version, pair it with the request form, and run the self-check once. Move up to the standard policy when you add managers who schedule other people, when overtime becomes routine rather than exceptional, or when you operate in more than one state. This is general information, not legal advice.
6 Free Overtime Policy Templates
Download all six together or take the ones you need. The standard and short policies are alternatives to each other rather than companions; the mandatory policy, the request form, and the handbook section layer on top; and the self-check is the step to run before you adopt any of them.
Download All 6 Overtime Policy Templates
A standard policy, short small-team policy, mandatory overtime policy, request and approval form, handbook section, and compliance self-check. All as DOCX files in one download.
Template 1: Standard Overtime Policy
The complete policy: purpose, scope, definitions, rate, approval, timekeeping, manager responsibilities, comp time, payment, and acknowledgment. The version for a business that wants one document covering everything.
Standard Overtime Policy
[Company Name]
OVERTIME POLICY
Effective date: _ Last reviewed: _
PURPOSE
This policy explains how [Company Name] authorizes, records, and pays overtime.
It applies to all non-exempt employees and to the managers who schedule them.
SCOPE AND ELIGIBILITY
•Non-exempt employees are eligible for overtime pay. This includes hourly
employees and salaried employees who do not meet an exemption.
•Exempt employees are not eligible for overtime pay. Classification is based on
how the employee is paid and what the job actually involves, not on job title.
•Any employee unsure of their classification should contact [name or role].
DEFINITIONS
•Workweek: a fixed, regularly recurring period of seven consecutive 24-hour
days. Our workweek runs from [day and time] to [day and time]. Each workweek
stands alone and hours are never averaged across two workweeks.
•Overtime: hours worked beyond 40 in a single workweek, or beyond any daily
threshold that applies where the employee works.
•Regular rate: the hourly rate used to calculate overtime, which includes
certain additional payments such as non-discretionary bonuses and shift
differentials, not only the base hourly wage.
•Hours worked: all time the employee is required or permitted to work,
including work performed before or after a scheduled shift.
OVERTIME RATE
Non-exempt employees are paid at one and one-half times their regular rate for
all hours worked over 40 in a workweek.
[If you have employees in a daily-overtime state, add the applicable rule here.
For example, in California overtime is also owed after 8 hours in a workday.]
Paid time that was not worked, such as holidays, vacation, or sick leave, does
not count toward the 40-hour overtime threshold unless [Company Name] chooses to
count it. [State your choice here.]
APPROVAL PROCESS
•All overtime must be approved in advance by [manager or role].
•Requests should be submitted [how, and how far in advance].
•Approval will be based on workload, coverage, deadlines, and budget.
Important: if an employee works overtime without approval, [Company Name] will
still pay for those hours, because the law requires payment for all hours
actually worked. Working unapproved overtime is a policy violation that may
result in corrective action, but it never means the hours go unpaid.
RECORDING TIME
•Non-exempt employees must record all hours worked, using [system or method].
•Record actual start and stop times, including meal breaks.
•Do not work off the clock. This includes answering messages, taking calls,
finishing tasks after clocking out, and preparing before a shift starts.
•Report any missing or incorrect time entry to [name or role] promptly, and it
will be corrected.
MANAGER RESPONSIBILITIES
•Approve or decline overtime requests before the hours are worked.
•Monitor hours during the week rather than after the fact.
•Never ask or imply that an employee should work off the clock or under-record
hours.
•Confirm that recorded time matches what was actually worked before approving
it for payroll.
COMPENSATORY TIME OFF
[Company Name] does not offer compensatory time off in place of overtime pay for
non-exempt employees. Overtime is paid in wages.
PAYMENT
Overtime is paid on the regular payday for the pay period in which the overtime
was worked.
QUESTIONS AND CONCERNS
Any employee who believes their hours or overtime pay were recorded or paid
incorrectly should contact [name or role]. Raising a concern in good faith will
not result in retaliation.
ACKNOWLEDGMENT
I have received and read the overtime policy.
