Is It Legal to Offer Comp Off Instead of Overtime Pay? Seeking Advice on Laws and Cases

According to Section 59 of the Factories Act, 1948, the worker working more than 8 hours is entitled to overtime wages, and such wages shall be paid at double the rate. However, in our company, there is a policy of giving Comp off for such extra work. So, is this right as I will get only a single payment, and that too in a non-cash nature? Are there any legal cases, laws, or judicial pronouncements relating to this issue? Please, I need your help on this issue.

Law on Overtime

The law is clear on overtime: it requires double the rate of ordinary wages. The wording of the Act is clear and unambiguous.

Extra Wages for Overtime

(1) 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.

(2) For the purposes of sub-section (1), "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.

A plain reading of the wording of the section makes it clear. Read Section 53 of the Factory Act for understanding the Compensatory Act. The proposition is clear: overtime means double wages for the number of hours. Limits of overtime are also stipulated.

Dear colleague,

As per the provisions of the F.A., you cannot substitute O.T. with compensatory off. For O.T. hours, you have to pay at double the rate, and for working on a weekly off, the same has to be compensated by giving compensatory off, which should be given on or before the 10th working day.

Regards,
Vinayak Nagarkar
HR Consultant

I do agree with Mr. Nathrao and Mr. Vinayak Nagarkar that overtime should be paid at double the rate. However, we need to understand this from the perspective of the establishment that has adopted it as a policy. Working on an off-day also attracts payment under overtime but is compensated with a compensatory off for such extra work.

There is nothing wrong with substituting extra leave. In my opinion, the workman or workmen should refer the matter to the Labour Office or Factory Inspector for interpretation.

Thank you for the reply, experts. I would like to know one thing: is it legal to substitute overtime with comp time off? Are there any provisions in the Factories Act that outline the process for the discharge of overtime? Does the Factories Act mention comp time off, aside from Section 53? Any specific section numbers or judicial pronouncements on this matter would be greatly appreciated.

Dear Mr. Narayanan,

I beg to differ with the interpretation of Mr. Mohanty on OT and Comp off. The relevant provisions lend no different scope other than paying OT at double the rate and no substitution by comp off. We are not discussing right or wrong but what is provided by law. There is also no question of paying OT for working on the weekly off under the provisions except giving substituted off.

Regards, Vinayak Nagarkar HR Consultant

Dear Mr. Vinayak Nagarkar,

Is there any case law or pronouncement in this regard which specifically provides that OT cannot be substituted for comp off? It would be of great help as I will have a reference in this regard.

Regards

Law clearly states when OT is to be given and when compensatory time off is to be provided. OT and compensatory time off are not comparable in any manner, and they are not substitutes for each other.

Seeking a court order on this matter is unnecessary as no court will issue a judgment in violation of the clear law on the subject. Employers may attempt to save money by using such tactics, capitalizing on the ignorance of workers. It is important to be cautious as HR will address any violations.

Please let me know if you need any further assistance or clarification.

True, Mr. Nathrao,

But I would like to check it from all aspects. In other countries, there is an act called the Fair Labor Standards Act, which talks about this issue. I would like to know if there is any Indian law in this regard or any other judicial cases related to it.

Not to my knowledge.

Conditions differ from country to country.

I would like to know the court judgment that opposes the comp off usage instead of overtime.

Compliance with Indian Law

Respected Nathrao ji, what you mentioned in your note #3 is correct. The bottom line is that we work in India, and we must follow Indian law regarding this particular matter, not any other country's laws. If any organization is not complying, they will have to answer to the authorities when called upon.

Overtime Payment on National Holidays

One more thing I would like to share: when it’s a National Holiday or Festival and overtime is paid, it will be paid at three times the regular rate rather than double.

If there are still any questions, I suggest you write to the respective Labour Officer (LO) or Labour Commissioner (LC) of your region. I hope they will also confirm the same.

Thank you & regards,

Basics need to be clear. Courts interpret the law. Courts do not make the law. That is the task of the legislature. When the wordings of the law are clear, as in this case, we just have to follow it. When the offense is to be given is laid down. When and how it is treated is clearly laid out. Now, why look for caselaw to reiterate it.

Dear Mr. Vinayak Nagarkar,

Thank you for your response.

In my post, I clearly mentioned that the overtime is to be paid at double the rate as per the provision of the law. This aligns with the opinion expressed by you and Mr. Nathrao.

The interpretation of overtime and compensatory offs was based on the "adopted policy of the company," with anticipation of a Chief Security Officer.

Therefore, in my concluding statement, I advised the concerned employee to refer the matter to the appropriate authority for interpretation or action.

""One more thing I would like to share, when it's National Holiday or Festival and overtime is paid it will be paid thrice rather than double.""
Good_hr
Could you please clarify this statement.
To my knowledge there are three National Holidays-26 Jan, 15 Aug and 02 Oct,
Workers of called for duty need to be paid DOUBLE wages and not triple.

Dear Mr. Nathrao,

The payment to be made as per the state rules under the INDUSTRIAL ESTABLISHMENTS (NATIONAL AND FESTIVAL HOLIDAYS) ACT, 1963 where the establishment exists, or under Central Rules, as the case may be.

*Central rules specify payment: double or substituted with a leave with pay.
**Andhra, Odisha, Tamil Nadu, and Karnataka state pay double or substitute with leave with pay.
***Maharashtra and Kerala: double the rate along with one leave or thrice the rate.

Dear colleagues,

I believe the original query was regarding OT and Comp. Off under the Factories Act/Rules and not about payment for working on National/Festival holidays.

Regards,
Vinayak Nagarkar
HR Consultant

The person who started this thread has not given an answer to the query raised by Srinath Sai Ram regarding the category to which the employee belongs. Obviously, if the employee falls under the supervisory category, there is no legal hurdle to provide compensatory time off in lieu of double the rate of wages. It is important to note that in such cases, if a supervisory employee is granted compensatory time off, it should be considered as a bonus. This is because Section 59 of the Factories Act, which addresses double the rate of wages, is applicable only to workers.

In our company, GSFC, they give compensatory time off instead of overtime. They implement this provision during wage revisions as part of the 2P settlement with the Union. Is this possibility?