How to Calculate Overtime Pay – India Rules & Formula Explained

Overtime pay in India is governed by multiple labour laws, and understanding how it's computed is essential for both employees verifying their payslips and employers ensuring compliance. This comprehensive guide covers the Factories Act, Shop & Establishment rules, private sector norms, and the formulas to compute overtime accurately.

What is Overtime Pay?

Overtime pay is additional compensation paid to employees for hours worked beyond the standard working hours defined by law or employment contract. In India, the primary legislation governing overtime is the Factories Act, 1948 — which mandates a specific multiplier over the regular rate. Private IT and service companies often follow different rules under state Shop & Establishments Acts.

Overtime Rules Under Indian Law

• Factories Act, 1948 (Sec. 59): Overtime at 2x the ordinary rate for hours exceeding 9/day or 48/week.
• Minimum Wages Act: Overtime for workers earning at or near minimum wage must be at the rate specified by state governments.
• IT/BPO Sector: Most IT companies offer compensatory off (comp-off) rather than paid overtime for managerial staff.
• Contract Labour: Overtime entitlements depend on the contract and applicable state rules.

The Overtime Pay Formula

Step-by-Step Example

A factory worker earns ₹18,000/month. Works 200 hours/month normally. Works 20 overtime hours in September.

1. Regular Hourly Rate = ₹18,000 / 200 = ₹90/hour
2. Overtime Rate (2x under Factories Act) = ₹90 × 2 = ₹180/hour
3. Overtime Pay = 20 × ₹180 = ₹3,600
4. September Take-Home = ₹18,000 + ₹3,600 = ₹21,600

Common Overtime Scenarios

• Salaried IT Employee (Private sector): Usually receives comp-off (compensatory leave) for extra hours. Some companies pay 1.5x for project-based overtime.
• Construction Workers: Entitled to 2x rate under Factories Act provisions applicable to construction sites.
• Security Personnel: 12-hour shifts are standard. Anything above the contracted shift hours must be paid as overtime.
• Gig Workers: Surge pricing hours on platforms like Swiggy/Zomato are effectively an overtime equivalent built into dynamic pricing.

How to Calculate Your Hourly Rate from Monthly Salary

If your monthly salary is ₹X and you work M hours per month:

Hourly Rate = ₹X / M

Standard: 8 hrs/day × 26 working days = 208 hours/month | Or 8 hrs × 22 days = 176 hours/month. Use whichever your company specifies in the offer letter.

Frequently Asked Questions