Employee name: __
Employee signature: __ Date: _
DISCLAIMER: This is a sample template for general information only and is not
legal advice. State law can be stricter than federal law, including daily
overtime rules and higher salary thresholds for exempt status. Have counsel
review this policy before adopting it.
Template 2: Short Overtime Policy for Small Teams
The same rules in plain language on a single page, sized for a business with a handful of hourly staff and no HR department. Everything essential, none of the enterprise scaffolding.
Short Overtime Policy for Small Teams
[Company Name]
OVERTIME POLICY
Effective date: _
WHO THIS APPLIES TO
This policy applies to all non-exempt employees, meaning employees who are
eligible for overtime pay. If you are unsure whether it applies to you, ask
[name].
WHEN OVERTIME IS PAID
You are paid one and one-half times your regular rate for every hour you work
over 40 in a workweek. Our workweek runs [day] through [day].
[If applicable: You are also paid overtime after 8 hours in a single day.]
GETTING APPROVAL
Get approval from [name] before working overtime. Ask ahead of time when you
can, or as soon as you realize the extra hours will be needed.
If you work overtime without approval, you will still be paid for those hours.
We are required to pay for all hours you actually work. But repeatedly working
unapproved overtime may lead to corrective action, so please ask first.
RECORDING YOUR TIME
•Record all the time you work, using [system].
•Clock in when you start and out when you finish, including meal breaks.
•Do not work off the clock. If you answer a message, take a call, or finish
something after hours, that time counts and should be recorded.
•If your time record is wrong, tell [name] and we will fix it.
TIME OFF INSTEAD OF PAY
We do not offer time off in place of overtime pay. Overtime is paid in your
paycheck.
QUESTIONS
If something about your hours or overtime pay does not look right, tell [name].
Nobody will be treated badly for asking.
ACKNOWLEDGMENT
Employee name: __
Employee signature: __ Date: _
DISCLAIMER: This is a sample template for general information only and is not
legal advice. Confirm your state rules, since some states require overtime on a
daily basis and set higher salary thresholds for exempt status.
Still Using Spreadsheets for Onboarding?
Automate documents, training assignments, task management, and track onboarding progress in real time.
For businesses that sometimes must assign overtime. Covers when it can be required, how assignments are distributed, notice, fatigue limits, and what happens when an employee cannot work an assigned shift.
Mandatory Overtime Policy
[Company Name]
MANDATORY OVERTIME POLICY
Effective date: _ Last reviewed: _
PURPOSE
There are times when [Company Name] must ask non-exempt employees to work beyond
their scheduled hours to meet operational demands. This policy explains when
overtime may be required, how it is assigned, and how it is paid.
WHEN OVERTIME MAY BE REQUIRED
Mandatory overtime may be assigned for reasons including:
•Unplanned absences or a gap in shift coverage
•Seasonal or peak-period volume
•Equipment failure, delivery deadlines, or urgent customer commitments
•Emergency conditions affecting the business or its customers
HOW IT IS ASSIGNED
•[Company Name] will give at least [number] hours of notice when practical.
•Assignments will be distributed [describe your method: by rotation, by
seniority, by volunteers first, by shift, or by skill needed].
•Employees may volunteer for available overtime before it is assigned.
•Employees with an approved accommodation or a documented conflict should
notify [name or role] as early as possible so alternatives can be considered.
PAY
All required overtime is paid at one and one-half times the regular rate for
hours over 40 in a workweek, and at any daily rate required where the employee
works. Required overtime is treated identically to voluntary overtime for pay
purposes.
DECLINING AN ASSIGNMENT
Employees are expected to work assigned overtime. An employee who cannot work an
assigned shift should notify [name or role] before the shift, with the reason.
Repeated refusal without an approved reason may result in corrective action
under our [disciplinary or attendance] policy.
LIMITS AND SAFETY
[Company Name] will make reasonable efforts to avoid assignments that create a
safety risk from fatigue. Employees will generally not be scheduled for more
than [number] consecutive hours or more than [number] hours in a workweek
without review by [name or role].
[Note: some states and some industries, including healthcare in a number of
states, restrict mandatory overtime by law. Confirm the rules for your state and
industry and adjust this section accordingly.]
