Confused About Overtime Pay Rates for Factory Workers? Let's Clarify Together

Dear Readers,

Our company falls under the Factory Act. We pay overtime to employees who work in the plant if they work for more than 8 hours and 30 minutes. I have read many threads related to overtime (OT), but I am still confused about whether it is 1.5 times or 2 times the regular rate. Also, please clarify whether we have to calculate overtime pay based on the gross salary or the basic salary.

Moreover, what happens if they work on a National or Public Holiday?

Thanks & Regards

Kindly note that the calculation for overtime is based on the minimum wage rate of the state and is twice the normal rate.

Thank you.

Please read Section 59 of the Factories Act and the rules made under it by the TN state.

Regards, Varghese Mathew

Overtime will be paid at twice the normal rate of gross wages, not basic.

Hi Dheeraj, how are you? This is O.B. Gautam from Rudrapur. In the same line, I agree with Dheeraj, but I want to add one more point: double overtime is payable only when an employee has worked 48 hours in a week. If an employee has not completed 48 hours in a week, then they are not liable to be paid twice the wages of the normal rate.

Regards,
O.B. Gautam

Overtime Wages Under the Factory Act, 1948

Section 59 of the Factory Act, 1948 clearly stipulates that 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.

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

Overtime on National or Public Holidays

In relation to your query about working on any National or Public Holiday, you need to refer to the Factory Rules of your state. However, as a common practice, overtime at the rate of twice his wages is paid on a Public Holiday, whereas overtime at the rate of twice his wages is paid on a National Holiday, in addition to a day's compensatory off.

Regards,
BS Kalsi
Member since Aug 2011

Thank you all for your assistance. I need some clarification regarding the normal working hours in a day. Is it 8 hours or 8 hours and 30 minutes?

Overtime Regulations

During the last inspection at our factory, it was mentioned that there is an upper limit for overtime hours as well. No employee is allowed to work beyond this limit. Could you please inform me what the specific upper limit for overtime is?

Thank you all for your assistance. I would like further clarification on the normal working hours in a day. Is it 8 hours or 8 hours and 30 minutes?

During the recent inspection at our factory, it was mentioned that there is an upper limit for overtime as well. No employee is allowed to work beyond this limit. Could you please provide information on what the upper limit for overtime is?

Standard Working Hours

The standard working hours in a day vary depending on the company's structure. In a continuous process industry, the duty time is typically 8 hours, including 2 tea breaks and 30 minutes for lunch. The shift timings are structured to ensure continuous production.

Shift Timings in a Continuous Process Industry

- A Shift: 6:00 - 14:30, 07:00 - 15:30, 08:00 - 16:30
- B Shift: 14:30 - 23:00, 15:00 - 23:00, 16:00 - 24:00
- C Shift: 22:00 - 06:00 (next day), 23:00 - 07:00 (next day), 24:00 - 08:00 (next day)

If the industry does not operate on a continuous process basis, the duty hours may be 8:30 or 9:00 hours, depending on the breaks provided during the day. In such industries, production may halt during lunch breaks.

Shift Timings in Non-Continuous Process Industries

With a 30-minute lunch break:

- A Shift: 6:00 - 14:30, 07:00 - 15:30, 08:00 - 16:30
- B Shift: 14:30 - 23:00, 15:30 - 24:00, 16:30 - 25:00
- C Shift: 23:00 - 07:00 (next day), 24:00 - 08:00 (next day), 25:00 - 09:00 (next day)

Please note that the C shift is for 8 hours only, as employees do not take their dinner break during this shift.

Thank you for your attention to this matter.

Best regards

Overtime Provision and Compensation Under the Factories Act

Overtime provision is a measure to restrict the engagement of workmen after they have completed the scheduled working hours. It should not be considered a right of the employer to require workers to do overtime by offering higher wages, such as double the regular rate, but rather as a means to limit excessive work hours. Therefore, the Factories Act mandates the payment of wages at double the ordinary rate for overtime work and limits the number of overtime hours per quarter to 50 hours. In certain states, amendments allow for up to 75 hours of overtime in a quarter.

According to the Factories Act, double the regular rate of wages must be paid as overtime compensation if a worker is asked to work beyond 9 hours in a day or 48 hours in a week. This implies that if an employee works more than 9 hours in a day, they should receive overtime wages for the hours exceeding 8 hours, not for those exceeding 9 hours. For companies operating less than six days a week, the daily hours may increase while the weekly hours remain below 48, making the daily hours the key factor in determining overtime pay. The actual number of hours worked per week, as per the employment terms, serves as the threshold to determine overtime. In cases such as Indian Oxygen Ltd. Vs Their Workmen (1969-I LLJ 235: A.I.R. 1969 S.C. 306), where 38 hours per week is the established service condition, any work exceeding 38 hours is considered overtime, irrespective of the 48-hour guideline. A similar ruling was made in Philips India Ltd Vs Labour Court, Madras, and others.

