Overtime (OT)

What is Overtime (OT)?

Overtime is the additional compensation an employee gets for working beyond their regular shift hours or on weekly off days. Under Section 59 of the Factories Act 1948, any worker who puts in more than 9 hours a day or 48 hours a week must be paid at twice the ordinary rate of wages. The Act caps overtime at 50 hours per quarter (some states allow 75 or 100 with special permission). Overtime rules apply mainly to non-supervisory workers in factories and similar establishments. White-collar staff in IT, BPO, and corporate offices usually fall outside Factories Act coverage and are governed by their state's Shops & Establishment Act, where OT rates and caps differ. The Code on Wages 2019, once fully notified, will harmonise OT rules across sectors.

Formula: OT pay = (Basic + DA) / (working days x daily hours) x 2 x OT hours

Example

A worker earning ₹600 daily wage (8 hours) gets ₹75/hour as the base rate. For 4 hours of OT, the OT pay = ₹75 x 2 x 4 = ₹600.

How Overtime (OT) is used

Manufacturing and operations payroll teams calculate OT monthly based on biometric attendance and shift logs, applying state-specific OT rules and caps.

Overtime (OT) FAQs

Is overtime mandatory in India?

For workers covered under the Factories Act or Shops & Establishment Act, yes, OT pay at 2x the regular rate is mandatory. Supervisory and managerial staff are usually exempt.

Is overtime taxable?

Yes, overtime pay is fully taxable as part of salary income. It's added to gross salary and taxed at the applicable slab rate.

What's the maximum overtime allowed?

The Factories Act caps OT at 50 hours per quarter. State governments can extend this to 75 or 100 hours with notification. Beyond that, employers face compliance penalties.