ACKNOWLEDGMENT
Employee name: __
Employee signature: __ Date: _
DISCLAIMER: This is a sample template for general information only and is not
legal advice. Several states restrict mandatory overtime for particular
industries, and union contracts may limit it further. Have counsel review this
policy before adopting it.
Template 4: Overtime Request and Approval Form
A request and approval form capturing hours, reason, and the manager decision, with a section for documenting overtime worked without prior approval, which still has to be paid.
Overtime Request and Approval Form
[Company Name]
OVERTIME REQUEST AND APPROVAL FORM
Submit before working the hours whenever possible.
REQUEST
Employee name: __ Employee ID: _
Department: __ Manager: __
Date of request: _
Date or dates overtime is needed: ___
Estimated overtime hours: _
Scheduled hours that week: _ Projected total: _
Reason for the overtime request:
•[ ] Covering an absence - [ ] Deadline or customer commitment
Template 5: Overtime Section for an Employee Handbook
A condensed version written to sit inside a handbook rather than stand alone, so the wording lines up with your timekeeping and pay sections instead of duplicating or contradicting them.
Overtime Section for an Employee Handbook
OVERTIME
[Insert as a section of your employee handbook. Keep the wording consistent with
your timekeeping, attendance, and pay policies.]
Eligibility. Non-exempt employees are eligible for overtime pay. Exempt
employees are not. Classification depends on how an employee is paid and the
actual duties of the job, not on job title. Contact [name or role] with any
question about your classification.
Workweek. Our workweek is a fixed period of seven consecutive days running from
[day and time] to [day and time]. Overtime is calculated within a single
workweek, and hours are not averaged across two workweeks.
Overtime pay. Non-exempt employees receive one and one-half times their regular
rate for hours worked over 40 in a workweek. [Add any daily overtime rule that
applies where your employees work.] The regular rate includes certain additional
payments, such as non-discretionary bonuses, not only the base hourly rate.
Approval. Overtime must be approved in advance by [manager or role]. Overtime
worked without approval will still be paid, because all hours actually worked
must be paid, but it may result in corrective action.
Timekeeping. Non-exempt employees must record all hours worked. Working off the
clock is not permitted, including work performed before or after a shift or
outside normal hours. Report any error in a time record to [name or role] and it
will be corrected.
Compensatory time. We do not provide time off in place of overtime pay for
non-exempt employees. Overtime is paid in wages.
Questions. Any concern about hours or overtime pay should be raised with [name
or role]. Raising a concern in good faith will not result in retaliation.
DISCLAIMER: This is a sample template for general information only and is not
legal advice. State law may impose stricter overtime rules than federal law.
Have counsel review your handbook before distributing it.
Template 6: Overtime Compliance Self-Check
A checklist covering classification, workweek and rate, timekeeping, pay practices, and records. Run it before you adopt the policy and again once a year, since thresholds and state rules move.
Overtime Compliance Self-Check
[Company Name]
OVERTIME COMPLIANCE SELF-CHECK
Work through this before adopting the policy, and again at least once a year.
