Overtime Exceeding 50 Hours Quarterly: Are There Legal Solutions to Stay Compliant?

Overtime Legal Provisions Inquiry

Please advise if overtime hours exceed 50 hours per quarter on a regular basis, is there any legal provision that helps to avoid legal violations? This could include approvals, agreements, penalties, or special case considerations.

In our case, we work 10 hours a day with 12 hours of overtime per week, which is compliant with the factory act. However, it violates the limit of 50 hours per quarter. We compensate for overtime hours at a double rate.

Please advise if there is any solution available.

Thank you.

There is apparently no legal remedy for escaping the provisions of the Factories Act, 1948 on this issue.

Suggestion for Reducing Overtime

My suggestion is, instead of looking for loopholes in statutes, you may look at why overtime (OT) is so high in your organization and aim to become a "Zero OT" company. There are many companies I know of like Mather & Platt, Hyundai, Cummins, etc., where manpower planning and work scheduling are done in such a way as to avoid any OT payment whatsoever. Hence, these companies have no legal headaches concerning OT.

By the way, why pay double OT when you can get the same work done in a single payment by adding a few more heads!?

You are clearly violating the Factories Act by working 10 hours per day and 60 hours per week. There is no mechanism to overcome the statutory obligation in this regard. As pointed out by Dixon, you may have to do some manpower planning and rearrange the workforce in shifts to resolve the issue.

Regards,
KK

Thank you for your reply. I agree with Mr. Dixon on zero OT, but we have our genuine problem. I hope you experts try to understand the situation. We have set up a new manufacturing plant with limited machines and manpower; our strength is only 50. To retain manpower on a minimum wage of 4500 was very difficult. So, we started offering 2 hours of OT and pay them double the rate for OT. By doing this, the workers get 1.5 and we get 2 extra hours of work on the same machines. This strategy has helped us manage to retain our manpower.

In my opinion, experts like you who belong to and refer to big concerns where manpower hiring and retaining are no big deal, may not fully understand the challenges faced by smaller scale units. In these smaller concerns, workers often work 12 to 14 hours a day, including night shifts. While from an outside perspective, this may seem like exploitation, for those working there, it is a means to earn a better livelihood. Many of these workers are not literate, skilled, or expert due to circumstances beyond their control. They only have one option – to work extra hours to make ends meet. While I am not saying you are wrong or justifying this working mechanism, it is important to acknowledge the realities that exist.

Improving Working Conditions

Our current focus is on improving the working conditions. The first step towards this improvement is compliance with government regulations in a true sense. I have come here seeking some solutions.

I do not agree with Knair that 10 hours a day is a crime. As per FA, 2 hours a day or 12 hours a week of OT is allowed. Please correct me if I am wrong.

Thank you.

I have one suggestion: "If we reach a mutual agreement with our workers' welfare committee on a 2-hour overtime, based on manpower retention, that will work. Please advise. I am sure there must be a way out of our problem."

There is apparently no legal remedy for escaping the provisions of the Factories Act, 1948 on this issue. My suggestion is, instead of looking for loopholes in statutes, you may look at why overtime is so high in your organization and aim to become a "zero OT" company. There are many companies I know of like Mather & Platt, Hyundai, Cummins, etc., where manpower planning and work scheduling are done in such a way as to avoid any overtime payment whatsoever. Hence, these companies have no legal headaches concerning overtime.

By the way, why pay double overtime when you can get the same work done in a single pay by adding a few more heads?

If you are certain that work will continue, you may hire new workers, with working hours limited to 8 hours (including lunch and tea breaks) as per statutes. For engineering workmen, the company operates on a 24-hour cycle and can run on shifts A, B, C, and one in the general shift (who will be a reliever) by increasing the manpower and offs. Therefore, four workers are required per day. If you calculate the amount you are paying to two persons, it can be adjusted to three persons, with only one person considered excess, which is needed to maintain zero overtime without deviation as per the Factories Act.

If the management is not accepting this proposal, you can hire temporary workers on an off-roll basis through contractors or outsourcing.

