Salary calculation based working hours - what we can do in case of the public holiday which needs to be paid?

Hello,

Our company has flexible working hours. Any employee needs to complete their per-day working of 8 hours. In case, on any day he is unable to cover the complete 8 hours, then it can be covered on the next day or later at any time. Ultimately, at the end of the month, we generate the salaries based on the total number of working hours they worked.

Now, in case I'll calculate the salary as:

One-hour salary = CTC / Total number of working hours in a month. Ex: Rs. 10,000 / 240 hours = Rs. 41.66

Now, the employee worked for 26 days only, meaning a total of 208 hours, excluding Sundays. So the salary should be, Per hour salary * number of working hours = Monthly salary 41.66 * 208 = Rs. 8,666

Here the employee never took leave but is still getting paid a lesser salary. So, in this case, either we can add 4 days or 32 hours of extra pay every time to his salary, which will cover his Sundays too. Because ultimately, we want to pay our employees for Sundays as well.

So, my question is in this case, do I need to add 4 days of extra pay for every employee every month, or is there any other solution we have for this? And what can we do in the case of public holidays that need to be paid?

Dear Pragyesh,

What's your establishment - if a factory or other kind of establishment?

Anyway, authorized holidays including national and festival holidays and statutory leave, if any availed by the employee need to be paid. If an employee is required to work on his weekly holiday, he needs to be paid at overtime rate for that day; work on a national or festival holiday without any substituted holiday needs to be paid double wages. Of course, adoption of an hourly rate for the calculation of wages is not unlawful. But such a micro approach would be convenient for the calculation of overtime wages, which is strictly based on the actual hours worked beyond the normal working hours of a day. In my opinion, it may not be advisable for regular work carried out in a systematic manner throughout the month, which seems to be the wage period. Working hours include the interval for rest also.

Quantitative works can be exactly measured in terms of actual hours spent on work continuously or intermittently. But qualitative work cannot be evaluated as easily. Therefore, flexible working hours do not mean rigid calculation of wages based on the actual number of hours spent by the employee on work.

Applying the concept of CTC for every day-to-day aspect of employment would certainly complicate things in the long run.

As the employees are working flexible hours and the salary level as mentioned in the post, the employee, when working more than 8 hours per day, will be required to pay overtime.

Daily wages should be calculated by dividing the monthly wages by 26 and then obtaining hourly wages by dividing the daily wages by 8. If the employee does not work on their day off, there is no need to pay for the weekly off day.

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions

One thing you need to decide is whether you are doing hourly or monthly rate salary. If you are following a monthly rate salary, then when you are dividing the salary by 240 hours a month, you are already paying for the weekly off by including the amount in the wage rate.

However, you still need to compute overtime, which means you need to see which day they have worked more than 9 hours or which week they have worked more than 48 hours.

If they work on a holiday, you need to give them double-rate overtime. This would be fine if you just add the hours worked. But you need to figure out who will take care of compensatory off, which is also compulsory to give.

I really appreciate the responses.

We are a product-based IT company.

As of now, I'm following the below calculation:

CTC/240 hours (30 days) = 1 hour salary

1 hour salary * total number of working hours of an employee = Salary based upon total work done for that particular month.

Adding the below amounts manually:

1 hour salary * 32 hours (4 Sundays) = Paid Sundays/Saturdays

Plus adding any Public holiday (if any).

Total salary given for that month: Salary based upon total work done for that particular month + Paid Sundays/Saturdays + Paid Public holidays (if any).

Please make the corrections if needed.

Calculating Wages According to Minimum Wages Act

As per the given data, it appears that the monthly rate is at or close to the minimum wages, likely for a single schedule employment. In that case, the daily wages can be calculated by dividing the monthly wages by 26, and the hourly rate can be determined by dividing the daily rate by 8, i.e., dividing the monthly wages by 26 x 8 = 208 as per the Minimum Wages Act.

Calculating Wages Above Minimum Wages

If the monthly wages are significantly higher than the minimum wages, there is no specific legal guideline. However, based on common practice in various organizations, the hourly rate can be calculated by dividing the monthly rate by 30 x 8 = 240, or by 31 x 8, or by 28 x 8, or by 29 x 8, or multiplied by 12 and then divided by 365 x 8, and so on.

S K Bandyopadhyay (WB, Howrah)
CEO-USD HR Solutions

The use of the term CTC is a misnomer. Indeed, CTC would include many factors that are outside the pay package, such as employer contributions to PF, ESI, gratuity, annuity, etc. Probably, you may have intended gross salary only.

The calculation of salary based on the formula is correct:

Salary for a given month: Salary based upon (total work done for that particular month + Paid Sundays & Saturdays + Paid Public holidays if any).

Take care that the salary paid every month is not less than the minimum wages notified for the type of work.

In computing hourly wages, you cannot divide CTC by 3240 hours.

First, tell us your salary structure. What does your monthly salary consist of? Is it only one component (basic), or are there other components?

Yes, it's only the complete CTC. There are no deductions.

Then it's Basic Salary, not CTC. CTC will include all other costs.

In case this is basic, then you cannot divide the salary by 240 to get working hours. By doing so, you are implying that you expect employees to work on Sunday/Weekly Off to receive their full salary. Therefore, this is illegal.

You should compute the salary this way:

Salary Payable = Monthly Salary / 208 X (No. of Hours worked)

All paid holidays will need to be counted as standard work hours (being marked present).

If you have Saturday and Sunday off, then the calculation will be:

Salary Payable = Monthly Salary / 176 X (No. of Hours worked)

Whether an establishment is registered under The Factories Act or The Shop & Establishment Act, one weekly off is payable to any regular employee working 6 days a week.

This means that the weekly working hours total to 8 hours x 6 days, which equals 48 hours. Adding the mandatory 8 hours of weekly off, the total becomes 56 hours.

Therefore, the salary should be calculated as follows:

Number of hours actually worked during the month divided by 48, multiplied by 56, and then multiplied by the hourly salary calculated by you as follows:

One-hour salary = CTC / Total number of working hours in a month.
For example, Rs. 10000 / 240 hours = Rs. 41.66.

Alternatively, calculate the per-hour salary as Rs. 10000 / (26 * 8) = Rs. 48.08 per hour actually worked.

The result in both cases will be the same.