For companies operating six days a week, the standard working hours are 8 hours, excluding rest intervals. The total work span, including rest breaks, should not surpass 10 hours and 30 minutes.

Regards,
Madhu.T.K

Can you please clarify for me, as per the Factories Act for the Tamil Nadu Government, what will be the compensation for working on National and Public holidays? I tried to refer to the Factories Act but could not find the calculation part. They have mentioned that the employer can have work done from employees even on National and Public Holidays, which should be compensated in the future.

Please guide me.

Regards,
Mandhar

Holidays Under Different State Acts

Factories Act is silent about holidays. The holidays are regulated by state enactments like the Tamil Nadu Industrial Establishments (National and Festival Holidays) Act, Kerala Industrial Establishments Act, Karnataka Act, etc. Under different Acts, a different number of holidays are given. In Tamil Nadu, there are 4 national holidays and 5 festival holidays.

An employer can engage workers on holidays but with one condition: they are paid twice the average wages for that day and are given a substituted holiday. As per the Act, the compensatory holiday is to be within three days of working on a holiday (it is okay if the worker is given an advance holiday at least 3 days before working on such a holiday), but under normal circumstances, workers are allowed to take the compensatory holiday within one or two months.

Regards,
Madhu.T.K

This 10-month-old thread came to my attention today due to fresh postings by Mr. Mandhar and Mr. Madhu Sir. Mr. BS Kalsi and Mr. Madhu Sir have thoroughly answered the query.

I would just like to add to Mr. Madhu Sir's point that the payment of overtime cannot be denied even if it exceeds 50/75 hours in a quarter. Pat. HC 1215

You cannot deny it because the workers have worked after they were asked to work overtime. The restriction is on the employer and not on the workers.

Regards,
Madhu.T.K

Dear Gautam, you need to take care of the daily spread as indicated by Madhu. It is not correct that if a person has not worked more than 48 hours in a week, they will not get overtime (OT).

Quarterly Overtime Limits

Moreover, the quarterly limit is only 48 hours in some states and 52 in others, but in no state is it 75 hours. Although we are likely to have some amendments to increase it to 100 hours, it has not been done yet.

Thanks,
VS Chauhan

Working Hours and Overtime Calculation

Normal working hours for companies that operate six days a week are 8 hours, excluding rest intervals. The spread of work, including rest intervals, should not exceed 10 hours and 30 minutes. It is true, but other companies calculate only the basic rate for overtime. Also, clarify that the calculation of days is needed to determine the overtime hourly rates.

Regards

Dear colleagues, my viewpoints are submitted below:

Working Hours and Breaks

- Working hours are prescribed for a full 8 hours a day, as working continuously is not allowed for more than 9 hours a day in any case. Exclude lunchtime and breakfast time. This means, for instance, if a 30-minute lunch break and 10 minutes for breakfast are allowed, then your total shift hours will be 9 hours. Normally, workers do not ask for breakfast time to save 20 minutes as they do it at the workplace or nearby, but a 30-minute recess time is mandatory, required for the cause, so their stay during the shift is 8 1/2 hours. The same information is to be published in the shift schedule and displayed on the notice board, as prescribed under FA. In both situations, it cannot exceed 48 hours a week; otherwise, payment of overtime is mandatory. Under the Shops and Establishment Act, it is 48 hours a week; that is why some offices in metro/non-metro areas work 9 hours a day and keep Saturday as a half day or have the 2nd and 4th Saturday off. We will soon hear an amendment in this regard about the limits of overtime hours.

Overtime Calculation

- Overtime is calculated practically/formally, which is double the basic salary if DA is not applicable, or basic + DA if DA is a wage component.

Holiday Duty Compensation

- If a worker is placed on duty during a festival/national holiday, you need to pay (i) overtime for that duty, (ii) one day leave to compensate for the paid holiday, and (iii) the holiday stands paid at par with the rest of the population as one day's wages. This means two basic salaries or 2 x (basic plus DA) as the case may be, plus one day's gross wages and one day holiday three days before or after the national/festival holiday.

Regards,
RDS Yadav
Advisor and Management Consultant
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