Overtime Calculation Formula: How to Calculate Overtime Salary in India

The basic overtime calculation formula is simple: overtime pay = overtime hours × hourly rate × overtime multiplier. For workers covered by India's labour codes, that multiplier is two, so each extra hour is paid at twice the normal hourly rate. The harder part is everything around the formula: which employees qualify, which salary components make up the hourly rate, and when an hour actually counts as overtime.

This guide walks through each of those questions with worked examples, so HR and payroll teams can calculate overtime salary accurately and explain the result to employees.

What overtime salary means

Overtime salary is the extra pay an employee earns for working beyond the normal working hours fixed for them, whether in a day or in a week. It is paid on top of the regular wage for the period, usually in the same payroll cycle, and appears as a separate line on the payslip.

The legal position on overtime in India

The government made the four labour codes effective from 21 November 2025, according to the Press Information Bureau, consolidating 29 earlier labour laws. Two of them matter for overtime pay calculation.

Occupational Safety, Health and Working Conditions Code, 2020

Section 25 of the OSH Code says no worker shall be required or allowed to work more than eight hours in a day, with intervals and spread-over notified by the appropriate Government. Section 27 then sets out the overtime rule:

• Overtime is paid at twice the rate of wages.
• It applies when a worker works beyond the hours prescribed by the appropriate Government in a day or in a week.
• Overtime is counted on a daily or weekly basis, whichever is more favourable to the worker.
• Overtime is subject to the worker's consent.
• The appropriate Government may prescribe a cap on total overtime hours.

Code on Wages, 2019

The Code on Wages replaced laws including the Minimum Wages Act, 1948. It provides that where an employee works beyond a normal working day, the overtime rate shall not be less than twice the normal rate of wages. The PIB backgrounder on the labour reforms summarises the position as normal working hours capped at 8 hours a day and 48 hours a week, with overtime allowed only with worker consent and paid at twice the regular rate.

Where state rules come in

Much of the detail, including daily and weekly hours, spread-over, and the quarterly overtime cap, is left to the “appropriate Government”. For most private establishments that means the state. Rules under the codes are being notified by the Centre and the states at different times, so confirm the current position for each state you operate in, and for your type of establishment, before you finalise an overtime policy.

Who is eligible for overtime pay?

Under the OSH Code, a “worker” includes people doing manual, skilled, technical, operational, clerical or supervisory work. It excludes people employed mainly in a managerial or administrative capacity, and people in a supervisory capacity drawing wages above ₹18,000 a month (or an amount the Central Government notifies). So eligibility depends on what an employee actually does and earns, not on their designation.

Employees outside these definitions are not automatically barred from overtime. Their entitlement comes from the appointment letter, company policy or a settlement, so read those documents before deciding.

The overtime calculation formula, step by step

Here is the overtime calculation formula broken into the three numbers you need:

1. Hourly rate = monthly wage used as the overtime base ÷ (working days in the month × normal hours per day)
2. Overtime rate = hourly rate × 2
3. Overtime pay = overtime rate × overtime hours

Which salary components form the base?

Under the codes, “wages” includes basic pay, dearness allowance and retaining allowance, and lists exclusions such as house rent allowance (HRA) and conveyance allowance. However, it adds back excluded payments above 50% of total remuneration, and a second proviso brings some excluded items back into the calculation “for the purpose of payment of wages”. Because of this, settle your overtime base with your legal or payroll advisor, then write it into your policy. Our guide to the new wage code and CTC structuring explains the 50% rule in more detail.

Overtime calculation examples

These overtime calculation examples use illustrative figures. Each states its assumptions so you can swap in your own numbers.

Example 1: monthly salary to hourly rate

Assumptions: the overtime base is basic pay plus DA of ₹20,000 a month, the employee works a six-day week (26 working days a month), and the normal working day is 8 hours. The employee logged 12 overtime hours this month.

Calculate the final figure from the unrounded rate, as in the last row. Rounding the hourly rate first (₹192.31 × 12 = ₹2,307.72) creates small differences that add up across a large workforce.

Example 2: how the base and divisor change the answer

The same 12 overtime hours produce very different payouts depending on two policy choices. Here, the employee's gross pay is ₹30,000: ₹14,000 basic, ₹6,000 DA, ₹8,000 HRA and ₹2,000 conveyance.

