What overtime management is
Overtime is work beyond an employee's normal working hours. Overtime management is how an employer authorises it, records it, checks it against legal limits and pays for it.
For workers covered by the Factories Act, overtime is work beyond nine hours in a day or forty-eight hours in a week, and is paid at twice the ordinary rate of wages. Shops and commercial establishments follow the Shops and Establishments Act of their state, whose rules differ.
Why it matters
Unmanaged overtime is a cost that appears after the fact, and often a sign of a staffing problem that nobody has named. It also carries legal limits on how much can be worked, which an employer is responsible for even when the extra hours were the employee's idea.
Because overtime is paid at a higher rate, errors in it are expensive in both directions: unpaid overtime is a wage claim, and overtime paid on unapproved hours is money that cannot easily be recovered.
Common challenges
Hours recorded but not approved
Punches show someone stayed late, but nobody decided they should. Payroll then has to decide whether to pay it.
Which law applies
A company with a factory and an office may have two overtime regimes at once.
The hourly rate
Converting a monthly wage to an hourly rate for overtime needs a consistent basis, applied the same way every month.
Overtime as a habit
Regular overtime in one team often means the team is understaffed, which a monthly overtime bill hides.
The process, step by step
- 1
Set the thresholds
Define normal hours and when overtime starts, per the law that applies to each establishment.
- 2
Authorise in advance where possible
Overtime is requested and approved before it is worked, or approved promptly after.
- 3
Record against the shift
Overtime is measured from the shift actually worked, not from a flat day length.
- 4
Check the limits
Compare against daily, weekly and periodic limits before approving further overtime.
- 5
Pay at the right rate
Apply the statutory or contractual multiplier on a consistent hourly basis.
Best practices
- Separate recorded extra hours from approved overtime, and pay only the second.
- Review overtime by team monthly, as a staffing signal as well as a cost.
- Document the hourly-rate basis used for overtime so it is applied consistently.
- Know which establishments fall under which overtime law.
Mistakes to avoid
- Paying every hour beyond the shift as overtime without approval.
- Ignoring overtime limits because the employee volunteered.
- Using a different hourly basis each month.
- Applying the Factories Act rule to office staff, or the reverse.
How software helps
Software makes overtime visible while it is happening. Worked hours are compared with the shift automatically, extra time is flagged for approval, and approved overtime flows into payroll at the configured rate, so the monthly figure is a sum of decisions rather than a surprise.
Questions about overtime management
For work beyond nine hours in a day or forty-eight hours in a week, at twice the ordinary rate of wages.
It depends on the law governing the establishment and the employee's role. Offices usually fall under the state's Shops and Establishments Act rather than the Factories Act, and the two differ.
Before, wherever the work can be planned. Retrospective approval is sometimes unavoidable, but it should be a prompt decision by the manager, not something payroll infers from punches.
No. Recorded extra hours and approved overtime are different things, and good practice is to pay only the approved overtime. Paying every extra punch-hour means paying for time nobody authorised.
The monthly wage is converted to an hourly rate on a consistent basis, and that basis should be documented and applied the same way every month. Changing it from month to month produces inconsistent overtime pay.
No. Legal limits on how much overtime can be worked are the employer's responsibility even when the extra hours were the employee's idea.
Often that the team is understaffed. Reviewing overtime by team each month treats it as a staffing signal as well as a cost.
Yes. A company with a factory and an office may have both the Factories Act and the state's Shops and Establishments Act applying at once, so it needs to know which establishments fall under which law.