Overtime Pay Confusion: Should It Include Allowances or Just Basic + DA?

Dear HR Colleagues, As per Section 59(2) of the Factories Act, 1948, overtime should be paid as per the "Ordinary Rate of Wages," which includes Basic + DA + allowances. However, the general trend observed is that OT is paid based on Basic + DA. I would like to have your opinion on the same.

Regards, Sanjay Neve

Dear Sanjay, We should always try to adhere to the Acts and Rules applicable to our unit. In case of litigation, who will save you?

R N KHOLA

Ordinary Rate of Wages in Overtime Calculations
Factories Act 1948 specifies that in respect of overtime work, the workman shall be entitled to wages at the rate of twice his ordinary rate of wages. Now, what is the Ordinary Rate of Wages? Undoubtedly, Basic Pay and DA are included, and accordingly, the rate is decided in a majority of establishments. What allowances are included and what are excluded have to be examined on a case-to-case basis, looking at the facts and circumstances regarding them. It can be said in general that all payments made every month as a fixed sum could be said to be included. Whatever amount is paid in variation or is a reimbursement is excluded.