Neither choice is a rounding detail: across 200 employees, the gap between the first and third rows is large enough to matter in an inspection or a dispute. Pick the method the applicable rules support, then apply it every month.

Example 3: daily vs weekly overtime

The OSH Code counts overtime daily or weekly, whichever favours the worker. Take a worker in a state where the prescribed limits are 8 hours a day and 48 hours a week, on a six-day week, who works:

On a weekly basis, 48 hours means no overtime. On a daily basis, there are 4 overtime hours. The daily count is more favourable, so 4 hours are payable. At the Example 1 rate, that is ₹20,000 × 2 × 4 ÷ 208 = ₹769.23. Systems that only check weekly totals miss this case.

Example 4: a daily-rated worker

Assumptions: daily wage ₹720, normal day of 8 hours, 3 overtime hours. The hourly rate is ₹720 ÷ 8 = ₹90, the overtime rate is ₹180, and overtime pay is ₹180 × 3 = ₹540.

Common overtime calculation mistakes employers make

• Using a flat overtime allowance. A fixed monthly amount rarely matches hours worked × twice the rate for covered workers.
• Paying 1.5× by habit. Rates borrowed from other countries or old policies may fall short of the statutory twice-the-rate requirement for covered workers.
• Checking only weekly totals. As Example 3 shows, daily overtime can be payable even when the weekly total is within limits.
• Deciding eligibility by job title. A “supervisor” earning below the wage threshold may still be a worker under the OSH Code.
• Switching divisors month to month. Using 26 one month and 30 the next makes payouts impossible to explain.
• No record of consent or approval. Overtime should be agreed and approved, not discovered at month end.
• Ignoring the quarterly cap. Check whether your state has prescribed a limit on total overtime hours.

How to track overtime hours and keep accurate records

Good employee overtime management starts with reliable time data. A few practices make overtime pay calculation much easier to defend:

• Record actual check-in and check-out times, not just present or absent.
• Assign each employee a shift, so overtime is measured against their own normal hours.
• Capture manager approval and the worker's consent before or alongside the overtime.
• Keep daily totals, not only weekly or monthly ones.
• Show overtime hours, rate and amount separately on the payslip.
• Retain the records for the period your state's rules require.

If you are still choosing a time-capture method, our comparison of biometric, GPS and manual attendance tracking covers the trade-offs.

How HRMS software helps with overtime and payroll

Spreadsheets struggle with overtime because the inputs live in different places: punch logs, shift rosters, approvals and salary structures. In Manitham HRMS, attendance and shift management compares each employee's check-in and check-out against their assigned shift to calculate overtime automatically. Those attendance records then feed into payroll processing, so overtime hours do not need to be re-keyed before each pay run.

Because the shift, attendance and salary data sit on the same employee record, HR can see where an overtime figure came from when an employee asks. Your overtime base, divisor and eligibility rules still need to reflect your policy and the rules that apply to you, so confirm them during setup. For the wider picture, see our HRMS software for Indian businesses.

Overtime calculation checklist

1. Identify which employees are workers under the applicable code and which are covered by contract only.
2. Confirm normal daily and weekly hours, spread-over and any overtime cap under your state's rules.
3. Define the salary components in the overtime base and document them.
4. Fix one divisor (for example, 26 × 8) and apply it consistently.
5. Count overtime daily and weekly, and pay whichever is more favourable.
6. Record consent and manager approval for overtime.
7. Calculate from unrounded rates and round only the final amount.
8. Show overtime separately on payslips and keep the records.
9. Review the policy whenever central or state rules change.

Conclusion

The overtime calculation formula itself fits on one line. Getting it right in India depends on the inputs: who counts as a worker, which components form the wage base, which hours count as overtime under your state's rules, and whether overtime is checked daily as well as weekly. Write those decisions into a policy, capture accurate time data, and the monthly calculation becomes routine. If you want to see how attendance-based overtime flows into payroll, book a demo of Manitham HRMS.

This article is general information, not legal advice. Rules may differ by state, establishment type and employee category, so confirm the current position with your labour law advisor.