Reviewed by: __ Date of review: _
CLASSIFICATION
•[ ] Every employee is classified as exempt or non-exempt, in writing
•[ ] Each exempt employee is paid on a salary basis, meaning a fixed amount not
reduced for the quality or quantity of work
•[ ] Each exempt employee meets the applicable salary level, which is at least
$684 per week federally, or the higher state figure where one applies
•[ ] Each exempt employee's actual duties meet the duties test for the claimed
exemption, and this was assessed on duties rather than job title
•[ ] Anyone who does not clearly meet all three tests is treated as non-exempt
WORKWEEK AND RATE
•[ ] A fixed workweek is defined in writing, with a start day and time
•[ ] Overtime is calculated within each workweek, never averaged across two
•[ ] The regular rate used for overtime includes non-discretionary bonuses,
shift differentials, and similar payments, not just the base rate
•[ ] Any daily overtime rule that applies where employees work is built into
the pay calculation
TIMEKEEPING
•[ ] Non-exempt employees record all hours worked
•[ ] Pre-shift and post-shift work is captured, not treated as unpaid
•[ ] After-hours messages, calls, and remote work by non-exempt employees are
recorded and paid
•[ ] No manager is editing time records downward without the employee knowing
•[ ] Time records are reviewed against schedules before payroll is processed
PAY PRACTICES
•[ ] Unapproved overtime that was worked is being paid
•[ ] No compensatory time off is offered to non-exempt employees in place of
overtime pay
•[ ] Overtime is paid on the regular payday for the period it was worked
•[ ] Qualified overtime is identified separately for year-end tax reporting
RECORDS
•[ ] Payroll records are kept at least three years
•[ ] Time cards and other records that wage calculations rest on are kept at
least two years, and longer where state law requires
•[ ] Signed policy acknowledgments are filed in the employee record
ISSUES FOUND
__
__
Action taken: __
Next review date: _
DISCLAIMER: This is a sample template for general information only and is not
legal or tax advice. A self-check is not an audit and does not substitute for
review by a qualified professional. Salary thresholds and state rules change.
What to Include in an Overtime Policy
A complete policy covers four groups: who it covers, how overtime is paid, how it gets approved and recorded, and the closing pieces. The list below is the working set behind every template on this page.
Who it covers
Non-exempt employees are eligible
Exempt employees are not
How to ask about classification
How overtime is paid
Your fixed workweek, defined
1.5x the regular rate over 40 hours
Any daily rule where you operate
Approval and recording
Who approves and how far ahead
Unapproved hours are still paid
No working off the clock
The closing pieces
No comp time for non-exempt staff
How to raise a pay concern
Employee acknowledgment signature
Two of these are worth stating explicitly even though they feel obvious. Define the workweek with a specific start day and time, because overtime is calculated within it and a vague definition makes the calculation arguable. And state that unapproved overtime is still paid, because the opposite wording is common in downloaded templates and it is wrong.
The Federal Rules Your Policy Rests On
The policy is your implementation of a small set of federal rules. Knowing them makes it obvious why each clause is worded the way it is.
Non-exempt employees must be paid at least one and one-half times their regular rate for hours worked over 40 in a workweek. A workweek is any fixed, regularly recurring period of seven consecutive 24-hour days, and it does not have to match the calendar week. Each workweek stands alone, so hours cannot be averaged across two weeks to avoid overtime. There is no federal requirement for daily overtime and no federal cap on hours for employees aged 16 or older, and no federal premium is owed for weekends, nights, or holidays unless those hours are themselves overtime.
The regular rate is not simply the base hourly wage. It includes most compensation for the workweek, notably non-discretionary bonuses and shift differentials, which means an employee earning a production bonus has a higher regular rate than their posted wage suggests. Leaving those payments out is a routine miscalculation. On the exempt side, all three of the salary basis, salary level, and duties tests must be met, and the Fair Labor Standards Act overview covers how the framework fits together.
The Numbers to Build the Policy On
Non-exempt employees are owed 1.5x the regular rate over 40 hours in a workweek (DOL Wage and Hour Division). Exempt status requires a salary of at least $684 per week, or $35,568 annually, plus the salary basis and duties tests, with $107,432 for certain highly compensated employees (DOL Fact Sheet 17G). Payroll records must be kept three years, and time cards and similar records two years (DOL Fact Sheet 21). Where a state is stricter, the state rule governs. This is general information, not legal advice.
States With Daily Overtime Rules
Most states follow the federal weekly standard, but a handful require overtime on a daily basis too, which means an employee can earn overtime in a week where they worked fewer than 40 hours. If you employ anyone in one of these states, the policy needs a daily rule written into it.
