Overtime Policy

Guidelines that regulate additional working hours beyond standard schedules, including compensation and eligibility criteria.

HR professionals ensure compliance with labor laws regarding overtime pay, work-hour limits, and employee well-being. Clear overtime policies prevent burnout and enhance work-life balance

According to the Factories Act, 1948 and various State Shops & Establishments Acts:

1. Maximum hours: Employees can work up to 9 hours a day and 48 hours a week.
2. Overtime: Work beyond 9 hours/day or 48 hours/week qualifies as overtime.
3. Compensation: Overtime must be paid at twice the ordinary rate of wages (i.e., double pay).
4. Cap on OT: In many cases, overtime cannot exceed 50 hours/month (varies by state law).
5. Voluntary: Overtime must be voluntary and documented.

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How to calculate overtime (OT) salary in India?

Here’s the basic formula:

OT Pay = (Basic Salary + DA) ÷ 26 ÷ 8 × 2 × OT Hours

Where:

• 26 = average working days in a month
• 8 = standard working hours/day
• 2 = double pay for OT
• DA = Dearness Allowance (if applicable)

Example:‍

If an employee earns ₹26,000/month and works 10 extra hours:

OT Pay = (26,000 ÷ 26 ÷ 8 × 2 × 10) = ₹2,500