Overtime Calculation in UAE

How to Calculate Overtime Salary?

Overtime calculation is an essential part of payroll calculation. This article explains to 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 Labor Law by the Ministry of Labor to check latest rules and formulas. Read this article to know how to calculate overtime in uae.

Overtime Pay Calculation is based on main three factors:

• 1. Basic Salary of Employee
• 2. Number of Overtime Hours
• 3. OT Formula Type (Normal / Weekend / Public Holidays)

Calculations for One Hour Overtime Rate:

One hour Overtime 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 overtime rate: By Month or By Year.

Method 2: One Hour OT Rate = ((Salary * 12) / 365) / 8

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.
Overtime payment compensation is different for Normal days as compare to working on Fridays or other public holidays.

Calculations for Normal Days Overtime Payment:

OT Payment = (One Hour OT Rate * 1.25) * Total OT Hours.

Example: [((Salary * 12) / 365) / 8) * 1.25] * OT Hours.

Calculations for Weekend Overtime Payment:

OT Payment = (One Hour OT Rate * 1.5) * Total OT Hours.

Example: [((Salary * 12) / 365) / 8) * 1.5] * OT Hours.

Calculations for Public Holidays Overtime Payment:

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.

Here is the HR Software to calculate overtime and payroll.

HR software UAE to manage employee records, track leaves, calculate gratuity, payroll calculation and create wps sif file.