Hello, I need insights on the correct way to calculate employee overtime pay.
Overtime Calculation Basis
1. Should it be based on the CTC amount or only on the base salary plus allowances?
Allowances Included in Overtime Calculation
2. Allowances: Does it include - House Rent Allowance, Conveyance Allowance, and Special Allowance?
From India, Shillong
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Overtime Calculation Basis
1. Should it be based on the CTC amount or only on the base salary plus allowances?
Allowances Included in Overtime Calculation
2. Allowances: Does it include - House Rent Allowance, Conveyance Allowance, and Special Allowance?
From India, Shillong
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Overtime Calculation Under the Factories Act
Overtime calculation under the Factories Act is for more than 48 hours in a week or 9 hours per day. It should be based on gross monthly wages. In the case of more than 9 hours per day, the 9th hour will be at a single rate, and the remaining hours will be double the ordinary rate of wages (monthly gross). For overtime hours exceeding 48 hours in a week, the entire payment will be at double the rate.
Regards, S K Bandyopadhyay (WB, HOWRAH) CEO-USD HR Solutions
From India, New Delhi
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367Overtime calculation under the Factories Act is for more than 48 hours in a week or 9 hours per day. It should be based on gross monthly wages. In the case of more than 9 hours per day, the 9th hour will be at a single rate, and the remaining hours will be double the ordinary rate of wages (monthly gross). For overtime hours exceeding 48 hours in a week, the entire payment will be at double the rate.
Regards, S K Bandyopadhyay (WB, HOWRAH) CEO-USD HR Solutions
From India, New Delhi
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OT is calculated on Basic wage + D A. at double the rate when worked more than 9 hours a day or 48 hrs in a week HRA Conveyance allowance are not included in calculation of OT.
From India, Pune
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From India, Pune
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Wages for Overtime Calculation
Wages for the purpose of overtime calculation shall include all allowances as per the contract of employment. Therefore, if the employee is given HRA separately as a compensatory allowance to meet the cost of staying in leased accommodation, then only the same can be excluded from the scope of wages. Similarly, a conveyance allowance paid to reimburse or compensate the cost of travel to and from the factory can be excluded.
Special Allowance Consideration
Special allowance is an allowance paid only to some categories of employees who possess special skills. If the employee to whom a special allowance is paid works overtime, naturally, his overtime allowance should be calculated on the wages including the special allowance. It is also an accepted rule that an allowance paid to all employees universally should be part of basic wages.
Simply put, if the HRA, conveyance, and special allowance are subjected to proportionate deduction in the case of absence without leave/without pay, they are part of the salary only, and in such a scenario, the gross salary inclusive of allowances should be considered for overtime calculation. On the other hand, if HRA is paid to a particular employee as per a separate arrangement, then that amount is practically an amount payable even if the employee is absent without leave for a few days. Obviously, if he works overtime, the landlord will not ask for enhanced rent. Similarly, if an employee is paid a traveling allowance for the days physically present at a prescribed rate, the same is not required to be paid for overtime working because, in order to do the overtime work, he is not going back and coming again so that he will incur additional expenditure.
From India, Kannur
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Wages for the purpose of overtime calculation shall include all allowances as per the contract of employment. Therefore, if the employee is given HRA separately as a compensatory allowance to meet the cost of staying in leased accommodation, then only the same can be excluded from the scope of wages. Similarly, a conveyance allowance paid to reimburse or compensate the cost of travel to and from the factory can be excluded.
Special Allowance Consideration
Special allowance is an allowance paid only to some categories of employees who possess special skills. If the employee to whom a special allowance is paid works overtime, naturally, his overtime allowance should be calculated on the wages including the special allowance. It is also an accepted rule that an allowance paid to all employees universally should be part of basic wages.
Simply put, if the HRA, conveyance, and special allowance are subjected to proportionate deduction in the case of absence without leave/without pay, they are part of the salary only, and in such a scenario, the gross salary inclusive of allowances should be considered for overtime calculation. On the other hand, if HRA is paid to a particular employee as per a separate arrangement, then that amount is practically an amount payable even if the employee is absent without leave for a few days. Obviously, if he works overtime, the landlord will not ask for enhanced rent. Similarly, if an employee is paid a traveling allowance for the days physically present at a prescribed rate, the same is not required to be paid for overtime working because, in order to do the overtime work, he is not going back and coming again so that he will incur additional expenditure.
From India, Kannur
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The purpose of overtime calculation is Basic + DA + all allowances, except for the production-linked bonus.
In our country, there are no specific rules for the payment of salary; however, it is understood based on minimum wages. The minimum wages often do not meet the basic needs of individuals, leading to the exploitation of human resources.
Overtime Calculation Formula for Salaried Employees
For salaried employees, the formula is: OT = 2 times (Basic salary + DA + any other allowance) divided by the total number of working days in a month, further divided by 8 to find the hourly rate.
From India, Mumbai
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In our country, there are no specific rules for the payment of salary; however, it is understood based on minimum wages. The minimum wages often do not meet the basic needs of individuals, leading to the exploitation of human resources.
Overtime Calculation Formula for Salaried Employees
For salaried employees, the formula is: OT = 2 times (Basic salary + DA + any other allowance) divided by the total number of working days in a month, further divided by 8 to find the hourly rate.
From India, Mumbai
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Hi Nazarine, Is your query related to those employed in a factory, shops, and other commercial establishments? Once this is clear, then the definition of 'wages' will also be clear. In any case, there is no concept of 'CTC' under Indian labor laws, so you need not worry about it.
Please go through the contents in these cases:
- Numaligarh Refinery Ltd. And Others v. Workmen, Represented By The General Secretary Gauhati High Court - Sep 8, 2022.
- Govind Bapu Salvi And Others v. Vishwanath Janardhan Joshi And Others Supreme Court Of India - Sep 22, 1993.
- Workmen Of The Calcutta Electric Supply Corporation v. Calcutta Electric Supply Corporation Supreme Court Of India - May 1, 1973
- EMPLOYEES UNION ORDNANCE FACTORY v. Ministry of Defence Central Administrative Tribunal - Apr 25, 2018.
From India, Bangalore
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Please go through the contents in these cases:
- Numaligarh Refinery Ltd. And Others v. Workmen, Represented By The General Secretary Gauhati High Court - Sep 8, 2022.
- Govind Bapu Salvi And Others v. Vishwanath Janardhan Joshi And Others Supreme Court Of India - Sep 22, 1993.
- Workmen Of The Calcutta Electric Supply Corporation v. Calcutta Electric Supply Corporation Supreme Court Of India - May 1, 1973
- EMPLOYEES UNION ORDNANCE FACTORY v. Ministry of Defence Central Administrative Tribunal - Apr 25, 2018.
From India, Bangalore
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Nazarine
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