Confused About Calculating Overtime Pay? Let's Clarify the Right Formula Together

Dear Friends,

Can you please guide me on how to calculate the normal overtime hour factor? What I know is:
Basic salary X 12 months / 365 days = 1 day average Basic Salary
1 day average basic salary / 8 hrs = 1 hr average basic salary
1 hr average basic salary X 1.5 Factor = 1 hr normal overtime cost.

Please tell me if this is the actual true formula. If not, please guide me to the best one.

Thanks & Regards,
Khaiser Ali Shah
00966509928983

Dear Mr. Shah,

In my opinion, you can calculate the overtime amount by fixing a certain rate for each hour of extra work and multiplying that rate by the number of hours of extra work performed. This calculation will provide you with the overtime amount earned by an employee. For example, if XYZ works for an extra 5 hours, and we have set a rate of 100 rupees per hour for overtime work, XYZ would be eligible for 100 * 5 = 500 Rs.

Regards,
Aparna
HR Professional

Overtime Calculation

Per day salary Basic salary = (pertaining to the number of days in a month) = Basic/31 = Salary per day.

Per day basic / 8 = per hour salary.

Overtime = 1.25 * per hour salary * number of overtime hours worked.

Liz

Hi Liza,

Thank you for your reply. I am looking for further suggestions, so come on, friends, give me the method of your overtime calculation. Once again, thanks to Liza.

Khaiser

Overtime calculation varies from country to country depending on the factories act. In India, overtime is given as double the normal rate (Basic + DA) for the extra hours worked. If it is a 31-day duty, then the hourly rate is calculated as A/31/8. If it is a 26-day work period, then the hourly rate is calculated as A/26/8, and so on.

Dear Murali,

That's okay, but it differs from company to company, so please send me the one your company follows.

Regards

Hi all,

Mr. Tiwari is right; overtime (OT) should be paid double the wages. When calculating the hourly wage, we should not consider 9 or 10 hours; we should only consider 8 hours because the Factories Act states that working hours should be 8 hours, including all intervals. Importantly, we should not allow an employee to work overtime exceeding 48 hours in 3 months.

Thank you.

Hi,

One company provides double overtime to its employees based on their gross salary. The question is why they use the gross salary for overtime calculation. For example, if the gross salary is $5000, working hours are 2, and the month is May:

$5000/31 = $161 (one day wage)
$161/8 = $20 per hour
$20 x 4 = $80 overtime pay

Using the gross salary for overtime calculation ensures that the extra pay is proportionate to the employee's overall earnings. This method aims to compensate employees fairly for their additional hours worked.

Dear Khaiser,

The calculation you have stated is true, but please look into the actual values (1.25 or 1.5) placed in the Saudi market.

Regards,
HR_HYD

In factories, when calculating the overtime (OT), Sundays should be excluded. The calculation is based on dividing the basic wages by 26 and then by 8 hours. In India, the OT rate should be double, while in the UAE, it should be 1.5 times the regular rate.

According to the Factories Act, I agree with Mr. K. Tiwari's opinion. Overtime is given at double the normal rate (Basic + DA) for the extra hours worked. If it is a 31-day duty, then the hourly rate is calculated as A/31/8. If it is a 26-day work schedule, then the hourly rate is calculated as A/26/8, and so on.

Average basic salary should only be considered on a monthly basis.

Regards,
Venkat

Overtime is calculated at double the rate of normal wages, i.e., Basic + DA. My question is, is there no provision for including allowances in overtime calculations?

Please see the attached file for overtime.

Regards, Salah

Overtime Wage Calculation as per the Factories Act 1948

As per the Factories Act 1948, the calculation of overtime wages is as follows:

Up to 9 hours per day or 48 hours per week, the rate is normal. Beyond that, the rate will be doubled.

Accordingly, calculate the difference between the scheduled working hours and the hours specified above. For the difference, the OT payment will be at a single rate and double for any excess hours. If there is a difference in the calculation on a daily and weekly basis, the employee should be paid based on whichever is more beneficial to them.

