Calculating Worker Overtime: How Do You Ensure Fairness and Accuracy?

I want to know how to calculate the overtime of workers in an organization.

Regards,
Ekta Pant

Well, as explained above, you can go with the same. In short, you can assume the overtime as double the amount per hour compared to the normal working hours in terms of compensation. You can find many online software tools that can help you manage your payroll, along with managing overtime payouts.

If the total working time, including overtime, is 9 hours per day or 48 hours per week, a single payment is applicable. For hours worked over and above this, double payment is applicable. Please calculate both scenarios and pay whichever is more beneficial to the employee/worker.

Regards,
Abbas.P.S

Hi, the formula for calculating overtime pay is either Salary/26/8*2 multiplied by the number of OT hours or Salary/104 multiplied by the number of OT hours.

Hi, overtime (OT) has to be calculated with all components of the salary.

Why is overtime calculated based on 26 days, or can it be calculated based on the number of days in a particular month? What does the law say? Please clarify.

Regards,
Rajendra Mohanty

If you look into the minimum wages gazette, it states, "To arrive at the daily wage, the monthly wages shall be divided by 26." This method helps maintain a constant wage for overtime or any salary-related calculations. If you calculate based on the number of days in a month, there will be variations in overtime and other allowances. For example, consider how you would calculate for the month of February. Your employees will receive their full salary if they work for the entire month, but they will receive less in overtime wages.

Understanding the 26-Day Calculation

The number 26 is constant and is derived as follows: 365 - 52 = 313 (365 days in a year - 52 Sundays), and 313 / 12 = 26 (313 days - 12 months = 26 days). Therefore, the average number of days in a month is 26.

As per the Shops and Establishments Act, every organization must pay overtime at double the wages, regardless of the number of hours worked by an employee beyond their normal working hours.