Compliance Trends in Factories Relating to Overtime

Factories across all sectors are typically plagued by non-compliance with regard to provisions of overtime.

Following are the major causes for non-compliances with regard to overtime:

  • Workers stay for longer hours to avail the benefits of overtime wages
  • Excess hours of overtime clocked and not accounting for overtime hours
  • Exemption from provisions relating to working hours is not obtained by the employer from State Government or Chief Inspector
  • Previous approval not obtained from the Chief Inspector for exceeding daily maximum threshold of working hours.
  • Single payment made for overtime wages
  • Overtime wages paid as other allowance, creating an impression that there is no overtime

The prominent cause of frequent occurrence of such non-compliances is a clear disconnect between the management of the factory and its workers coupled with their approach in driving the organization towards a culture of compliance. In some cases, employers are compelled to deal with grave non-compliances with regard to overtime. Most often, it is only when a factory is subject to an inspection that non-compliances relating to overtime are brought to light. At this juncture, there runs a risk of facing far-reaching and irreversible penal consequences by the factory.

The chart below highlights marked increase in non-compliances relating to overtime violation in factories across the states of Karnataka, Maharashtra and Goa. (BCP Associates data sample taken across several major factories in 8 major cities)

BCPA Bar graph on Compliance Trends in Factories Relating to Overtime violation across the states of Karnataka, Maharashtra and Goa.

Legal Provisions

Provisions of overtime are regulated under Sections 51 and 59 of the Factories Act, 1948 (‘the Act’). These sections stipulate that a worker in a factory should not be allowed to work for more than forty-eight hours in a week and nine hours in a day. The number of working hours in excess of the above is treated as overtime and requires the employer to pay extra wages for overtime viz. twice the rate of ordinary wages, as per Section 59 of the Act.

The Act also requires other compliances to be met, such as display of notice of periods of work, submission of such notice to the Inspector, maintenance of an overtime register reflecting the requisite details, etc. Any violation of any of the overtime provisions attracts punishment with imprisonment for a term which may extend to two years or with fine which may extend to one lakh rupees, or with both.

How can the Company Comply?

Factories can minimize or eliminate overtime in numerous ways depending on the factors resulting in overtime such as manpower, productivity, location, etc. Apart from observing a strict overtime policy for its workers and having a stringent mechanism to capture daily attendance, the factory could adopt unconventional methods like geo-tagging and access control disablement after 9 hours, to curb and prevent overtime inconsistencies and gaps.

The factory may also consider appointing in-house personnel to scrutinize these aspects. The factory may also engage in discussions with the workers to identify the overtime hours clocked and verify the overtime payment made.
Introducing periodic external checks and audits is instrumental in regulated and timely identification of non-compliances pertaining to overtime, including non-disclosure of overtime hours and non-payment of overtime wages and ensure that the factory is overtime compliant.

For more detailed information on factories overtime compliance, do reach out to us at [email protected]

*All numbers quoted are approximations

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