The Factory Act states the following:
a) As per Section 59(1), it has to be paid at the "ordinary rate of wages."
b) Section 59(2) defines ordinary rates of wages as basic wages plus such allowances as the worker is entitled to for the time being, excluding bonus and wages for overtime.
My Questions
1) Is overtime in factories to be calculated based on Basic + DA, or do we have to consider all allowances?
2) Is there any case law or ruling that specifies that overtime is only calculated on Basic and/or DA?
Experts, please shed some light on this subject.
Thanks in advance for your help.
From India, Aurangabad
Acknowledge(1)
Amend(0)
14a) As per Section 59(1), it has to be paid at the "ordinary rate of wages."
b) Section 59(2) defines ordinary rates of wages as basic wages plus such allowances as the worker is entitled to for the time being, excluding bonus and wages for overtime.
My Questions
1) Is overtime in factories to be calculated based on Basic + DA, or do we have to consider all allowances?
2) Is there any case law or ruling that specifies that overtime is only calculated on Basic and/or DA?
Experts, please shed some light on this subject.
Thanks in advance for your help.
From India, Aurangabad
Acknowledge(1)Amend(0)
Hi Sunnydays, OT can be paid on only basic+DA, and not rule to consider other allowances exept food allowances.
From India, Kolhapur
Acknowledge(2)
Amend(0)
From India, Kolhapur
Acknowledge(2)Amend(0)
Dear All, (OT paid on Basic+DA+Special Allowance+Cash value of subsidised food) and any other allowance except conveyance allowance and HRA. hope this will clear the confusion.
From India, Mumbai
Acknowledge(3)
Amend(0)
From India, Mumbai
Acknowledge(3)Amend(0)
Dear friends, The attached judgment of the Madras HC provides for inclusion of allowances also for computation of OT allowance, pl.note. kumar.s.
From India, Bangalore
Acknowledge(4)
Amend(0)
From India, Bangalore
Acknowledge(4)Amend(0)
As per the Act and Madras HC’s decision In factories OT wages should be calculated taking all allowances except those excluded u/s 59 . VARGHESE MATHEW
From India, Thiruvananthapuram
Acknowledge(2)Amend(0)
From India, Thiruvananthapuram
Acknowledge(2)Amend(0)
Understanding Basic Wages and Allowances
Recently, the Provident Fund (PF) has insisted that basic wages include all to which an employee is entitled by presenting themselves for work. This applies to both men and women and is also socially correct. Certain allowances, such as House Rent Allowance (HRA) and Conveyance, remain the same whether the employee works regular hours, overtime, or takes short leave. Overtime pay is not necessary for these cases. However, when an employee is on paid leave, the earnings considered are the Basic Wage, and overtime pay needs to be calculated based on that wage.
The Role of Allowances
In my observations, various allowances were introduced to avoid payments such as PF, Bonus, Gratuity, and overtime, which are considered indirect. I wonder why unions accepted these allowances. Why didn't they insist on providing homes instead of house rent allowance, education instead of education allowance, conveyance instead of conveyance allowance, and so on for all allowances? It is our shortsightedness that led us to convert everything into monetary terms, resulting in the dilemmas we face now.
Regards,
Vibhakar Ramtirthkar.
From India, Pune
Acknowledge(0)Amend(0)
Recently, the Provident Fund (PF) has insisted that basic wages include all to which an employee is entitled by presenting themselves for work. This applies to both men and women and is also socially correct. Certain allowances, such as House Rent Allowance (HRA) and Conveyance, remain the same whether the employee works regular hours, overtime, or takes short leave. Overtime pay is not necessary for these cases. However, when an employee is on paid leave, the earnings considered are the Basic Wage, and overtime pay needs to be calculated based on that wage.
