Is Overtime Pay Encouraging Unnecessary Hours? How Should We Tackle This Dilemma?

Dear All,

I am working with an engineering company. We have a practice of giving overtime pay to employees of certain grades/levels. However, we have observed that some employees are staying back primarily to receive overtime pay without having much work at hand. How can we address this issue? Do you have any suggestions on how to prevent this behavior? Alternatively, should we consider discontinuing this practice altogether? What potential repercussions should we be aware of in terms of legality?

Thank you.

Information Required for Analysis

To give you a reply, we need a little more information. Can you please confirm what your final product is, how many employees work on the shop floor, and how many are paid for overtime (OT)? Since when have you been paying OT? What is the percentage of OT against the total wage bill? In comparison with regular production hours, how many extra hours do workers work?

Analyzing Production Downtime

Have you studied the causes of production downtime during regular production hours? If yes, what percentage is the downtime, and have you analyzed the downtime? Have you analyzed the time spent on rework? What percentage does rework form against the total work?

Factors Affecting Productivity

We do not know your production process; therefore, it is difficult to provide comments on the payment of OT. However, human, as well as machine productivity, depends on the following factors:

a) Conducting time and motion studies

b) Proper Material Resource Planning

c) Coordination amongst Sales, Production, and Purchase departments

d) Proper maintenance of the machines used

e) Availability of spares for maintenance

f) Availability of raw material

g) Paying the vendors on time, ensuring that they do not stop the supply of materials due to the clearance of their past invoices

h) Implementation of Operations Research techniques in production

i) Employing right-skilled employees

j) Giving prominence to quality work, doing the right thing the first time, and thereby reducing rework

If you work on the above points, possibly your workers may not need to spend excess time beyond working hours. Our objective should be to improve scientific work practices and thereby make redundant payment of OT. Above all, how do you measure the productivity of the various departments? Which ratios do you use to measure productivity? For further queries, feel free to contact me.

Thanks,

Dinesh Divekar

If it enhances productivity and you earn profit, then there is no harm in continuing it. But if you have other concerns, then it is better to stop that practice before the situations become worse.

Legally, overtime can be stopped at any time if it doesn't violate any agreement.

Dear Solution Seeker,

Your Query: "I am working with an engineering company. We have a practice of giving overtime pay to employees of some grades/levels. Now, what we have observed is that employees are staying back just to get OT pay without much work in hand. How can we stop this? Any suggestions? Or can we just stop this practice suddenly? Are there any repercussions that we need to consider in terms of legality?" Pune, 8.6.17, Asmita

Solution: Payments for Overtime Work are categorically for the "Work due to the exigency of that assigned work to be done beyond normal 8 Hours-shift Work/Duty and it is governed by the laid down Law in this regard.

The Law prescribes that the Data regarding OT Work is reported to the Inspectorate/Govt Authority and the stipulated OT Limit is not violated without express permission of the said Authority. There is No Blanket sanction/Exemption granted to Employers to keep their Workers on Overtime Work.

Overtime Work is purely Business-Need-based. As such, OT Payments or allowance are neither in the nature of ex-gratia nor "negotiable," and any Malpractice in this respect must be discontinued forthwith, irrespective of its continuance for any period of time, failing which its unlawful, unauthorized misuse shall be deemed a violation of the Laws and Penalties imposed on the Employer.

Further, whereas such a malpractice as aforesaid remains Unlawful, it is also Unfair to all stakeholders of the Industrial Establishments such as yours and is likely to vitiate the IR Scenario in the neighboring undertakings.

Invite the Union, in case your Undertaking has one duly Registered and Recognized by your Employer, discuss with them and sort out and arrive at a Settlement if needed, and do away with the Unhelpful Practice.

By the by, please urge upon your Managers/Supervisory Staff to "manage" the Work; the Workplace and the Workers in a Professional manner and obey the Laws applicable.

Laws ask None if s/he would comply, that is Not the Choice; the Choice is "How" - with or without Legally Imposed Penalties.

Someday, the Laws will take notice of the aforesaid "Violation" and come down heavily, and as we now know, our Judiciary shall always Uphold the Rule of Law irrespective of repercussions.

And, remember our Advice... "Anything Worth Doing is Worth Doing, WELL."

Kritarth Team of Seasoned IR Professional Practitioners are always available to Help/Guide, every stage of implementing "the Solution."

Regards, Team Kritarth

Considerations Before Stopping Overtime

Apart from legality, I think there is something worth considering. If the practice of overtime has been in place since the beginning, it is not advisable to stop it suddenly from the staff's morale point of view. I suggest taking steps slowly.

However, think and review the reason first why you want to stop it. Is it because of financial reasons? Is it because there is no sizable volume of work at present or not expected to be for a longer span? Do you think this overtime attitude can be curtailed with suitable instructions from Management or HR? You have to consider both angles. Tomorrow, it should not happen that the company will have a tremendous workload, but no one will be ready to put in extra hours to finish it, which will hamper the projects. Do you think educating or directing them to finish given tasks in the given time will help? You are the best judge!

Upon review, if it emerges that overtime should be stopped, involve HODs in the discussion on how they will contribute to handling their team and supporting the decision. This way, HR alone will not have to face the music.

Hi, Firstly, please help clear a few doubts:

1) How many employees are working for OT?
2) What is their productivity level during OT (if it can be measured)?
3) Is their work area under camera surveillance?
4) Is it target-based work?

Suggestion:
Find ways to track the work of the OT group versus their productivity.
Probably, after receiving answers to my questions, I can provide some advice on the matter.

Regards,
Priyanka Vinda

Please see whether the Factories Act or the Shops and Commercial Establishments Act is applicable. If so, overtime (OT) payment beyond the period stipulated in the act is statutory. However, you have the right not to engage beyond the period specified.

1. Overtime work is not the right of an employee. Employees are asked/instructed by the employer to stay back for doing overtime work; they cannot stay for OT on their own. It is the prerogative of the employer.

2. In some companies, workmen stay back for OT as sometimes there is connivance between the workmen and the supervisory staff, and the workmen stay back.

3. You need to check who issues instructions to workmen to stay for OT. That person has to be clearly instructed on the subject.

OT is primarily linked to official needs such as production, sales, or accounting related to completing a job on time. I agree with the views of Vaishalee Parkhi. It would be better to watch for the behavior of overstayal only for OT and if it is not linked to productivity or need-based, you can issue an advisory through the Team Lead for control rather than scrapping it altogether. Sometimes, OT will be a fraction of the benefit the organization gets through improved productivity, etc.