How Do You Calculate Overtime Rates for Monthly Paid Employees in India? Seeking Expert Insights

Overtime Rate Calculation for Monthly Paid Employees in India

Please share your knowledge regarding the calculation of the overtime rate for monthly paid employees in India. (Amounts in INR)

Monthly Basic Pay - 5000
Monthly D.A. - 3000
Month - October

What Will Be the Overtime Rate?

1) (((5000+3000)/31)/8)*2 = 65 OR - (here 31 means the number of days in October)
2) (((5000+3000)/26)/8)*2 = 77 OR - (here 26 means common working days in a month)
3) ((5000+3000)/200)*2 = 80 (here 200 means 25 days x 8 hrs)

The above calculations are based on various postings on this site and also on other sites regarding OT rate calculation.

Therefore, to put an end to this issue, please share your expert views with supporting rules, acts, notifications, or judgments, etc. (if any) on how to calculate the overtime rate for monthly paid employees.

Regards to all members,
Tony

The OT has to be calculated as per their extra hours, which are beyond 8 hours of their work. For example, if they work for 10 hours, then you have to pay OT for 2 hours. The formula for calculation should be based on Gross, not on basic, as per the factory act. However, many companies are paying based on basic or Basic+DA. According to minimum wages regulations, OT has to be calculated on Basic+VDA or on Gross. The calculation formula is as follows: =Gross / 240 * 2 * No. of hours worked.

Applying the details you provided, (Basic+DA) 8000 / 240 x 2 x no. of hours worked will give you the amount. I hope this explanation clears any doubts.

Best regards,
Regards

Beyond 8 hours of working has to be calculated as overtime work or extra hours worked. For the calculation of the overtime rate per hour, your formula at Sl. No. 2 is correct.

Regards

Overtime Payment Calculation According to the Payment and Wages Act

To pay overtime, always follow the rules of the Payment and Wages Act. Here is an example for your reference: the payment breakdown for an employee is as follows:

- Basic: 5000/-
- DA: 3000/-
- Other: 3000/-
Total: 11000/-

Rate = [(11000/26)8] X 2 = 106/-

For more details, you can contact me at [Phone Number Removed For Privacy Reasons].

I am attaching various probabilities for calculating OT. This will vary if you work for 6 days a week, 5 days a week, 5.5 days a week, and also 8 hours in a day or 9 hours in a day. Based on all four probable scenarios which I have handled, I have given calculations in the attached Word document in a tabulated format.

Regards,
T. Sivasankaran

Simplified Overtime Payment Calculation

Even simpler calculation for overtime payments as per the Factories Act, based on Basic + DA only, excluding other benefits.

For example:
Basic: 5000/-
DA: 3000/-
Total: 8000/-
Rate = [(8000/208) x 2] = 76.92/-
(BASIC + DA/standard working hours) x overtime hours x 2

Note: 208 is the standard working hours for the month.

Thanks & Regards,
Janardhan

Methods to Calculate Overtime (OT)

1. For employees paid on a monthly basis: Gross Salary divided by 31 or 30, multiplied by 8, then multiplied by 2, and finally multiplied by the number of OT hours.

2. For employees paid on a daily basis: Gross Salary divided by 26, divided by 8, then multiplied by 2, and finally multiplied by the number of OT hours.

Calculating Total Working Hours

First, you have to determine the total working hours in a month. If it is 8 hours per day, then multiply that by all working days to calculate the total working hours per month. In some organizations, Saturday is a half day, while in others, Saturday is a holiday. Therefore, the working hours in these cases will vary when calculating the overtime (OT) rate.

Salary Calculation for Overtime Rate

Now, the salary calculation includes basic salary + Dearness Allowance (DA) + Variable Dearness Allowance (VDA) = total salary / working hours for the month = OT rate.

Thank you.

The Factories Act [Act No. 63 of 1948] as Amended by the Factories (Amendment) Act, 1987

CHAPTER VI, Working Hours of Adults

59. Extra Wages for Overtime

(1) Where a worker works in a factory for 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.

(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 for the time being is entitled to, but does not include a bonus and wages for overtime work.

(3) Where any workers in a factory are paid on a piece-rate 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.