Example Calculation

For example, a company works 6 days a week with a uniform working time of seven and a half hours per day (8 hours including a 30-minute break). Suppose a worker works an extra 2.5 hours, totaling 10 hours in a day, with a per hour remuneration of Rs. 30. The overtime payment calculation will be as follows:

1) Daily Basis: Scheduled time - 7.5 hours
- OT time @ normal rate: 9 - 7.5 = 1.5 hours
- OT payment: 1.5 x 30 = Rs. 45 - (A)
- OT time @ double rate: 10 - 9 = 1 hour
- OT payment: 1 x 30 x 2 = Rs. 60 - (B)
- Total: 45 + 60 = Rs. 105

2) Weekly Basis: Scheduled time - 7.5 x 6 = 45 hours
- OT time @ normal rate: 47.5 - 45 = 2.5 hours
- OT payment: 2.5 x 30 = Rs. 75 - (A)
- OT time @ double rate: 47.5 - 48 = N/A
- OT payment: 0 x 30 x 2 = Rs. 0 - (B)
- Total: 75 + 0 = Rs. 75

The higher amount is Rs. 105 (daily basis).

Additional Example

If the worker in the example above works an additional 2.5 hours for three days in the same week, the calculation will be as follows:

1) Daily Basis: Scheduled time - 7.5 hours
- OT time @ normal rate: 9 - 7.5 = 1.5 hours
- OT payment: 1.5 x 3 x 30 = Rs. 135 - (A)
- OT time @ double rate: 10 - 9 = 1 hour
- OT payment: 1 x 3 x 30 x 2 = Rs. 180 - (B)
- Total: 135 + 180 = Rs. 315

2) Weekly Basis: Scheduled time - 7.5 x 6 = 45 hours
- OT time @ normal rate: 48 - 45 = 3 hours
- OT payment: 3 x 30 = Rs. 90 - (A)
- OT time @ double rate: 52.5 - 48 = 4.5 hours
- OT payment: 4.5 x 30 x 2 = Rs. 270 - (B)
- Total: 90 + 270 = Rs. 360

The higher amount is Rs. 360 (weekly basis).

Regards,
Abbas.P.S

The formula for overtime calculation is wages, which they get per day/8 * No. of Hrs. OT * 2.

Thanks and Regards,
Manjunath
Human Resources
PSK Engg. Pvt. Ltd.
Mob: [Phone Number Removed For Privacy Reasons]

Find more information at https://www.citehr.com/69550-overtim...#ixzz16NdpxULa

Dear Manjunath,

Overtime Payment Calculation as per the Factories Act

As per the Factories Act, I have furnished the details on the calculation of overtime payment. Accordingly, the difference between 9 hours per day and the daily scheduled time or 48 hours and the weekly scheduled time, as the case may be, normal wages will be paid. Beyond this, it will be double; i.e., the overtime payment will be a mixture of normal and double rates.

However, according to you, it is double the normal rate for the whole overtime. Please share how we can bypass the Factory Act and what is the alternate legislation for your calculation?

Regards,
Abbas P.S

I want to know if I work on Monday, Tuesday, and Wednesday from 9 am to 9 pm daily, and after that, I take leave from the company using my annual leave, how will my overtime be calculated? Please reply.

Overtime Calculation as per the Factories Act

As per the Factories Act, we can only have overtime work for a maximum of one hour daily, and the payment will be for two hours (i.e., double).

Calculations

Total Wages (All-Inclusive) / 208 x OT Hours x 2. (where 208 = 26 days x 8 hours)

This payment for overtime will attract ESI contribution (if applicable) and not PF contribution.

Regards,
V K Gupta

Dear All,

As per the Factories Act, a person who has worked more than 9 hours in a day and 48 hours in a week should be paid double overtime. The calculation is as follows:
Basic + D.A / 26 / 8 * OT Hrs * 2

Suppose the Basic + D.A is Rs. 15,000 and the OT is 45 hours, then the calculation will be:
15,000 / 26 = 577
577 / 8 = 72
72 * 45 * 2 = 6,480

Hi Rajneesh,

In the above formula Basic + D.A / 26 / 8 * OT Hrs * 2, what does that '2' refer to?

Regards,
Jagdish.

Dear Jagdish Ji,

"2" refers to double the OT hours.

Regards,
Rajnish

Dear Mr. Khaiser Ali,

Please note the Overtime Calculation formula is as follows:
Basic / 26 / 8 * number of OT hours * 2.
This is because if the workers work beyond their regular hours, we are required to compensate them with double wages.

Thank you for your attention to this matter.

Thanks & Best Regards,
Ambika

Dear all,

I believe the OT formula is: (Basic + DA) / 26 / 8 * OT Hrs.