State
Daily rule
What it means for your policy
California
1.5x after 8 hours in a workday; 2x after 12 hours; 7th consecutive day rules
The strictest in the country. Also has a much higher exempt salary floor tied to the state minimum wage
Alaska
1.5x after 8 hours in a workday
Applies alongside the weekly rule, with exemptions for some agricultural and small-employer situations
Colorado
1.5x after 12 hours in a workday, or 12 consecutive hours
Set by the state COMPS Order; pay whichever calculation gives the employee more
Nevada
1.5x after 8 hours in a day, only below a wage threshold
Applies to employees earning less than 1.5x the state minimum wage; others are weekly only
Oregon
1.5x after 10 hours, manufacturing establishments
Industry-specific rather than general; check whether your operation is covered
Most other states
No daily rule, weekly 40-hour standard applies
The federal rule is your baseline, but verify since state rules change
The governing principle is simple: where federal and state rules differ, the more employee-protective rule applies. California deserves a specific flag beyond daily overtime, since its exempt salary threshold is set at twice the state minimum wage and sits far above the federal figure, so an employee who is exempt in Texas may be non-exempt in California on identical pay.
Four Mistakes That Cost Small Businesses
Overtime claims rarely start with an employer deciding not to pay. They start with one of these four, each of which looks reasonable at the time.
Treating salaried as automatically exempt
This is the single most common and most expensive overtime mistake a small business makes. Paying someone a salary does not make them exempt from overtime. Exempt status requires all three of a salary basis, meaning a fixed amount that is not reduced for the quality or quantity of work; a salary level of at least $684 per week under federal rules, which is $35,568 a year, or the higher figure where a state sets one; and a duties test, meaning the employee's actual primary duties are genuinely executive, administrative, or professional. Job title is irrelevant. An office manager, an assistant manager, or a team lead on a modest salary very often fails the duties test, the salary test, or both, which means they were owed overtime the whole time. When someone does not clearly satisfy all three tests, treat them as non-exempt. This is general information, not legal advice.
Refusing to pay overtime that was not approved
A policy can require advance approval for overtime, and it should. What a policy cannot do is refuse to pay for hours the employee actually worked. Federal wage law requires payment for all hours worked, whether or not anyone authorized them in advance, and an employer that knew or should have known the work was happening owes the money. The correct handling is to pay the hours, then address the policy violation separately through your normal corrective process if it keeps happening. Writing the rule the other way around, saying unapproved overtime will not be paid, is one of the most common defects in a downloaded policy template and it makes the document itself evidence of a violation. Every template on this page states the rule correctly. This is general information, not legal advice.
Letting work happen off the clock
Off-the-clock work is where small businesses accumulate liability without noticing, because none of it looks like overtime at the time. It is the ten minutes of setup before clocking in, the cleanup after clocking out, the customer call answered at home, the message replied to in the evening, and the training or meeting attended unpaid. For a non-exempt employee all of that is hours worked, and if it pushes the week past 40, it is overtime. Remote and hybrid arrangements have made this far harder to see. The defense is a policy that says plainly that off-the-clock work is not permitted, managers who do not send after-hours messages expecting a reply, and a correction process employees actually use when a time record is wrong. This is general information, not legal advice.
Offering comp time instead of overtime pay
Giving a non-exempt employee time off later instead of paying overtime now feels like a fair trade, and both sides often prefer it, but private-sector employers generally cannot do it. The compensatory time provision in federal wage law is written for state and local government employers, not private businesses, and paying a non-exempt employee in banked hours rather than wages is a wage violation regardless of whether the employee agreed to it or asked for it. Templates that offer comp time to private non-exempt staff are quietly handing you a compliance problem. If you want to give someone extra flexibility, pay the overtime as required and then grant additional paid time off separately, as a benefit rather than as a substitute for wages. This is general information, not legal advice.
The common thread is that all four are cheap to prevent and expensive to fix, because each compounds quietly across every affected employee and every pay period until someone notices. A yearly pass through the self-check catches all four.
The Overtime Tax Deduction and Your W-2s
A federal deduction for qualified overtime compensation now exists for tax years 2025 through 2028, and it changed what employers have to report. It does not change how you run payroll: withholding is unchanged, Social Security and Medicare still apply, and the benefit reaches the employee when they file their return, not in their paycheck.
