How many Month Days would be taken in calculating OT Rate as per Factory Act. Is it 26? or Is it 30?

Dear Sir/Madam,

I have a query: How many month days should be considered when calculating the OT rate as per the Factory Act? Is it 26 or 30?

For example, if the basic and DA of an employee are Rs. 15,000, what would be the OT rate (1-hour rate of salary) for the employee?

Please do the needful.

To calculate overtime wages, you have to take the average rate of wages. The average rate of earnings is the average of the earnings for the days he has "actually worked". As such, it should be monthly wages divided by 26 and then divided by 8.

Dear Madhu.T.K Sir,

What I feel is that under the Factory Act, the calculation of overtime daily average earnings for the days actually worked by the workman is applicable for piece rates only.

My understanding is that the hourly rate of overtime is to be calculated by dividing the daily rate by 8 if the workman is daily rated. In the case of monthly rated workmen, first, we have to convert the monthly rate into a daily rate by dividing by the number of days in a month (generally). The converted daily rate is then to be calculated into an hourly rate by dividing by 8.

However, in some states, the monthly rate is converted into a daily rate by dividing by 26, as per the notification of that state under the Minimum Wage Act.

I am posting this only to correct myself.

In respect of monthly paid workers, the system of dividing the gross salary by 30 is also in practice. But when it comes to employees who are eligible for overtime wages, it is always fine if you take the same 'actually worked' principle as applied for piece-rated employees.

Again, average wages as per the Minimum Wages Act are monthly wages divided by 26 and not 30.

Dear Madhu Sir,

I always read your best legal opinion and also follow you to gain knowledge from your posts.

Regarding OT calculation, you posted the opinion below a long time ago. Please clarify what is correct as per the law and under which Act.

"Under the Factories Act, OT is calculated at double the hourly average rate of wages. The hourly rate is the daily wages divided by 8, and the daily rate is the monthly wages (Basic + DA only) divided by 30 or 26, as the case may be. It is not necessarily 26 days since the Factories Act does not mention it like the Gratuity Act, where the daily rate is calculated by dividing the monthly salary by 26 and not by 30, irrespective of whether the employee is monthly rated or daily rated. However, under other labor enactments, the daily rate of wages means monthly wages divided by 30 in the case of monthly rated workers and 26 in the case of daily rated workers."

Regards,

Pankaj Shukla
Gurgaon

Both principles are in practice, but since the overtime wages are paid to workers based on their daily rate of wages as per law (monthly wage divided by 26), it is advisable to use 26 as the divisor for both daily rated workers and monthly rated workers.