Confused About Overtime Pay: Should We Use Minimum or Fixed Gross Wages?

Respected Group Members,

Our company is a manufacturing firm located in Gujarat. I would like to understand the definition of wages on which we should pay overtime at double the rate of wages as specified under the Factories Act of 1948. Please provide your comments or replies on the following two points:

1. Should we consider Minimum Wages or Fixed Gross Wages when calculating overtime wages?
2. If the payment of overtime on minimum wages is specified under Certified Standing Orders, is it legally correct?

Yours Faithfully,

Employee gross rate of wages is to be considered for the calculation of overtime wages.

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DEEPU9813

This forum is not where cases are fought, so don't ask for proof. Any organization is covered either under the Factories Act or the Shops Act. Both acts state that the basis for overtime pay is twice the normal rate of wages. The normal rate refers to the monthly rate of wages, i.e., gross wages. Therefore, the wage rate of the concerned employee, whether minimum wages or otherwise, will be the basis for calculating overtime wages.

Answer for Question 1: The minimum wage is fixed by the respective state government, and in reality, the actual wages may be higher than the minimum wage. Therefore, overtime (OT) shall be calculated based on the gross wages (wages + DA, if any).

Answer for Question 2: The payment of overtime on minimum wages as per the standing order means that if the fixed wages are lower than the minimum wages, then this will be applicable. However, it is not legally valid to have wages fixed below the prescribed minimum wages.

Remember to maintain a single line break between paragraphs for better readability.

1. If you are paying minimum wages only, then it will be calculated as double the minimum wages.

2. If you are paying more than minimum wages, i.e., BASIC+DA+HRA+COV+OTHER ALL, and this is more than the minimum wages, then OT will be calculated as double of Basic+DA.

Dear Anamika,

Can you please elaborate on your statement "Payment of overtime on minimum wages is specified under Certified Standing Orders, then is it legally correct or not"? Which Certifying Authority has approved this? Can you please upload the relevant document to substantiate your statement?

On this issue, the points mentioned by Shri KM Kogata (reproduced below) are important:

Quote ---
Ans. for Q # 2. Payment of OT on minimum wages as per standing order means if the wages so fixed are lower than minimum wages, then this will be applicable. But it is not legally valid to have fixed the wages below the prescribed minimum wages.---
Unquote // c.neyimkhan