Understanding Overtime: When Do Extra Hours Start Paying Off and Who Qualifies?

Dear All,

Can anyone give me details on the exact working hours after which overtime is applicable? Additionally, from what level do overtime payments start, and to what grade or level is it applicable?

Please help.

BK

In a week, overtime should not exceed 12 hours, quarterly overtime should not exceed 50 hours, and daily overtime should not exceed 4 hours as per the Factory Act of 1948. Overtime is paid at a double rate, and ESI should be deducted from the overtime amount. In terms of grade or level, most industries pay overtime to workers earning up to Rs. 15,000 per month gross salary. For others, you can design incentive plans for those earning more than Rs. 15,000.

If the requirement for overtime is high, it is advisable to design an incentive plan for all employees.

Regards,
Baba Naresh

Over time should be paid as per the Factory Act of 1948. All statutory deductions are to be made. As a special provision, you may seek special permission for more than 50 hours, up to 75 hours in a quarter, from the appropriate government authority.

Very interesting. Not being aware of this, there are many companies that are making staff do overtime and paying almost half the staff's salary as overtime! Thanks, babanaresh and nagarpankaj07, for the information. I would like to add a sincere thanks to all those other contributors to this site, as most of us use the information but very often forget to acknowledge the same. Thanks all!

Dear All,

Is there any law in labor laws that overtime should be calculated based on the basic salary plus the hourly rate of the employee only?

What do you mean by 'OT to be paid at double rate?' In our concern, the additional hours spent are paid on an hourly basis with a gross salary per hour. If the monthly gross salary is G, then the calculation goes as follows:
G x 12 / 365 / 8
(8 represents the working hours per day)

Is this calculation correct?

Hi Shabana,

How are you? Overtime calculation is (G x 2 / 26 / 8) x overtime hours. Then, ESI deduction on overtime amount is compulsory.

Thanks, I hope your query will be resolved.

Chander HR-Exec.

Hi all,

The corrected formula is: Monthly Gross/26/8 * OT hrs * 2 for OT calculations, as per the Factory Act. OT is mandatory for employees drawing up to Rs. 10,000/- as per the Minimum Wages Act.

Thanks, Manish Gupta

Dear Manish,

I do not think there is any provision or rule under the Minimum Wages Act, 1948 which says that OT is mandatory for employees drawing up to Rs. 10,000. No wage ceiling is there in this Act.

With Regards,
R.N. Khola

Overtime Calculation and ESI Deductions

Suppose an employee has worked overtime for 10 hours in the month of July, and his salary is Rs. 15,000 per month. The overtime (OT) amount and Employee State Insurance (ESI) deductions would be as follows:

- **OT amount:** Rs. 15000 / 31 / 8 * 10 * 2 = Rs. 1209.67, which means Rs. 1210/- (to be divided by the number of days in that month).
- **ESI deduction on OT amount:** Rs. 1210 * 1.75% = Rs. 21.17 (rounded to Rs. 22/- to be deducted from the employee).
- **Employer's share of ESI:** Rs. 1210 * 4.75% = Rs. 57.47 (rounded to Rs. 58/- to be paid by the employer).

The total amount payable to the employee would be Rs. 1130 (1210 - 80). The total ESI amount for deposit under challan would be Rs. 80/-.

Hope the above clarifies your queries.

Regards,
Baba Naresh

Dear Member,

Kindly note that the total amount payable to an employee would be Rs. 1188/- (1210-22), not Rs. 1130/- as only the employee's share of ESI is deducted from the payable amount, not the employer's share.

Regards,
Baba Naresh