Overtime (OT)
Work hours put in by an employee beyond the standard shift hours.
Overtime (OT) refers to the extra hours that employees work beyond their standard working hours, typically compensated at a higher wage rate as mandated by labor laws. In Indian manufacturing, overtime is governed by the Factories Act, 1948, which requires employers to pay at least double the ordinary rate of wages for overtime work.
Legal Framework for Overtime in India
Under the Factories Act, 1948, no adult worker can be required to work more than 48 hours per week or 9 hours per day. Any work beyond these limits qualifies as overtime and must be compensated at twice the normal wage rate. Additionally, the total working hours including overtime cannot exceed 60 hours per week or 10 hours per day.
For example, if a worker's regular hourly wage is ₹100, their overtime rate must be at least ₹200 per hour. Some companies offer even higher rates (2.5x or 3x) for holidays or night shifts to incentivize workers and remain competitive in hiring.
Calculating Overtime Pay
Formula: Overtime Pay = (Basic Pay / Total Working Days / Working Hours per Day) × 2 × Overtime Hours
Example Calculation:
Basic Salary: ₹18,000 per month
Working Days: 26 days
Working Hours: 8 hours per day
Overtime Worked: 10 hours in a week
Hourly Rate = 18,000 / 26 / 8 = ₹86.54
OT Rate = ₹86.54 × 2 = ₹173.08
OT Pay for 10 hours = ₹173.08 × 10 = ₹1,730.80
Common Scenarios Requiring Overtime
- Rush Orders: Customer urgently needs delivery by specific date, requiring extended production hours
- Machine Breakdown Recovery: Production lost due to breakdown needs to be compensated with overtime shifts
- Seasonal Demand: Festival seasons (Diwali, wedding season) create temporary surge in orders
- Export Shipment Deadlines: Missing container booking dates can be costly, necessitating overtime to meet schedules
- Unplanned Absences: When workers take unplanned leave, remaining staff may need to work extra hours
Impact on Factory Costs
While overtime helps meet production targets, it significantly increases labor costs. A factory running consistent overtime should analyze whether hiring additional workers or adding another shift would be more cost-effective. Overtime also leads to worker fatigue, which can reduce productivity and increase quality defects over time.
Overtime Management Best Practices
- Plan Production Capacity Realistically: Don't depend on overtime as a regular production strategy
- Maintain OT Records: Keep detailed digital records for compliance and labor audits
- Rotate OT Opportunities: Distribute overtime fairly among workers to prevent favoritism complaints
- Monitor Fatigue Levels: Track quality metrics during OT shifts to identify fatigue-related issues
- Alternative to OT: Consider temporary workers or subcontracting during peak seasons
How Manufacturing ERP Helps Track Overtime
Modern systems like Karygar automatically calculate overtime based on attendance records, apply correct wage rates, and generate statutory compliance reports. Real-time dashboards show OT costs per department, helping management identify areas where production planning needs improvement to reduce dependency on overtime.
See Overtime (OT) in Action
Don't just read about Overtime (OT). See how Karygar automates this process to reduce manual work and errors on your factory floor.