What did change is reporting. Beginning with tax year 2026, employers must separately identify qualified overtime compensation and report it on Form W-2 in Box 12 using code TT. The transition relief that applied for 2025 is not available for 2026. Qualified overtime is narrower than most people assume: it is the premium portion above the regular rate, generally the half in time-and-a-half, and only where the overtime is required by federal wage law. Overtime owed purely under state law, a union contract, or your own policy does not qualify.
What This Means Practically
If your payroll system treats all overtime as a single generic pay code, it cannot produce the Box 12 code TT figure, since that requires separating the premium half from the straight-time portion and separating federally required overtime from overtime owed for other reasons. Raise this with your payroll provider before year-end rather than in January. The overtime policy itself does not need to mention the deduction, but the compliance self-check on this page includes a line for it. This is general information, not tax advice; confirm the current rules with a qualified professional.
Standalone Policy or Handbook Section?
Both work. A standalone policy is easier to hand to the specific group it affects, easier to revise on its own, and easier to collect a separate acknowledgment for. A handbook section keeps everything in one place and reduces the chance that two documents drift apart.
For most small businesses the practical answer is both: a condensed section in the employee handbook, worded to match your timekeeping and pay sections, plus the fuller standalone policy for non-exempt staff and the managers who schedule them. The one arrangement to avoid is two versions saying different things, because an inconsistency between your own documents is worse than either document alone.
Adopt, Acknowledge, and Review
A policy only does its job once it has been checked against your actual classifications, distributed to the people it covers, acknowledged, and revisited when the rules move.
Fill in your specifics
Set your workweek, name the approver, and add any daily overtime rule that applies where your employees work.
Run the self-check
Work through the classification and timekeeping checklist before you adopt the policy, not after a question comes up.
Distribute and acknowledge
Give it to every non-exempt employee and their managers, and collect a signed acknowledgment from each of them.
File and review yearly
Store signed acknowledgments in the employee record, and re-check the policy once a year as thresholds and state rules change.
The templates above work on their own. To run it without paper, FirstHR distributes the policy to the right employees, captures the acknowledgment signature with e-signature so you have a dated record for each person, and stores it in the employee record alongside the rest of their documents, with a reminder when the annual review comes due. FirstHR is an onboarding and HR platform, not a payroll provider and not a law firm: it does not calculate overtime, run payroll, or determine anyone's exempt status, so pair it with your payroll provider and a qualified professional for those calls. Applicant tracking is coming soon to FirstHR.
Key Takeaways
An overtime policy covers eligibility, the fixed workweek, the rate, approval, timekeeping, comp time, and an acknowledgment signature.
Non-exempt employees are owed 1.5x the regular rate over 40 hours in a workweek, and the regular rate includes non-discretionary bonuses, not just base pay.
A salary never makes someone exempt on its own: the salary basis, the $684 weekly salary level, and the duties test must all be met.
Overtime worked without approval must still be paid; handle the policy breach separately rather than withholding wages.
Private-sector employers generally cannot give non-exempt employees comp time in place of overtime pay, even with the employee's agreement.
California, Alaska, Colorado, Nevada, and Oregon manufacturing have daily overtime rules, and the more protective rule always governs. This is general information, not legal advice.
Frequently Asked Questions
What is an overtime policy?
An overtime policy is an internal document that explains how a business authorizes, records, and pays overtime. It tells employees who is eligible, when overtime is paid and at what rate, how to get approval before working extra hours, and how to record time accurately. It tells managers what they can and cannot do, including that they cannot ask anyone to work off the clock. A written policy is not required by federal law, but it is worth having for two reasons. It prevents the everyday confusion that leads to unpaid hours and disputes, and it gives the business a documented, consistently applied practice if a wage question ever comes up. The policy itself does not change anyone's legal rights: it explains and implements them. This is general information, not legal advice.
What should an overtime policy include?
A complete overtime policy covers the purpose, who it applies to, definitions of the key terms, the overtime rate, the approval process, timekeeping rules, manager responsibilities, the position on compensatory time, when overtime is paid, how to raise a concern, and an acknowledgment signature. Within those, the pieces that matter most are the fixed workweek stated explicitly, the rate of one and one-half times the regular rate for hours over 40, a clear statement that overtime worked without approval will still be paid, and an unambiguous prohibition on off-the-clock work. The definitions section deserves care too, particularly the regular rate, which includes certain additional payments such as non-discretionary bonuses rather than just the base hourly wage. This is general information, not legal advice.
