When overtime is due
- Work beyond the daily limit, usually 8 or 9 hours, or beyond 48 hours in a week.
- In factories, the factory law under the Occupational Safety, Health and Working Conditions Code applies. In shops, offices, hotels and restaurants, the state's Shops and Establishments Act sets the limits.
- People in managerial or supervisory roles are usually outside the overtime rules.
- An appointment letter or policy can be more generous than the law, never less.
The rate: twice the ordinary rate of wages
Overtime is paid at twice the ordinary rate. The hourly rate comes from wages (basic and DA, plus any allowances above half of total pay under the Labour Codes) divided by the days in the month and the hours in a day. Some companies use gross pay instead, which gives the employee more.
An example
| On basic and DA | On gross | |
|---|---|---|
| Monthly amount | ₹15,600 | ₹26,000 |
| ÷ 26 days ÷ 8 hours | ₹75 an hour | ₹125 an hour |
| × 2 for overtime | ₹150 an hour | ₹250 an hour |
| 10 hours of overtime in the month | ₹1,500 | ₹2,500 |
Whichever basis you use, write it into your policy and use it for everyone.
Limits on overtime
Besides the daily and weekly hours, there is a limit on the total hours in a day including overtime and breaks, and on the overtime hours in a quarter. The quarterly limit is set by state rules, and several states have raised it in recent years. Check your state's rules before planning long overtime.
Records, tax and PF
- Keep a record of each person's overtime hours and the amount paid, and show overtime as its own line on the payslip.
- Overtime is taxable as salary.
- Overtime is not part of PF wages, so no PF is deducted on it.
Common mistakes
- Paying overtime at the normal rate instead of twice the rate.
- A fixed monthly "overtime allowance" that has nothing to do with the hours worked.
- Paying a few extra minutes a day as overtime, or ignoring hours that add up across the month. Set a starting point and rounding in your policy.
- Paying overtime and giving comp-off for the same day.
- No record of overtime hours for an inspection.
How HR Bingo handles it
HR Bingo works out overtime from the hours worked beyond each person's shift. You set when it starts counting (for example after 30 minutes), the steps it is counted in, a monthly cap, the hourly rate basis (gross, or basic and DA), the days in a month, and separate multipliers for working days and for weekly offs and holidays. Set the working-day multiplier to 2 where the law requires double pay. Overtime shows as its own line on the payslip, and the overtime report lists the hours by person. Shifts and overtime.
Sources
Frequently asked questions
Is overtime paid at double rate in India?
Yes. Under factory law and most states' Shops and Establishments Acts, overtime is paid at twice the ordinary rate of wages.
Is PF deducted on overtime pay?
No. Overtime is not part of PF wages.
Do managers get overtime?
Usually not. People in managerial or supervisory roles are generally outside the overtime rules, unless their contract says otherwise.
Can we give comp-off instead of overtime?
For extra hours on a working day, the law asks for overtime pay. For working on a weekly off, many companies give a substitute day off instead. Do not do both for the same day.