What is OT? How to calculate overtime pay for employees in detail

In today's working environment, the concept of OT has become an indispensable part. So what is OT ? How to calculate overtime pay for specific employees? In this article, 1C Vietnam will provide businesses with a detailed and comprehensive view of the OT concept, related legal regulations, as well as how to calculate OT salary accurately. Refer now!

1. What is OT?

What is OT ? OT is the acronym for Over Time, which means working overtime. When work is performed outside of prescribed office hours, workers are working OT to improve work efficiency and progress. Businesses in the service sector such as Hotels, F&B, Logistics, Agencies,... often apply OT to ensure work is completed quickly and with better results.

2. How to calculate overtime pay for employees

Understanding what OT salary is and how to calculate OT salary helps employees ensure their rights as well as help businesses comply with legal regulations. The way to calculate overtime pay is specified in Article 98 of Labor Law No. 45/2019/QH14, specifically as follows:

2.1 How to calculate daytime OT salary

Below are detailed instructions on how to calculate daytime OT salary according to current regulations.

• For normal working days:

OT salary = Actual hourly pay x 150% x Number of overtime hours

• For weekends:

OT salary = Actual hourly pay x 200% x Number of overtime hours

• For holidays, New Year, and paid days off:

OT salary = Actual hourly pay x 300% x Number of overtime hours

2.2 How to calculate night OT salary

Below are detailed instructions on how to calculate night OT salary:

OT salary = [Overtime coefficient x Actual hourly pay on normal working days + Actual hourly pay on normal working days x Minimum rate of 30% + 20% x Corresponding hourly pay of daytime] x Number of overtime hours worked at night

3. Latest regulations on overtime in businesses

According to the 2019 Labor Code, regulations on overtime are clearly stated in Article 107. Specifically as follows:

3.1 Regulations on OT time

According to the provisions of the Labor Law, an employee's working time is 8 hours per day and no more than 48 hours a week. For restaurants and hotels, working time is divided into shifts not exceeding 10 hours per day. Night shifts are calculated from 10 p.m. the previous night to 6 a.m. the next morning.

The Labor Law allows overtime but does not exceed 50% of a day's working hours. For example, after working 8 hours a day, the maximum overtime is 4 hours. Thus, the total official working time plus overtime of the employee must not exceed 12 hours in a day.

When working overtime, employees can be scheduled for compensatory rest time. If they do not receive compensatory leave, they will be entitled to overtime pay.

3.2 Conditions for employees to be counted as OT

Employers can only employ employees to work overtime after obtaining the employee's consent. According to Decree 145/2020/ND-CP, this consent needs to be specifically guided and clearly stipulated about time, location and part-time work. Enterprises can refer to the written agreement between the employee and the employer according to Form No. 01/PLIV Appendix IV.

• The limit on overtime hours is no more than 50% of normal working hours in a day, no more than 12 hours in a day if calculated on a weekly basis, and no more than 40 hours in a month.
• The total number of overtime hours in a year must not exceed 200 hours, except in specified special cases.

3.3 Cases where employees are allowed to work less than 300 hours/year

Employers are only allowed to employ employees to work overtime for no more than 300 hours in a year in the following cases:

• Industries manufacturing, processing and exporting textiles, garments, leather, shoes, electricity, electronics, agricultural, forestry, salt and fishery processing.
• Manufacturing, electricity supply, telecommunications, oil refining, water supply and drainage industries.
• When solving tasks that require workers with high professional and technical qualifications, the labor market does not provide them fully and promptly.
• When dealing with urgent work that cannot be delayed due to the seasonality or timing of raw materials or products or problems arising from objective factors that cannot be predicted in advance such as adverse weather or natural disasters. , fire, enemy sabotage, lack of electricity, lack of raw materials, technical problems of the production line.
• Other cases prescribed by the Government.

