Comprehensive Guide to Overtime Calculation and Labor Laws for Workers

Hi All,

I have a query related to overtime by our workers. We are a small manufacturing company and have overtime almost on a daily basis in which some workers work for a few hours extra every day.

I understand that the labor law indicates that overtime should be paid at double the normal rate. I am not clear what the normal rate is. Whether it is only the basic salary or includes conveyance allowance and HRA as well? We do not have any DA for our workers.

Can someone please provide a reference to the relevant law and tell me how to calculate overtime in our case?

Thanks in advance, and I look forward to your reply.

Regards,
Renu

Hi,

As per our company policy, overtime (OT) has to be paid based on the total salary. The formula is as follows:

OT = Basic + DA + HR + LTA + MED + Conv / 8 Hrs x No. of hours of OT done.

Hope this explanation helps you.

Best regards,
Sunil Malla

Please ignore my earlier comment.

As per our company policy, overtime (OT) has to be paid based on the total salary. The formula is as follows:

OT = (Monthly Salary / 30 Days / 8 Hrs) x Number of hours of OT done.

Hope this will help you.

Best regards, Sunil Malla

Hi,

In our company, we calculate the OT rate as follows:

OT Rate = Basic + DA + HRA = Total
= Total / 26 / 8 * 2

Regards,
Vrusha

I am working in a manufacturing company. As per our rules and regulations, the overtime calculation is based on BASI + DA + HRA + CON. If it is below 4 hours, then half of their ordinary rate of wages is paid. If it is above 4 hours, then it is calculated at the rate of 1 day's wages.

Thank you for all your replies.

I have a further question. In our company, the overtime (OT) rate is very high. If OT is to be paid at double the normal rate - considering basic, House Rent Allowance (HRA), and conveyance allowance as the normal rate - then it would amount to a significant sum of money.

Is it possible to introduce a special allowance for our workers to lower their normal rate? In such a scenario, can OT be paid based only on the remaining normal rate, excluding the special allowance?

For instance, if the normal rate is X and the Special Allowance is Y, the adjusted normal rate would be X-Y. Can OT be paid at double the rate of X-Y without factoring in Y?

I would greatly appreciate your prompt response.

Regards,
Renu

Hi Brijesh,

If you believe that the overtime rate at your company is very high, then you can stop the overtime and implement an internal policy as follows:

1) Overtime should be closed above 12,000/-
2) For amounts above 12,000/-, pay an incentive as follows: 2 hours = 25 Rs, 5 or 6 hours = 100/-. If not, follow this policy.
3) I have observed that many export houses do not pay overtime at a double rate. As per legal requirements, overtime should not exceed 48 hours in a quarter. Each person should show 16 hours on the actual salary sheet and be paid double the rate of wages for those hours, with the remaining overtime paid at a single rate of wages.

Daily wage overtime calculation formula: Gross salary/8 x no. of hours, if double x 2
Monthly salary overtime calculation formula: Gross salary/208 x no. of hours, if double x 2

Regards,
Brijesh

Hi,

Overtime (OT) is to be paid double the salary. For OT salary calculation: Basic + DA only, not any other allowances that are paid to the employee. The calculation should be as follows: Basic + DA / 26 days = per day wage, Per day wage / 8 Hrs = Per Hr Wage, Per Hr wage X No of OT Hrs X 2 times = OT wage. OT should not be given arbitrarily; considering that we are dealing with human beings, rest is essential after every 8 Hrs of work. Moreover, the energy levels in an employee decrease with each passing hour. It is unreasonable to expect the same level of productivity after 8 Hrs of continuous work compared to the initial hours of duty.

According to the factories act, if an employee works for more than 48 Hrs in a week, OT should be given for the extra hours exceeding 48 Hrs. If OT is a regular necessity, it might be more cost-effective to hire new employees to ensure full-fledged work output instead of incurring the additional cost of paying double the salary through OT payments.

Mohan Rao
Manager HR

Hi,

OT calculation is very simple:

1. Gross Salary * OT hrs / 104 (for double rate).
2. Gross Salary * OT hrs / 208 (for single rate).

Rajesh Tripathi
LDK Pantnagar

Dear Brijesh,

I'm working in Adani Group as an HR Executive. Could you please clarify the OT calculation process for me? I would also like to have your cell phone number.

As per my understanding, OT should be calculated based on Basic + D.A. and not any other components of the pay structure.

Regards.

Hi all,

I am working in the Hotel Industry. I have the same problem about the overtime pay for hotel employees. Can anyone suggest to me how to calculate overtime for the hotel industry?

Please do the needful.

Regards,
Amol

Sir,

Overtime wages are calculated only for PF wages (basic + DA + Personal Pay + Productivity allowance such as concern).

KSV

Basic salary x 12/52 * 48 = Result * 1.25 for normal working hours

Result * 1.50 for holiday working hours

Result can be multiplied by any figure the company applies.

Please don't misguide if you are unaware of something. Overtime (OT) is paid on basic wages, i.e., Basic + DA only, and not on other allowances or conveyances.

OT is calculated on gross salary as per all labor laws. It is one hundred percent correct.

Regards,
Jyoti

Please go through the factory act which is self explanatory
Sec-59. Extra wages for overtime.—(1) Where a worker works in a factory far more than nine hours in any day or for more than forty-eight hours in any week, he shall, in respect of overtime work, be entitled to wages at the rate of twice his ordinary rate of wages.
6[(2) For the purposes of sub-section (1), \'ordinary rate of wages\' means the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of food grains and other articles, as the worker is for the time being entitled to, but does not include a bonus and wages for overtime work.
(3) Where any workers in a factory are paid on a piecerate basis, the time rate shall be deemed to be equivalent to the daily average of their full time earnings for the days on which they actually worked on the same or identical job during the month immediately preceding the calendar month during which the over

Hi,

The worker is paid daily wages. You can calculate daily wages by dividing the total daily wages by 8 and multiplying it by 2 times the number of overtime hours.

For staff calculation, the formula is Basic + DA / 30 / 8 * Number of OT Hrs.

If a staff member's salary is above 10000 gross, you can provide a commission, overtime incentive, or compensation time off.

This is the formula used in our company. I hope this information helps you.

Regards,
Bhaskar

Hi, I am working in a manufacturing division. We are working in two shifts. Each shift starts from 8 am in the morning to 8 pm at night.

I would like to know about overtime (OT) hours. As per normal working hours, the shift starts from 8:30 am to 5 pm. From 5 pm to 8 pm, can we provide 3 hours of OT, or do we have to pay for 4 hours of OT?

If any documents are available, please share them with me.

Thanks,
Ks