How Can Restaurants Fairly Compensate Employees for Overtime Without Hassles?

Dear Professionals,

Could you please guide me on payment in lieu of overtime worked by the employees in a restaurant? The restaurant is quite fair and just, but just to avoid the hassles attached with the OT, it wants to make an alternative mode of payment for the overtime worked.

Dear Meenakshi,

The information provided is a bit inadequate to offer proper comments. Are you from HR, or are you the owner of the restaurant? How many extra hours do restaurant staff work to become eligible for overtime (OT) payment? What challenges do you foresee in the payment of OT? In some restaurants, staff work anywhere between 12 to 16 hours. Does this also happen in your restaurant?

You may keep track of the extra working hours of the staff and pay them a "performance bonus." However, this could come under the scrutiny of labor authorities, as if an employee works for 12 hours, they will become eligible for a half-day's performance bonus on each working day.

Another alternative could be a five-day workweek. However, in the restaurant business, this is quite impossible.

Lastly, in the hospitality industry, payment of OT is relatively rare. When an employee is hired, it is assumed that they are expected to work for 12-14 hours, and generally, no OT is paid. Why is your restaurant an exception to this norm?

Thanks,

Dinesh Divekar

Dear Meenakshi Gupta, It would have been better if you had mentioned the location of the restaurant. The question in the second part of your post is not clear, as suggested by Dinesh—whether you want an alternative to the system of overtime work or simply an alternative mode of payment for overtime work. Whatever clarification is sought, I am sure you are fully aware of the concept of overtime work by employees and the need for, as well as the scale of, compensation in this regard.

Understanding Overtime Work

The restriction of working hours to 8 hours a day and 48 hours a week is the first convention of the ILO, if I remember correctly. The time an employee works at the instance of the employer beyond normal working hours is called "overtime" in employment terms. Apart from the Minimum Wages Act, 1948, a monetary labor legislation, the Contract Labour (Regulation & Abolition) Act, 1970, and the Building and Other Construction Workers (Regulation of Employment Service) Act, 1996, labor legislations deal with special types of indirect/ad hoc labor.

Establishment-Oriented Labor Legislations

Establishment-oriented labor legislations such as the Factories Act, 1948, Mines Act, 1952, Working Journalists (Conditions of Service) Miscellaneous Provisions Act, 1955, the States' Catering Establishments Acts, etc., invariably provide for overtime work and the mode of compensation for it. Most of these enactments, except the Working Journalists Act, prescribe only monetary compensation at twice the rate of normal wages. Rule 10 of the Working Journalists Act prescribes compensatory rest hours equal to the overtime hours worked beyond 6 hours in a day shift and beyond 5 1/2 hours in a night shift.

Impact of Reducing Overtime Work

Generally, a reduction in overtime work will result in more employment and more leisure for the existing labor at the end of the normal workday. However, exigencies of work can necessitate the adoption of overtime work, justifying compensation at twice the normal wages. Any alternative mode of compensation, like the one hesitantly suggested by Dinesh, should not be effectively less than the statutorily prescribed compensation.

Considering practical factors peculiar to your restaurant, such as the types of menu, serving times, and restrictions on service time by Public Authorities like the Police, you may decide on the possibility of shift working to minimize the incidence of overtime work.

Regards

Dear Sir,

Please elaborate on what the alternative is for overtime hours in the Shops & Establishment Act in Noida. There is a constraint of 50 hours per quarter, and employees are working more than 50 hours. Therefore, management does not want to pay double the wages and is looking for an alternative way to ensure compliance.

Thank you.