What Are Overtime Hours? Meaning, Calculation, Types, and Compliance

Shed light on overtime hours - what they are, their types, and how to calculate and approve them under company policies.

By Victoria Avdieieva

What Are Overtime Hours?

Overtime work is the time an employee spends working beyond the standard hours defined by law or company policy for a given day, week, or reporting period. These extra hours are compensated at a higher rate, in line with local labor regulations and internal company rules.

Why Overtime Tracking Matters

Legal & Payroll Compliance

Proper overtime tracking isn’t just about accuracy in pay; it’s about complying with labor laws, protecting your company, and promoting fairness in the workplace.

Accurate Costing & Profitability by Project/Client

Accurate tracking of costs and overtime by project or client reveals true profitability, supports smarter budgeting, and helps identify where resources deliver the most value.

Burnout Prevention & Workforce Planning

Effective workforce planning helps prevent employee burnout by balancing workloads, allocating resources efficiently, and ensuring teams have the right support.

Transparent Policies & Trust with Employees

Clear and transparent policies help employees understand expectations. Building trust with employees boosts productivity andimproves work environment.

Forecasting Capacity and Reducing Fire-fighting

Planning resources with precision helps prevent constant “crisis mode” work, improving productivity, reducing stress, and ensuring a smoother workflow.

How to Calculate Overtime

Provide a clear framework not tied to a specific jurisdiction:

• Thresholds: daily (over X hours/day), weekly (over X hours/week), on weekends/holidays - according to a policy..
• Multipliers: time-and-a-half (1.5×), double time (2×) - examples commonly used; exact values are determined by law/contract.
• Base rate: how to determine the base hourly rate for calculating overtime (including bonuses/allowances if they are included in the base according to the policy).

Examples:

• Weekly overtime: 44 hours/week → 4 hours of overtime × 1.5×.
• Daily overtime: 10 hours/day with an 8-hour standard policy → 2 hours × 1.5×.

Notes: the difference between paid overtime and time off in lieu (TOIL), if the company compensates with time off.

Types of Overtime

Daily Overtime (beyond the daily standard)

Daily overtime means any hours an employee works beyond the standard number of hours set for one workday, for example, more than 8 hours per day if the daily standard is 8. These extra hours are usually paid at a higher rate (such as 1.5× or 2× the regular rate), depending on company policy or local labor laws.

Weekly Overtime (beyond the weekly standard)

Weekly overtime refers to the hours worked beyond the standard total for a workweek, such as more than 40 hours if the weekly limit is 40. These hours are typically paid at an overtime rate (for example, 1.5× the regular pay) according to company policy or local labor laws.

Rest Day / Holiday Overtime (work on weekends/holidays)

A rest day or holiday overtime means working during an employee’s usual days off, such as weekends or public holidays. Because these are non-working days, such hours are generally paid at a higher rate (often double pay) or compensated with additional time off, following company policy or labor regulations.

Emergency / On-call (how the company takes into account shifts)

Emergency / On-call refers to time when employees must be available outside regular hours (e.g., at night, on weekends, or in urgent situations). The company tracks and compensates this time based on its shift and on-call policy.

Overtime Policies & Approval Workflow

• Policy essentials: thresholds, multipliers, exceptions, time off in lieu (TOIL), submission deadlines.
• Approval chain: employee → manager → HR/Payroll.
• Documentation: required data in the timesheet (date/project/reason/duration).
• Communication: where the policy is published, how it is updated.

Common Mistakes to Avoid

• Mixing of regular and overtime hours; lack of confirmations.
• Incorrect base for multipliers (wrong rates/allowances).
• Lack of clear thresholds/policy and manager training.
• Ignoring local requirements and collective agreements.

TMetric as an Overtime Tracking Solution

Position TMetric as a simple solution for managing overtime:

• Time Tracking: timer, manual entries, and editable logs with full history.
• Rates & Billing: billable rates, project budgets, and overage control.
• Policies: support for various work schedules; transparent tracking of overtime in reports.
• Reports & Export: by employee or project; CSV/PDF export for payroll.
• Integrations: works seamlessly alongside your accounting and management tools.

Conclusion

Overtime hours are hours worked beyond the standard schedule, often paid at a higher rate. Tracking them ensures fair pay, manages workload peaks, and reveals productivity trends. Clear policies and automation simplify calculation, reporting, and compliance.

Automate overtime tracking and reporting with TMetric — start free today.