Overtime Policy Template for Indian Companies

An overtime policy sets out when work beyond normal hours is treated as overtime, how it is approved, and how it is paid. It matters most in factories, warehouses, hospitals and support centres where extra hours are common. HR and plant managers use it to keep overtime under control and to pay it correctly, because overtime carries a legal rate that a company cannot pay below. A written policy stops disputes about who authorised the extra hours and what they are worth.

When to use it: Put this policy in place wherever employees may be asked to work beyond their hours. Publish the approval steps and the rates, and brief supervisors that overtime needs approval before it is worked. HR and operations own it, and management approves it. Review it whenever production patterns or the shift structure change.

Overtime policy template

Copy the text below and replace everything in square brackets with your company details.

1. Purpose

This policy defines overtime at [Company Name] and sets how it is approved, recorded and paid. It ensures extra hours are worked only when needed, with consent and prior approval, and paid at no less than the rate the law requires.

2. Scope and eligibility

This policy covers employees eligible for overtime, usually those paid on a wage or hourly basis and those in roles that record hours. Senior and managerial staff on a fixed monthly salary are generally not eligible and are covered by comp-off instead, as stated in their appointment terms.

3. What counts as overtime

Work beyond the full daily hours, or after the shift end, with prior approval, is overtime.
Overtime starts only after a minimum of [30] minutes of extra work.
Overtime is worked with the employee's consent, as the working hours rules require.
Short extra minutes with no approval are not overtime.

4. Approval

Overtime must be approved by the reporting manager before it is worked, except in a genuine emergency, when it is regularised immediately after. Approval names the reason and the expected hours. Overtime worked without approval is not paid unless the manager confirms afterwards that it was needed.

5. Overtime rates

Overtime is paid at not less than twice the ordinary wage rate, as the law requires.
The company may set separate multipliers for working days, weekly offs and holidays, at or above the legal rate.
The rate is applied to the ordinary wage as defined for overtime, not to allowances outside it.
See overtime wages for how the rate is worked out.

6. Payment or comp-off

Approved overtime is paid in the next payroll, or given as comp-off, or the employee is allowed to choose, as the company sets. Comp-off is credited as [4] hours for half a day and [8] hours for a full day and is used within the comp-off validity. A monthly overtime cap keeps hours within safe and lawful limits.

7. Responsibilities

Employees: work overtime only when approved, record it correctly and use comp-off before it expires.
Managers: approve overtime in advance, keep it to genuine need and stay within the cap.
HR and payroll: apply the correct rate, pay approved overtime on time and track comp-off balances.

8. Exceptions

[HR Head Designation] may allow overtime above the usual cap for a stated period during a peak season or an emergency, keeping within the legal spread-over limits. Any such approval is recorded with the reason and the period.

9. Review

HR reviews this policy every [12] months and when the law on working hours or the shift structure changes. Any change to multipliers or the cap is announced before it takes effect.

Acknowledgement: I have read the [Company Name] overtime policy and agree to work overtime only with prior approval and to record it correctly.
Name: [Employee Name] Employee ID: [Employee ID]
Signature: [Signature] Date: [Date]

What to include

Pay at least twice the wage

The law sets overtime at twice the ordinary wage rate. Write the policy to pay no less, and set any higher multipliers for weekly offs or holidays clearly. Paying below the legal rate is the fastest way to a wage claim.

Approval before the hours

Require the manager to approve overtime before it is worked, except in a real emergency. This keeps extra hours to genuine need and stops arguments later about who authorised the work and whether it should be paid.

Cap the monthly hours

Set a monthly overtime cap within the legal spread-over limit. A cap protects health and safety, controls cost, and stops overtime becoming a permanent way to run short-staffed instead of hiring.

Offer comp-off as an option

Let employees take comp-off instead of overtime pay where it suits both sides, with a clear credit and expiry. Comp-off eases cost in a lean month while still recognising the extra hours the employee worked.

Exclude the right roles

State that fixed-salary senior and managerial roles are not eligible for overtime and get comp-off instead. Vagueness here leads to claims from managers and to overtime bills nobody budgeted for.

Common mistakes to avoid

Paying overtime at the single ordinary rate instead of the legal double rate.
Letting employees work extra hours with no prior approval, then arguing about payment afterwards.
Applying an overtime multiplier to the whole salary including allowances outside the wage.
Setting no monthly cap, so overtime runs unchecked and hides the need to hire.
Crediting comp-off with no expiry, so balances build up and become a liability at exit.

Run it in ZeniaHR

ZeniaHR detects overtime nightly from the punch stream against each shift, counting hours beyond full-day hours or after shift end, with a minimum and rounding. Under the overtime policy you set whether approval is needed, the pay, weekly-off and holiday multipliers, the comp-off rule and the monthly cap. The reporting manager then HR approve, and approved overtime becomes a payroll earning at the gross day rate, monthly gross divided by 30, then by 8, times hours, times the multiplier, or a comp-off credit. Keep your multipliers at or above the legal rate of twice the ordinary wage.

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Frequently asked questions

What is the overtime rate in India?

Under the labour codes, work beyond the prescribed hours is overtime and is paid at twice the ordinary wage rate, with the worker's consent. A company can pay more, and often sets higher multipliers for weekly offs or holidays, but it cannot pay less. The rate applies to the ordinary wage as defined for overtime, not to every allowance.

Is prior approval needed for overtime?

Good practice, and most company policies, require the reporting manager to approve overtime before it is worked, except in a genuine emergency that is regularised straight after. Prior approval keeps extra hours to real need, controls cost and avoids disputes about who authorised the work. Overtime worked without approval is usually paid only if the manager confirms it was needed.

Can overtime be given as comp-off instead of pay?

Yes, many employers let employees take compensatory time off instead of overtime pay, or offer a choice, as long as it is set out in the policy. Comp-off is credited for the extra hours worked, commonly half a day or a full day, and must be used before it expires. Legal overtime pay still applies where the policy or law requires payment rather than time off.