The Role of Allowances
In my observations, various allowances were introduced to avoid payments such as PF, Bonus, Gratuity, and overtime, which are considered indirect. I wonder why unions accepted these allowances. Why didn't they insist on providing homes instead of house rent allowance, education instead of education allowance, conveyance instead of conveyance allowance, and so on for all allowances? It is our shortsightedness that led us to convert everything into monetary terms, resulting in the dilemmas we face now.
Regards,
Vibhakar Ramtirthkar.
From India, Pune
Acknowledge(0)Amend(0)
Ordinary wages also does not includes amount of bonus & overtime as mentioned in the in Chapert VI(59) of Factory act. Anand
From India, Mumbai
Acknowledge(0)Amend(0)
From India, Mumbai
Acknowledge(0)Amend(0)
Understanding Wage Definitions and Overtime Calculation
Different enactments have given various definitions to the word "wages." However, one common aspect is the inclusion of basic wages and dearness allowances. Since overtime is paid for work beyond one's scheduled working hours, the compensation for these extended hours, i.e., overtime payment, should be calculated based on the daily average of wages, including all allowances to which the employee is entitled. A simple way to decide this is by considering the wages to be deducted if the employee is on leave without pay. If one takes one LOP (Leave of Pay), naturally, we will deduct one day's salary from their monthly pay, and that should be the basis for calculating OT wages. The daily wage should be divided again by 8 hours to determine the hourly rate of wages.
The daily rate of wages shall not include any allowance paid based on attendance. For example, for attending the night shift, there can be a night shift allowance that is excluded from wages. Similarly, if the conveyance allowance is not a fixed sum per month but is based on the number of days worked, it can also be excluded from wages. This is because for attending a day's work of 8/9 hours, the employee is paid one conveyance allowance, which is sufficient even if they work for 10/12 hours.
Regards,
Madhu.T.K
From India, Kannur
Acknowledge(4)
Amend(0)
Different enactments have given various definitions to the word "wages." However, one common aspect is the inclusion of basic wages and dearness allowances. Since overtime is paid for work beyond one's scheduled working hours, the compensation for these extended hours, i.e., overtime payment, should be calculated based on the daily average of wages, including all allowances to which the employee is entitled. A simple way to decide this is by considering the wages to be deducted if the employee is on leave without pay. If one takes one LOP (Leave of Pay), naturally, we will deduct one day's salary from their monthly pay, and that should be the basis for calculating OT wages. The daily wage should be divided again by 8 hours to determine the hourly rate of wages.
The daily rate of wages shall not include any allowance paid based on attendance. For example, for attending the night shift, there can be a night shift allowance that is excluded from wages. Similarly, if the conveyance allowance is not a fixed sum per month but is based on the number of days worked, it can also be excluded from wages. This is because for attending a day's work of 8/9 hours, the employee is paid one conveyance allowance, which is sufficient even if they work for 10/12 hours.
Regards,
Madhu.T.K
From India, Kannur
Acknowledge(4)Amend(0)
Need help regarding, attendance award, during in deduction of ESIC, attendance award could be included or excluded.
From India, Bangalore
Acknowledge(0)Amend(0)
From India, Bangalore
Acknowledge(0)Amend(0)
Attendance bonuses paid on a monthly basis will attract ESI, whereas the same bonus paid quarterly, half-yearly, or annually based on the attendance in the respective period will not attract ESI. Simply put, all allowances that are paid at intervals of more than two months will not be considered for ESI deduction.
Madhu.T.K
From India, Kannur
Acknowledge(0)Amend(0)
Madhu.T.K
From India, Kannur
Acknowledge(0)Amend(0)
What is the maximum hours of overtime an employee can perform in a organisation? As per factories act for a adult for a adolscent
From India, Bengaluru
Acknowledge(0)Amend(0)
From India, Bengaluru
Acknowledge(0)Amend(0)
There are state rules on this. It may vary from 50 hours to 75 hours per quarter. Madhu.T.K
From India, Kannur
Acknowledge(0)Amend(0)
From India, Kannur
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Wage Calculation.xls
Overtime calculation- weekly hours of work.PDF