Calculation of overtime in Factories and Other Establishments

Overtime with respect to factories and industrial establishments are calculated under the Factories Act. No adult worker is allowed or required to work in a factory for more than 48 hours in a week and for more than 9 hours in a day, as per Section 51and 54 of the Factories Act, 1948 respectively. Irrespective of the above the Chief Inspector may, as per Section 56, increase such timings to up to 12 hours in a day.

Now, as per Section 59(1) of the Factories Act, if an adult worker works in a Factory for more than 9 hours in a day or for more than 48 hours in any week, he shall be entitled to twice his ordinary rate of wages in respect of overtime work. Ordinary rate of wages, as per Section 59(2) shall be deemed to include Basic Wage plus Dearness Allowance plus all such allowances which are fixed and part of monthly salary components. It shall also include House Rent Allowance. If Food grains, edible oil is given on a concessional rate then the cash equivalent of such concessions may be considered. If any other allowance like travelling, education allowance, sickness allowance etc is paid as a part of monthly salary component, it should be included. However, ordinary rate of wages does not include Bonus or wages for overtime work.

The Hon’ble Bombay High Court in 1998 in the matter of Chief General Manager, Telecom Factory v/s H R Thakur (Appellate Side Writ Petition No. 3015 of 1992, decided on 24.06.1997) and others held that for calculation of Overtime, House Rent Allowance must be included in ordinary rate of wages.

However, as per employment law in India, before a worker becomes entitled to extra wages in respect of overtime work the necessary permission and exemption under Sections 64 and 65 will have to be obtained from the appropriate authorities by the Manager of the factory. Failure to obtain such permission is a statutory offence as per employement law in India. This important aspect needs to be considered while employing workers on overtime.

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