How to Calculate Overtime Pay in India
Overtime rules depend on the law that covers your workplace, so start by knowing which one applies to you. This guide gives a general overview and a simple way to calculate it.
Which rules apply?
The Factories Act, 1948 provides for overtime at twice the ordinary rate of wages for covered factory workers. Shops, offices and other establishments follow the Shops and Establishments Act of their state, and rules differ. Always check the rule for your state and industry, or ask a labour-law consultant.
A simple worked example
Suppose the ordinary hourly wage is ₹100 and the applicable overtime rate is twice the ordinary rate. An employee who works 5 hours of approved overtime is owed 5 × ₹200 = ₹1,000 for overtime. This is an illustration only. Use the rate and the definition of ordinary wages that apply to your business.
Avoiding errors
- Record actual in and out times, not estimates
- Require manager approval before overtime is paid
- Keep a clear record of who approved what and when
- Carry approved hours directly into payroll
Automating it
Akinven HRMS captures overtime from real attendance hours, routes it for approval and feeds approved overtime into payroll, which removes re-entry and reduces disputes.
Frequently asked questions
Is this legal advice?
No. This is a general overview. Confirm the rules with a qualified professional for your state and industry.