Understanding Overtime Wage Calculations: How Do You Navigate Legal Guidelines?

I have not come across any such formula in any acts other than state gazettes of the minimum wage where the formula for the computation of overtime wages is given. I need to learn the practiced system vis-a-vis lawful guidelines in this matter.

With regards,
Asitabha Sanyal

Hi,

Overtime wages under most of the labor laws are defined as:
OVERTIME WAGES = TWICE THE NORMAL RATE OF WAGES.

In practice, it is being calculated as OT. = (2 * (Basic + DA) / Days in the month) * Overtime days.

For further clarification, you can email me at: mak007hr@rediffmail.com.

Mohd Arif Khan

Dear Md. Arif Khan,

At the very outset, I express my heartfelt thanks for your reply. I have no doubt about the double rate which is mentioned in different laws. However, there is no guideline about the computation of daily wage to which I believe you will agree. As for practice, I hope everyone is doing as you have said, but this forum should approach the appropriate authority in this matter. Hope we shall always be in touch as professionals in the future also.

With regards,
Asitabha Sanyal

Does the same formula apply for calculating the hourly overtime as well?

Regards,
Santosh Verma.

The formula that we are using is total overtime hours in the month, suppose 120 hours. Then, 120/8=15 days. After that, basic/days (30 or 31 as per the month)*15 days. I hope this example makes it clear.

Dear,

If you go by law, the formula for calculating overtime is:
(gross salary/26/8*OT hrs)*2
This rate is double from the normal rate, and as per the act, you can allow 51 hours of overtime in a quarter to an employee, with ESI to be deducted from this wage.

Regards,
Vipin

Dear Vipin,

The overtime (OT) limit is 50 hours in a quarter. Your OT payment calculation formula is as per the legal requirements under the Minimum Wages Act, 1948.

Regards,

R.N. Khola

(Labour Law & Legal Consultants)
09810405361

Hello Mr. Khola,

Since we are providing single overtime instead of double, I feel the formula I previously provided for calculating OT is correct. I need your guidance.

Thank you.

Dear,

Each and every Indian labor law concerning overtime (OT) (Central and States) states that we are to make payment to the worker/employee at double the ordinary rate of wages/normal wages. According to me, The Factories Act, 1948, The Minimum Wages Act, 1948, and State Shops & Commercial Establishment Acts provide us with a procedure for taking OT and for calculating the OT payments. Section 59 of the Factories Act says that where a worker works on OT, he will be entitled to wages at the rate of twice his ordinary rate of wages. According to Rule 25 of Minimum Wages (Central) Rules, 1950, it also states that OT is to be given at double the ordinary rate of wages. According to the Minimum Wages Act and Rules, we are to divide the rate of wages by 26 for calculating 8 hours (one day) wages. For calculating one-hour wages, we are to divide by 8 to get one day's wages. Thus, if we take OT for one hour, then we are to pay wages at double this wage for one hour. State Shops & Commercial Establishment Acts also provide provisions for OT payments. You may go through these enactments for more clarification on the subject.

I hope this will help you in solving your query to some extent. This clarification is made for law-abiding personnel.

Regards,

R.N. Khola
Sr. Associate
(Labor Law & Legal Consultants)
09810405361