Overtime looks simple — hours worked beyond the shift — until you try to calculate it for a real team. Does staying late after arriving late count? What about coming in early? What rate should it be paid at? Here's a clear way to think about it, with worked examples.
This article explains common practice and how attendance software calculates overtime. It isn't legal advice — overtime rules depend on your state and on which law your business falls under, so check with your accountant or labour consultant.
What the law generally says
For factories, the Factories Act, 1948 treats work beyond 9 hours in a day or 48 hours in a week as overtime, payable at twice the ordinary rate of wages. Shops and commercial establishments are covered by each state's Shops and Establishments Act, which sets its own daily and weekly limits and overtime rules. Many offices also follow a company policy — paying overtime at a set multiplier, or giving compensatory leave instead.
The key question: overtime from when?
The most common mistake is to count everything after the shift's end time as overtime. That rewards late arrivals: someone who comes in two hours late and stays two hours late shows "two hours overtime" while working a normal day.
A fairer rule is:
Overtime = (punch-out − the later of punch-in or shift start) − shift length
In words: overtime only begins once a person has completed a full shift, counted from when they actually started (but never earlier than the shift start).
Worked examples
Shift: 9:00 AM to 6:00 PM (9 hours).
| Punch in | Punch out | Counted from | Overtime |
|---|---|---|---|
| 9:00 AM | 8:00 PM | 9:00 AM | 2 hours |
| 11:00 AM | 8:00 PM | 11:00 AM | 0 — they've only just done 9 hours |
| 12:00 PM | 10:00 PM | 12:00 PM | 1 hour |
| 7:30 AM | 6:00 PM | 9:00 AM | 0 — arriving early doesn't count |
The early-arrival row is a policy choice: many businesses don't want to pay for time before the shift starts unless it was asked for. If you do want to count it, make that an explicit rule rather than something that happens by accident.
Week-offs and holidays
Work on a week-off or holiday is handled differently by different companies — some pay a flat extra day, some give a compensatory off, some count all hours as overtime. Decide your policy and apply it consistently; don't let it depend on who calculates payroll that month.
Turning overtime hours into pay
A straightforward method:
- Hourly rate = monthly wage ÷ (working days in the month × hours per day).
- Overtime pay = overtime hours × hourly rate × your multiplier (for example 2×).
Example: ₹26,000 a month, 26 working days of 8 hours → ₹125 an hour. Ten overtime hours at 2× = ₹2,500.
How Punchly calculates overtime
Punchly uses the rule above: overtime is time beyond a full shift, counted from the later of punch-in or shift start, for every employee every day. Week-offs and holidays don't add overtime automatically. Overtime minutes appear on each day, in the monthly report and on the payroll register, and you can choose whether to include overtime pay on salary slips and at what multiplier. See attendance to payroll or read from punches to payroll in one export.