Overtime Calculation Confusion: Should It Be Based on 26 or 31 Days? Seeking Legal Insights

Dear experts,

My query:

1. We pay according to 26 days and calculate overtime on the same basis (26 days). Recently, an audit query was raised by the auditor stating that overtime should be calculated based on 31 days. Please clarify this issue with a legal law reference.

Thanks

In legal point of view, wages will be calculated on worked days (26) + weekly paid offs (4). For example: payment of gratuity act, Minimum wages act.

Can you ask them on what basis they are asking to calculate on a 30/31-day basis? If you calculate in this way, the OT payable amount will be slightly reduced. Maybe they might be insisting it on a cost-saving factor for the company.

Understanding the Term "Month"

The term "month" has several meanings.

As a stretch of a period of time from the perspective of a year, it is one of the twelve periods into which a year is divided, and therefore each would have 28, 29, or 31 days.

In commerce, it is a period of 30 successive days.

As a unit of time based on the revolution of the Moon around the Earth, it is the period between two successive new moons or an average of 29.53 days.

The length or duration of a month, therefore, is a matter of approximation for the purpose of convenience of calculation.

Payment Structure and Overtime Calculation

As per your post, your payment is for a month comprising 26 days, i.e., 26 working days plus 4 holidays in a month notionally comprising 30 days on average. In other words, the monthly wages/salary paid for 26 working days includes the 4 weekly off days. Since a week is considered to comprise 7 days, the principle of the 7th successive day after 6 days of continuous work as the weekly-off has emerged.

The universal practice of calculating overtime work is based on actual hours worked in excess of normal working hours, isn't it? So, compensation for overtime work is determined on the basis of the hourly rate only, and as such, the actual number of days in a particular month, in my opinion, is immaterial for the purpose of calculating overtime wages.

Regards

To arrive at the wages per day for the purpose of payment of overtime wages, it should be divided by 26 days only as per the provisions of the Act. There is no deviation or interpretation to this since it is already written in the Act. Non-compliance with this will be a violation.

For the purpose of calculating the daily salary, the amount should be divided by 30 or 31, depending on the number of days in the month for which the salary is payable.

Adoni Suguresh
Labour Laws Consultant