Overtime calculation is the process of extra payment made to employees for working more than the allocated hours. It is the responsibility of the employers to calculate and pay to the employees based on their overtime work. There are lots of components to consider when calculating and paying OT on time as per compliance. In this blog, we will see the following topics on overtime calculation in India.
- What Is Overtime?
- Overtime Payment Rules in India
- Benefits to provide overtime
- What is the overtime calculation formula in India?
What Is Overtime?
Overtime is extra working time compared to normal working hours. This is paid at a higher rate than regular hours. If an employee is working beyond regular working hours, then it will be considered overtime. Also, an employee can work different shifts according to their working hours, if available.
But, the essential point is that employees need to be productive and complete their official work then only overtime will be considered.
In India, working hours are between 8 to 9 hours, but it depends on the locations where you established your organisation.
Overtime Payment Rules in India
In India, there are various rules and regulations that govern overtime hours and provide the overtime calculation formula. Also, it helps to understand the employers and employee, who is eligible or not eligible for overtime payment.
Given below, there are several acts of overtime payment
- As per the minimum wages act, an employee is entitled to get hourly wages for extra hours work.
- An employee is entitled to get wages on overtime payment, if they work on rest day.
- Overtime paid bonuses should be twice to regular pay.
Plantation Labour Act, 1951
If any masterwork, an employee is working more than the regular working hours in a week or day, then the employee will be entitled to get the overtime payment, but payment needs to be double to the regular payment. But, employees can’t work for more than 9 hours a day or 52 hours a week, including overtime.
Factories Act, 1948
As per the factories act, if a worker works more than 9 hours a day or 48 hours a week, then they will be entitled to get overtime wages, and wages need to be higher than the regular pay. But, including regular working time, overtime shall not exceed more than 10 hours. And it is mandatory to provide an interval after 4 to 5 hours of work.
Mines Act, 1952
According to the mines act, no workers are allowed to work more than 10 hours at the workplace, including overtime work.
Contract Labour (Regulation & Abolition) Act, 1970
The Contract labour Act governs that every contractor has to maintain an overtime register under form XXIII to contain worker’s details related to overtime calculation, such as work timing, date, name of the employee, and other details.
Building and Other Construction Workers (Regulation of Employment Service) Act, 1996
According to the building and other construction workers act, if an employee works more than the regular time work, then the employee is entitled to get overtime wages.
Beedi And Cigar Workers Act 1966
Under this act, workers can’t work more than 10 hours a day and 54 hours a week, including overtime, that extra work will be calculated as overtime.
Working Journalists And Miscellaneous Provisions Act 1955
If a journalist is working more than 6 hours in a day shift and 5.5 hours in night shifts, then they shall be compensated with extra hours equal to the overtime work.
Benefits to provide overtime
There are several benefits of overtime for employers and employee, that we will see below –
Benefits of employer
As an employer, if you allow to work longer hours to your employee, then you can get various benefits, such as –
- work done within a deadline
- No need to hire extra staff, as well as you can save on your training cost.
- Productive work
- Avoid job discrepancy
Benefits of employee
As an employee, you will also be beneficial, such as –
- You can improve your relationship with your colleague
- You can get the opportunity for promotion
- Career enhancement
- Salary increment
What is the overtime calculation formula in India?
Based on Indian labour law, there are two methods to calculate overtime pay, but as per the location or designation, overtime pay may vary.
To calculate overtime and other payroll-related calculations, many organisations are using an automated payroll management system that helps to calculate within a minute without any hassles.
Now, we will see the overtime calculation formula.
Under Indian law, if an employee is working beyond 9 hours in a day or 48 hours a week of work, then overtime will be calculated based on two types of workers – Day workers and piece workers.
Overtime calculation for day workers –
Hourly overtime wages = 2* ((Basic pay + DA + RA) / (total no. of days (26/30)) * maximum working hours in day (8 to 9)) * overtime hour
Overtime will be calculated for each hour of extra work done by the employee.
Overtime calculation for piece workers –
Additional wages = Basic pay / (total no. of days (26/30)) * maximum working hours in day (8 to 9))
Overtime will be calculated for each hour for day shift. During the calculation of an additional amount of night shift, a night shift bonus will be added to the basic pay. The remaining formula will be same
Basic Pay of the employee + Night Shift Bonus / total no of days * working hours in a day.
And the following wage is calculated for half an hour for each extra pay working hour.
What is the meaning of spreadover?
It is the total time duration of working hours from start to end including interval, rest time and others.
Who all are eligible and not eligible for overtime pay?
It is eligible for –
- A person who is working in factory, Contractual labour, mines, journalist, shop & establishment, building & construction workers.
Overtime is not eligible for –
- Any person who is working overtime without authority, armed forces and many private sector companies.
Can an employee refuse overtime work?
It depends on the organisation’s contract, if there is any provision or mentioned in the contract that employees may have to work beyond regular working hours. Then the employee can not refuse to work overtime. But, if it is not mentioned in the contract, then an employee can refuse to work beyond the regular working hours.
How do I manage overtime?
There are some points that you need to follow –
- Inform the employee in advance, and both need to agree to this.
- An employer and employee need to keep track of working hours.
- And you should create a flexible overtime working policy, so that you both can do work easily.
This brings us to the end of our discussion on overtime calculation in India. Let us know if you have any other questions and opinions on this topic. Mention the comment box below.
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