Are you an HR professional trying to understand how overtime is calculated in India? Or are you an employee wondering why you didn’t receive the correct amount for your extra work?
Here, we will explain in simple language and as per Indian labour laws how overtime should be calculated – including formulas, eligibility, and legal compliance for 2025.
What is Overtime?
Overtime refers to the extra hours worked beyond the regular working hours.
In India, if an employee works more than 9 hours a day or 48 hours a week, they are entitled to overtime pay at double the rate.
As per the Factories Act, 1948: If an employee works beyond the prescribed daily or weekly hours, they must be paid overtime at double the ordinary rate.
Major Labour Laws Related to Overtime
| Law Name | Key Provision |
|---|---|
| Factories Act, 1948 | Overtime applicable beyond 9 hrs/day or 48 hrs/week |
| Shops & Establishments Act | Varies by state |
| Minimum Wages Act | Overtime based on minimum wage |
| Wage Code 2020 | New rules once implemented |
Who is Eligible for Overtime?
Eligible Employees:
- Workers, helpers, technicians, blue-collar staff
- Employees whose role is not managerial or supervisory
- Must have proper attendance records
Not Eligible:
- Managers and Supervisors
- Employees earning ₹21,000 or more per month
- If overtime clause is not mentioned in their contract
How to Calculate Overtime?
Overtime Pay = [(Basic + DA) ÷ 26 ÷ 8] × 2 × OT Hours
Where:
- Basic + DA = Basic Salary + Dearness Allowance
- 26 = Average working days in a month
- 8 = Standard working hours in a day
- 2 = Double rate as per law
- OT Hours = Total overtime hours worked
Example:
Let’s say an employee’s Basic + DA = ₹13,000
And they worked 10 extra hours as OT.
Step 1: ₹13,000 ÷ 26 = ₹500 per day
Step 2: ₹500 ÷ 8 = ₹62.5 per hour
Step 3: ₹62.5 × 2 × 10 = ₹1,250 as OT Pay
So, the employee should receive ₹1,250 as overtime payment.
How to Maintain Overtime Records?
Every OT record should include:
- Employee Name
- Date
- Total Hours Worked
- Overtime Hours
- Overtime Rate
- Supervisor’s Signature
Common Mistakes in OT Calculation
- Using gross salary instead of Basic + DA
- Not maintaining proper attendance records
- Treating OT as fixed allowance
- Not showing OT in salary slip
When Should Overtime Be Paid?
Overtime must be paid along with the same month’s salary. Delays may attract penalties under the Payment of Wages Act.
Frequently Asked Questions (FAQs)
Q1. Do Managers get OT?
➤ No, only workers are eligible for overtime.
Q2. Is OT applicable for work done on holidays?
➤ Yes, if compensatory off is not given.
Q3. Is overtime taxable?
➤ Yes, OT income is fully taxable.
Q4. Can OT be converted into Compensatory Off?
➤ With employee’s consent, and depending on state laws.
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