Regards,
Srao
[Phone Number Removed For Privacy Reasons]

Provision for Overtime Relaxation in the Factory Act

There is a provision in the Factory Act that allows the factory inspector to relax the limit of overtime for a limited period of time and for certain reasons to be recorded. We have a client who received an exemption from the overtime rule for 1 year because the factory is in a remote location where trained manpower was not readily available.

The maximum overtime allowed under the increased limit will be 75 hours a quarter. The talk of workers wanting overtime, etc., is just a cover-up for exploitation. How can a person working 10 or 12 hours a day survive in the long term? Including travel time, they will be home less than 8 hours, which is not enough to have food and rest.

Considerations for Wage Increase

Larger companies attract candidates because they are willing to pay more than minimum wages. Considering the amount you are paying for overtime, I think you can afford to increase the wage rate to match the market rate. You will also get better productivity from workers working 8-hour shifts.

Overtime as a Challenge in Employee Retention

Overtime is a disease. To attract workers and retain them within an organization, the only way is to pay more and provide additional benefits such as a canteen, transportation, shoes, uniforms, etc. In today's context, no worker will be willing to work for minimum wages when other industries offer better salaries. If they can earn the same or more by working only 8 hours, why should they spend 12-13 hours a day to earn?

Don't assume that workers are illiterate. While some may be illiterate, they are often more calculating than you and I. Exploiting workers under the guise of "paying OT" is not considered a healthy practice by the law. Therefore, it is better to hire more employees rather than rely on paying overtime.

Regards,
V. Balaji

I understand the concern is about "Genuine over Time" and not exploitation on either side. There are several companies running continuous chemical processes, where the concept of Duty Post exists. This means that 24-hour manning is essential (in A B C shifts) and overtime (OT) is generated when a reliever is absent. If the respective reliever takes more than nine leaves within a span of three months, the OT can exceed the permissible maximum of 75 hours as an exception. They ensure that no workman is allowed to work for more than 16 hours. Please note that in most cases, it involves manning and controlling plant parameters, either manually (operation of valves, etc.) or through DCS panels.

The remedy may involve informing the Factory Inspectorate about such exceptions with justifications. The inspectorate places more emphasis on the safety of the plant, as no chemical plant should be left unmanned.

It is essential to be sincere by paying them twice the rate of other shifts and OT allowances, in addition to taking care of their food and rest periods, etc.

Regards,
Shailesh Parikh
Vadodara, Gujarat
[Phone Number Removed For Privacy Reasons]

He is not talking about cases where a person does not come in because the reliever has not arrived. He is referring to getting everyone to work 10-12 hour shifts every day under the pretext that the workers are happy to earn more money through double rate wages for the extra hours worked. That is precisely what the law is intended to prevent.

My observations are as follows:

Clarification on Working Hours

Please clarify how you are working 10 hours a day and 12 hours of overtime per week. Is this on a permanent basis, and if so, do you have sanction from the appropriate authorities under the Factory Act?

Overtime Regulations and Exemptions

Overtime work per quarter, with approval from the appropriate Factory Inspectorate, is allowable up to 50 hours and could be stretched to 75 hours with specific approval under Section 65 (power to make an exempting order) due to "exceptional press of work."

Therefore, you may seek exemption from the factory inspectorate with a valid reason under the aforementioned provision of the Act.

Legal Considerations for Regular Overtime

My understanding is that overtime work on a regular basis—whether daily, weekly, or quarterly—may not be allowed as it goes against the principles under which working hours, including overtime, have been legalized and stipulated in the Act. No agreement or other laws are allowed to override this legal provision of working hours.

Regards,
Samir Kr. Bhattacharya - HR & IR Consultant

I just spent almost a whole day today debating this matter at a client meeting. The conclusion seems to be in line with what we discussed here: there is no legal way to get this done. It's a risk, but there is no penalty specified for this as such (only a general penalty under the Factory Act). If you are paying double pay, the factory inspector is not likely to take action (provided the overtime hours are not excessive).

I would have loved to say, "Don't do it. It's illegal, and workers should go home after one shift." But apparently, MIL is right; it's a universal practice and perhaps necessary.