Overtime Calculation in India (2026): Formula, Rules & Real Examples

If your workers stay back to finish a production run or cover a rush, they have earned overtime — and paying it correctly is not just fair, it is the law. Yet overtime calculation in India trips up more small businesses than almost any other part of payroll, because the rate is not simply "a bit extra." For most factories it is double the ordinary wage, and getting the maths or the hours wrong can mean underpaying your team or falling foul of a labour inspection.

This guide explains overtime the way a plant head or shop owner actually needs it: the legal rule under the Factories Act, the exact formula, the daily and weekly limits, and worked examples you can copy. We will also look at why the real difficulty is never the formula — it is measuring the hours accurately.

What the law says: the double-rate rule

The core rule comes from Section 59 of the Factories Act, 1948. It states that a worker who works more than nine hours in a day, or more than forty-eight hours in a week, is entitled to wages for the overtime at twice the ordinary rate of wages.

Two things are worth underlining here. First, the trigger is either the daily limit (9 hours) or the weekly limit (48 hours) — whichever is crossed. Second, "twice the ordinary rate" means the overtime hour is paid at 2× the normal hourly wage, not 1.5× as in some other countries. This double-rate principle is the baseline most Indian factories work from.

Establishments that fall under a state Shops and Establishments Act rather than the Factories Act may have slightly different daily or weekly thresholds, but the double-rate idea for overtime is widely mirrored. Always confirm which law applies to your specific business and state.

The overtime formula, step by step

Every overtime calculation comes down to three numbers. Here is the method:

1. Find the ordinary hourly rate. Divide the worker's daily wage by the normal number of hours in a shift.
   Ordinary hourly rate = Daily wage ÷ Shift hours
2. Double it. Multiply the ordinary hourly rate by two to get the overtime rate.
   Overtime rate = Ordinary hourly rate × 2
3. Multiply by overtime hours. Multiply the overtime rate by the number of hours worked beyond the limit.
   Overtime pay = Overtime rate × Overtime hours

That's the whole calculation. The only judgement calls are what counts as the "daily wage" and how you define the "ordinary rate of wages," which we cover further down.

Worked example 1: a daily-wage factory worker

Ravi is a machine operator on a daily wage of ₹640 for a standard 8-hour shift. One day he works 3 extra hours to finish an order.

• Ordinary hourly rate = ₹640 ÷ 8 = ₹80/hour
• Overtime rate = ₹80 × 2 = ₹160/hour
• Overtime pay = ₹160 × 3 = ₹480

So for that day Ravi earns his normal ₹640 plus ₹480 overtime = ₹1,120. Notice the 3 overtime hours are worth almost as much as 6 normal hours — that is the double-rate rule at work, and why tracking those hours honestly matters to your costs.

Worked example 2: a monthly-salaried employee

For salaried staff you first convert the monthly salary into a daily wage. Suppose Meena earns ₹20,800 per month and you use the 26-day method (see our guide on calculating salary from attendance for why):

• Daily wage = ₹20,800 ÷ 26 = ₹800/day
• Ordinary hourly rate = ₹800 ÷ 8 = ₹100/hour
• Overtime rate = ₹100 × 2 = ₹200/hour
• If Meena works 10 overtime hours in the month: 10 × ₹200 = ₹2,000 overtime

Her total for the month would be ₹20,800 + ₹2,000 = ₹22,800, before statutory deductions.

Daily vs weekly limits: which one triggers overtime?

Overtime is owed when either threshold is crossed, so it helps to see how they compare:

The exact figures — especially the overtime cap and spread-over — are set by state rules and can differ, so treat this table as the common pattern and verify your state's notification. The important takeaway: you must watch both the daily and the weekly count, because a worker can cross the weekly limit even on days they didn't individually exceed 9 hours.

What counts as the "ordinary rate of wages"?

This is where businesses most often slip. The overtime rate is built on the ordinary rate of wages, which generally means basic pay plus allowances such as dearness allowance and the cash value of certain concessional benefits — but it usually excludes bonus and the overtime payment itself.

Because the exact components can depend on the applicable law and how your salary is structured, the safest approach is to define your overtime base clearly in your HR policy and appointment letters, apply it consistently, and keep it aligned with the law your establishment falls under. Consistency protects both your workers and your business if the calculation is ever questioned.

The overtime formula takes two minutes to learn. The expensive mistakes come from guessing the hours — a supervisor's rough estimate at month-end instead of a precise, minute-level record of who actually stayed back.

Why measuring the hours is the real challenge

Read back over those examples and you'll notice the formula was never the hard part. The hard part is knowing, with confidence, that Ravi worked exactly 3 extra hours and Meena exactly 10 across the month. When overtime rides on a paper register, a WhatsApp message, or a supervisor's memory, three problems appear:

• Under-recording — genuine overtime gets rounded down or forgotten, so workers are underpaid and morale drops.
• Over-recording — friendly estimates inflate hours and quietly raise your wage bill.
• Disputes — with no exact clock-in and clock-out, month-end becomes an argument nobody can settle.

Accurate, tamper-proof timing is the foundation of correct overtime. If the in-and-out times are right, the double-rate maths is trivial.

How software calculates overtime automatically

This is exactly the problem an app like LogLinkr is built to remove. Workers punch in and out with face recognition on an ordinary Android phone — no biometric machine, no shared card that a colleague can misuse — so every shift is timed to the minute and can't be faked.

From that clean record, LogLinkr measures each person's hours, compares them against the daily and weekly limits you configure, and applies the double-rate overtime formula as part of its automatic payroll. Overtime, present days, half-days and leave all flow into the final salary without a single manual calculation, and each employee can receive their payslip on WhatsApp — including a clear line for overtime — so there are no month-end disputes.

Plans start at ₹99/month for up to 50 employees (launch offer; regular ₹199), with a ₹399/month plan for up to 200 — prices exclude 18% GST — and there's a 45-day free trial, no credit card. You can see the full pricing here, or read our guide to face recognition attendance to see how the timing is captured in the first place.

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