Overtime under the labour codes
The Occupational Safety, Health and Working Conditions Code, 2020 limits normal working hours to 8 a day and 48 a week. Work beyond that is overtime, which needs the worker's consent and is paid at twice the ordinary rate of wages under the Code on Wages, 2019. The Central rules cap overtime at 144 hours a quarter; some States allow different limits, so the cap is a setting.
In the register, enter the hours worked on each day with extra hours. On a normal day, overtime is hours beyond the daily limit; on a weekly off or holiday, every hour counts. Part-hours can be rounded the way the rules describe – 15 to 30 minutes as half an hour and more than 30 minutes as an hour – or left exact.
The ordinary rate of wages
Overtime is paid on wages as defined in the Code on Wages: basic, dearness allowance and retaining allowance, plus any excess of excluded allowances over 50% of total pay. The Employees sheet works out this wage, divides it by the working days you use (26 by default) and the normal hours to get the hourly rate, and doubles it for overtime. For an employee on ₹13,800 a month, that is about ₹66 an hour and ₹133 an hour for overtime.
Annual leave and carry forward
Under section 32 of the OSH Code, a worker who has worked 180 days in a calendar year earns one day of annual leave with wages for every 20 days worked. Unused leave can be carried forward up to 30 days; leave beyond that is encashed at the end of the year, and the worker can also choose to encash leave. Shops and establishments rules in your State may be more generous – the more beneficial provision applies.
Encashment on exit
When an employee leaves – by resignation, retirement, termination or death – leave earned in the year is paid along with the balance brought forward, even if they had not yet completed 180 days that year. It forms part of the full and final settlement, which under the Code on Wages must be paid within two working days. Leave encashed at retirement or resignation is exempt from tax up to the least of four limits (with a ₹25 lakh overall cap for non-government employees); the Pro edition works this out.
Free vs Pro
The free edition has the overtime register and summary with the quarterly check, and the full leave encashment calculation. The Pro edition adds a monthly overtime slip for each employee and the tax exemption calculator for encashment on leaving.
Written by Prakash Bagchi, finance professional and founder of PB Lab. Last reviewed .