Can an employer require mandatory overtime?
Under federal law, generally yes. There is no federal limit on the number of hours an employer may require from an employee aged 16 or older, and an at-will employee who refuses assigned overtime can generally be disciplined or terminated. The important qualifier is that the employer must pay for every hour worked at the correct overtime rate, so requiring overtime is a scheduling question, never a pay question. Several limits apply on top of the federal baseline: some states restrict mandatory overtime in specific industries, healthcare in particular; union contracts frequently limit or govern how it is assigned; and an employee may have a right to an accommodation for a disability or a religious observance. Give notice where you can, distribute assignments by a method you can explain, and watch fatigue. This is general information, not legal advice.
Do I have to pay for overtime that was not approved?
Yes. This is the point small businesses most often get wrong, and where a badly written policy actively hurts you. Federal wage law requires payment for all hours actually worked, and an employer that knew or had reason to know the work was happening owes the money regardless of whether anyone authorized it. A policy that says unapproved overtime will not be paid does not create that outcome; it just documents a violation. The correct approach is to pay the hours and handle the policy breach separately through your normal corrective process. In practice, repeated unapproved overtime is usually a signal about workload or coverage rather than defiance, so it is worth asking why the hours were needed before treating it as a discipline matter. This is general information, not legal advice.
Can I give comp time instead of overtime pay?
Generally not, if you are a private-sector employer and the employee is non-exempt. The compensatory time provision in federal wage law applies to state and local government employers, not to private businesses, so banking time off in place of paying overtime wages is a wage violation even when the employee asked for it or agreed to it. Employee consent does not fix it, because wage rights of this kind cannot be waived by agreement. There is a legitimate way to get a similar result: pay the overtime as required, then separately grant additional paid time off as a benefit. The difference matters because the wages get paid on time either way. Be aware that many template policies still offer comp time to private non-exempt employees, which is a defect to remove before you adopt one. This is general information, not legal advice.
Does a salaried employee get overtime?
Often, yes. Being paid a salary does not by itself make someone exempt from overtime. To be exempt under the white-collar exemptions, an employee must satisfy all three of a salary basis test, meaning a fixed predetermined amount not reduced for the quality or quantity of work; a salary level test, currently at least $684 per week federally, which works out to $35,568 a year, with several states setting a higher figure that governs where it applies; and a duties test, meaning their actual primary duties are genuinely executive, administrative, or professional. A separate total annual compensation threshold of $107,432 applies to certain highly compensated employees. Job title is never the deciding factor. A salaried employee who fails any one of the three tests is non-exempt and owed overtime. This is general information, not legal advice.
Should the overtime policy be standalone or part of the handbook?
Both work, and many businesses do both. A standalone policy is easier to hand to a specific group, easier to update on its own, and easier to collect a separate acknowledgment for, which is useful if most of your overtime exposure sits with one team. A handbook section keeps everything in one place for the employee and avoids the risk that two documents drift out of alignment over time. The practical answer for a small business is usually to put a condensed version in the handbook, matching the wording of your timekeeping and pay sections, and to keep the fuller standalone policy for non-exempt staff and their managers. Whichever you choose, avoid having two versions that say different things, since an inconsistency between them is worse than either one alone. This is general information, not legal advice.
How long do I need to keep overtime records?
Federal rules require employers to preserve payroll records for at least three years, and to keep the records that wage computations rest on, including time cards, work schedules, and records of additions to or deductions from wages, for at least two years. Because the lookback period for a wage claim generally runs two years and extends to three for a willful violation, the practical answer is to keep everything for at least three years rather than splitting the difference, and longer where your state requires more. Signed policy acknowledgments belong in the employee record alongside the time records. Good records are also your defense: when time records are missing or incomplete, the practical burden in a wage dispute tends to shift toward the employer, which is a bad position to be in. This is general information, not legal advice.
