Overtime: Overview, definition and example
What is overtime?
Overtime refers to additional hours worked by an employee beyond their regular work schedule, typically defined by law or company policy. Overtime is often compensated at a higher rate than regular hours, such as time-and-a-half or double-time, depending on applicable labor laws or contractual agreements.
For example, under U.S. federal law, non-exempt employees are entitled to 1.5 times their regular pay rate for hours worked over 40 in a single workweek.
Why is overtime important?
Overtime is important because it ensures fair compensation for employees who work extra hours while helping employers meet workload demands. Overtime provisions in contracts or policies establish clarity about eligibility, pay rates, and approval processes, reducing misunderstandings and ensuring compliance with labor regulations.
Clearly defined overtime policies also protect employers from legal disputes and provide employees with a transparent understanding of their rights and compensation.
Understanding overtime through an example
An employee in a manufacturing plant works 45 hours in one week. Under their employment contract, they are entitled to overtime pay at 1.5 times their regular hourly rate for the 5 hours worked beyond the standard 40-hour workweek. This ensures the employee is fairly compensated for the additional effort.
An example of an overtime clause
Here’s how an overtime clause might appear in an employment contract:
“Employees classified as non-exempt under applicable labor laws are eligible for overtime pay at the rate of 1.5 times their regular hourly rate for all hours worked over 40 in a single workweek. Overtime work must be pre-approved by the Employee’s supervisor. The Company reserves the right to schedule and require overtime as necessary to meet operational needs.”
Conclusion
Overtime provisions are a crucial component of employment agreements, ensuring fair compensation for extra work and compliance with labor laws. By clearly outlining overtime policies, contracts protect the interests of both employers and employees, reduce disputes, and foster transparency. A well-drafted overtime clause promotes fairness and operational efficiency.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.