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Overtime Wages

The workers, sometimes, have to work for an extra time over and above the normal hours of work. Workers have to be paid double the rate for overtime work. This also lays down that a worker is entitled to overtime wages when he works more than normal hours on any day or in a week. A rigid control must be exercised over the workers because there is tendency among the workers to miss the work during the usual hours deliberately and this can be made a regular practice. The causes of overtime work must be find out and only in cases of emergency or extra load of work, this practice should be followed. Overtime work increases the cost of production significantly because, as stated before, the hourly rate is significantly higher for overtime. Moreover, additional expenses like lighting, extra depreciation of machinery, cost of supervision etc. are incurred, besides extra cost due to low efficiency and productivity.

Thus, overtime payment has an adverse effect on productivity in the following manner:

(i) Overtime payment is an extra payment and normally its rate is also higher.

(ii) Workers may try to avoid work during normal hours, leading to decreased productivity during normal time also.

(iii) Extra work involves more pressure on workers, resulting in reduced efficiency and consequently lesser productivity.

(iv) Reduction in output and increase in overtime premium leads to increased cost of production.

The overtime wages can be taken as direct or indirect labour depending upon its identifiability with specific jobs or products. In case overtime wages are necessary to be paid on account of the intention to increase the general output of the factory, the cost of such overtime or night work be taken as a works overhead charge. Where overtime work has become necessary on account of the special request of a customer get the work completed within a specific time, the cost of such overtime or night work should be taken as a direct charge and recovered from job only. The payment of overtime necessitated by abnormal factors such as breakdown of machinery, abnormal idle time etc. should be treated as abnormal expenses and charged to costing profit and loss account.

The foreman should prepare a list of workmen required for overtime work and get it duly approved by the work manager. The list should be sent to wages officer after recording the time in their time cards so that extra payment can be made to the workers.

Proper planning is required for keeping the overtime premium cost to the minimum. Factories like demand for the product, production capacity, seasonal conditions etc. should be kept in mind.