I have a doubt about overtime calculation. Is it calculated based on Gross Salary or Basic+DA? Which is the correct formula to use?
Overtime Calculation Formula
Is it:
- Gross Salary/26/8*2*Number of hours of Overtime
- Basic+DA/26/8*2*Number of hours of Overtime
Thank you.
From India, Bangalore
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21Overtime Calculation Formula
Is it:
- Gross Salary/26/8*2*Number of hours of Overtime
- Basic+DA/26/8*2*Number of hours of Overtime
Thank you.
From India, Bangalore
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[(Basic + DA)/26x8]x2xtotal Overtime Hours.
Below is a brief on overtime for your understanding as per the act.
As per Factories Act:
Overtime: Where a worker works in a factory for more than nine hours in any day or for more than forty-eight hours in any week, he shall, in respect of overtime work, be entitled to wages at the rate of twice his ordinary rate of wages.
For the purposes of sub-section (1), "ordinary rate of wages" means the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of foodgrains and other articles, as the worker is for the time being entitled to, but does not include a bonus and wages for overtime work.
As per Minimum Wages Act:
(1) When a worker works in an employment for more than nine hours on any day or for more than forty-eight hours in any week, he shall in respect of overtime work, be entitled to wages -
(a) in the case of employment in agriculture, at one and a half times the ordinary rate of wages;
(b) in the case of any other scheduled employment, at double the ordinary rate of wages;
Shops & Establishment Act:
Overtime: For any work in excess of nine hours on any day or for more than 48 hours in any week, overtime wages are to be paid at the rate of double the wages. It is provided therein that where a worker is required to work beyond the normal hours of work or on any day of rest, he shall be entitled to wages at the rate of twice his ordinary rate of wages in respect of the overtime work or work done on a day of rest, as the case may be.
When payment is made on a monthly scale of pay, the daily rate of wages for a worker can be obtained only by dividing the amount of wages for 30 days by 26. This is done because the workman is entitled to four days as weekly rest during which period he does not work. The reason is that the workman actually gets monthly wages for the work done only for 26 days. Thus for a workman, it is the actual receipt for 26 days which is his monthly scale of pay, i.e., 30 days wages. Therefore, a day's wage should mean the result obtained by dividing the monthly wages by the actual number of working days, i.e., 26 days. This principle will, however, be applicable in the case of such workers who get monthly wages only for the actual number of working days. The formula for the calculation of the overtime wages for one hour is to divide the month's wages by 26 into the number of normal working hours and the result so obtained by them then multiplied by two to calculate one hour's overtime wages.
Hope you have got a fair idea on Overtime and calculation.
From India, Mumbai
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Below is a brief on overtime for your understanding as per the act.
As per Factories Act:
Overtime: Where a worker works in a factory for more than nine hours in any day or for more than forty-eight hours in any week, he shall, in respect of overtime work, be entitled to wages at the rate of twice his ordinary rate of wages.
For the purposes of sub-section (1), "ordinary rate of wages" means the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of foodgrains and other articles, as the worker is for the time being entitled to, but does not include a bonus and wages for overtime work.
As per Minimum Wages Act:
(1) When a worker works in an employment for more than nine hours on any day or for more than forty-eight hours in any week, he shall in respect of overtime work, be entitled to wages -
(a) in the case of employment in agriculture, at one and a half times the ordinary rate of wages;
(b) in the case of any other scheduled employment, at double the ordinary rate of wages;
Shops & Establishment Act:
Overtime: For any work in excess of nine hours on any day or for more than 48 hours in any week, overtime wages are to be paid at the rate of double the wages. It is provided therein that where a worker is required to work beyond the normal hours of work or on any day of rest, he shall be entitled to wages at the rate of twice his ordinary rate of wages in respect of the overtime work or work done on a day of rest, as the case may be.
