Over time calculation is an essential part of payroll calculation. This article explains you the formulas to calculate the overtime salary payable and formulas in effect as of not in UAE, however, it is advised that you read the UAE Labour Law by the Ministry of Labour to check latest rules and formulas.
1. Basic Salary of Employee
2. Number of Over Time Hours
3. OT Formula Type (Normal / Fridays / Other Public Holidays)
One hour Over Time rate is calculated based on a major parameter: Per day work hours. As per current rule, 8 hours are working hours for most of the businesses. There are two main ways to calculate one hour over time rate: By Month or By Year.
Description: Monthly Basic Salary multiplied by 12 months, divided by 365 days a year, divided by 8 hours.
Method 2 is absolutely perfect however Method 1 is popular and in use widely.
Over time payment compensation is different for Normal days as compare to working on Fridays or other public holidays.
OT Payment = (One Hour OT Rate * 1.25) * Total OT Hours.
Example: [((Salary * 12) / 365) / 8) * 1.25] * OT Hours.
OT Payment = (One Hour OT Rate * 1.5) * Total OT Hours.
Example: [((Salary * 12) / 365) / 8) * 1.5] * OT Hours.
OT Payment = (One Hour OT Rate * 2.5) * Total OT Hours.
Example: [((Salary * 12) / 365) / 8) * 2.5] * OT Hours.
Note: This article is shared as a general guideline, use or apply with your own understanding and accountability.
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