How to calculate overtime pay for staff in Pakistan

Overtime is where small businesses most often underpay without meaning to, and where staff keep the closest count. Here is how to work it out cleanly.

Step 1: the hourly rate

Overtime starts from the hourly rate, which comes from the monthly salary:

Hourly rate = monthly salary ÷ days ÷ hours per day

For Rs 32,000 a month, 30 days and 8 hours a day: 32,000 ÷ 30 ÷ 8 = Rs 133 an hour.

Use the same days rule you use for absent deductions (see per-day salary calculation), so the two never contradict each other.

Step 2: the overtime rate

Under the Factories Act and the provincial shops and establishments laws, overtime is generally paid at twice the ordinary rate. Many smaller shops pay 1.5×, often by agreement. Labour laws differ by province and are updated, so check the current rule for your province and business, and put your rate in writing.

Example: a shop

Bilal earns Rs 32,000. In December he stayed 2 extra hours on 10 days for the wedding season: 20 hours of overtime.

• At 2×: 20 × 267 = Rs 5,340
• At 1.5×: 20 × 200 = Rs 4,000

Example: a factory on a weekly off

Workers who come in on their Sunday off, or on Eid, are usually paid more than normal overtime. Set a separate rate for the weekly off and gazetted holidays (2× is common) so you do not have to remember it at month end.

Basic or gross?

Some businesses work out the hourly rate on basic salary only, others on the full salary with allowances. Gross gives staff more. The law and your agreements decide; the point is to pick one and use it every month.

Count the minutes, not the guess

Most arguments about overtime are about how many hours, not the rate. When staff check in and out on a fingerprint machine or a QR card, the hours are already there.

Munshi's HR and payroll takes the hours from attendance and pays them at the rates you set: one for normal days, one for the weekly off, one for holidays, on basic or gross. Each slip shows the overtime hours and the rate. Try it free.