When payment is made on a monthly scale of pay, the daily rate of wages for a worker can be obtained only by dividing the amount of wages for 30 days by 26. This is done because the workman is entitled to four days as weekly rest during which period he does not work. The reason is that the workman actually gets monthly wages for the work done only for 26 days. Thus for a workman, it is the actual receipt for 26 days which is his monthly scale of pay, i.e., 30 days wages. Therefore, a day's wage should mean the result obtained by dividing the monthly wages by the actual number of working days, i.e., 26 days. This principle will, however, be applicable in the case of such workers who get monthly wages only for the actual number of working days. The formula for the calculation of the overtime wages for one hour is to divide the month's wages by 26 into the number of normal working hours and the result so obtained by them then multiplied by two to calculate one hour's overtime wages.
Hope you have got a fair idea on Overtime and calculation.
From India, Mumbai
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Thx 4 ur response. Sry to say my doubt is not cleared i have seen few companies of same nature calculating ot on basic+da & few on monthly gross salary.
From India, Bangalore
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From India, Bangalore
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It cannot be done since the rate will be very high if you are calculating in gross. Moreover, every company sees the cost-saving. Since you have mentioned that some companies are paying, then their pay structure will be based on minimum wages, and the gross salary will be marginally higher than the basic+DA salary.
For example, in Karnataka, the minimum wages for a salesman are Rs. 3890 (Basic + VDA), but the company will pay a salary of Rs. 4000 for the person. In this case, the gross salary is only slightly higher than the basic salary, so they calculate based on gross.
Regards
From India, Mumbai
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For example, in Karnataka, the minimum wages for a salesman are Rs. 3890 (Basic + VDA), but the company will pay a salary of Rs. 4000 for the person. In this case, the gross salary is only slightly higher than the basic salary, so they calculate based on gross.
Regards
From India, Mumbai
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I do not quite agree with K_Shenbagarajan. Overtime is calculated based on gross salary and not solely on Basic + DA, regardless of whether the figure is large or small.
Mr. K_Shenbagarajan is contradicting the definition of wages for this purpose as given by him in his post. The definition is reproduced below: For the purposes of sub-section (1), "ordinary rate of wages" means the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of food grains and other articles, as the worker is for the time being entitled to, but does not include a bonus and wages for overtime work.
The definition very clearly includes allowances, which means overtime is to be calculated on gross salary.
From India, Pune
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Mr. K_Shenbagarajan is contradicting the definition of wages for this purpose as given by him in his post. The definition is reproduced below: For the purposes of sub-section (1), "ordinary rate of wages" means the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of food grains and other articles, as the worker is for the time being entitled to, but does not include a bonus and wages for overtime work.
The definition very clearly includes allowances, which means overtime is to be calculated on gross salary.
From India, Pune
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I still do not agree with Mr. Shenbagarajan K. I feel overtime is calculated on gross salary and not on basic + DA alone. Fellow CiteHR members are requested to share their legal knowledge on this issue.
Wages are defined differently for different purposes under different legislations. The definition of wages under the Gratuity Act and Bonus Act is of no relevance for the purpose of calculating and payment of overtime.
Regards
From India, Pune
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Wages are defined differently for different purposes under different legislations. The definition of wages under the Gratuity Act and Bonus Act is of no relevance for the purpose of calculating and payment of overtime.
Regards
From India, Pune
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Dear Naziyasm, I am sorry to say, but I am also not in agreement with the statement that O.T. is calculated on Basic+DA. As per my knowledge, OT is calculated on GROSS SALARY.
Example of Overtime Calculation
For example, if the salary parameters are consistent, then OT is calculated on Gross Salary: Basic+DA+HRA+Conv. Allowance+?/26/8*2.
Regards,
Niyaj Ahmed
[Sr. HR Officer]
Bajaj Electricals Ltd.
From India
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Example of Overtime Calculation
For example, if the salary parameters are consistent, then OT is calculated on Gross Salary: Basic+DA+HRA+Conv. Allowance+?/26/8*2.
Regards,
Niyaj Ahmed
[Sr. HR Officer]
Bajaj Electricals Ltd.
From India
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