3.4 Penalties for businesses not paying OT salaries

According to Decree 12/2022/ND-CP, employers will be subject to administrative penalties if they do not fully pay overtime wages to employees. Specifically, the fine level will increase according to the number of violated workers as follows:

• From 5,000,000 VND to 10,000,000 VND for violations of 1 to 10 employees.
• From 10,000,000 VND to 20,000,000 VND for violations of 11 to 50 employees.
• From 20,000,000 VND to 30,000,000 VND for violations of 51 to 100 employees.
• From 30,000,000 VND to 40,000,000 VND for violations of 101 to 300 employees.
• From 40,000,000 VND to 50,000,000 VND for violations of 301 or more employees.

This is governed by Article 6 of Decree 12/2022/ND-CP, which stipulates that the fine for organizations is double the fine for individuals. In addition to being fined, the company must also pay the full amount of late wages plus the highest interest rate on demand deposits announced by state-owned commercial banks at the time of sanction, according to Clause 5, Article 17. Decree mentioned above.

4. Why do so many employees choose OT today?

Questions such as what is OT salary and what is OT work almost did not appear in the previous period. However, with changes in the job market and regulations of businesses, overtime work is becoming more and more common. Here are some reasons why many employees choose OT:

• High workload: One of the common reasons why many people have to work overtime is because the workload is too large, especially on the last days of the year or when company projects are underway.
• Increase income: Working overtime with an OT salary higher than regular working hours helps employees earn significant additional income, improve their lives and meet personal financial needs.
• Promotion opportunities: Working as an OT brings opportunities for career advancement. Employees can attract attention and appreciation from their superiors by exceeding monthly KPIs, opening up opportunities for advancement and advancement at work.
• Complete on time: Working as an OT helps ensure work progress and quality of products or services provided, especially when work accumulates and requires more time than expected.

5. Should businesses apply OT to employees?

Applying OT to employees is a decision that depends on the specific circumstances of each business and each work situation. When applying overtime, businesses need to carefully consider factors to ensure that overtime is appropriate and does not cause overload among employees. Specifically

• Demand and workload: Businesses need to evaluate whether overtime is necessary. If workloads are consistently high, there are urgent projects, or there are peak periods, applying OT can help ensure progress and deadlines are met.
• Finance and economic efficiency: OT costs are often higher than regular working hours. Businesses need to carefully calculate to ensure that applying OT brings economic efficiency and does not have a negative impact on the business budget.
• Employee health and satisfaction: Working overtime can affect employees' health and work-life balance. If OT is applied excessively, it can lead to fatigue, stress and reduced work productivity. Businesses need to care about their employees' health to maintain a positive work environment.
• Labor policies and laws: Enterprises need to comply with regulations on overtime according to current labor laws. The application of OT must be approved by employees and ensure regulations on working time, salary and other working conditions.
• Work management and assignment: Smart management and reasonable work assignment can help avoid the need for frequent overtime. This helps balance work and minimize pressure or overload.

6. Harmful effects of working too much overtime

Although overtime (OT) can bring certain benefits to individuals and businesses, it also comes with serious harm if overused.

• Health problems: Overworking can easily lead to fatigue and physical weakness. Continuous OT can cause insomnia, stress, loss of concentration and health problems such as neurological, stomach and cardiovascular disorders.
• Loss of personal time: Working too much overtime will lead to an imbalance in personal life, family and leisure activities. Cornell University research shows that working overtime can cause discord in family relationships and increase divorce rates.
• Some other incidents: Working late can increase the risk of encountering dangerous situations when on the road late at night. To protect yourself, you need to learn how to defend yourself or have someone go with you.

In the above article, 1C Vietnam answered what OT is as well as how to calculate overtime pay in detail. To take advantage of the benefits of OT while still maintaining a balance between work and life, workers need to prepare and manage their time appropriately. Meanwhile, businesses can refer to 1C:Company Management software to manage personnel's working time well and stabilize workload. 1C:Management is a comprehensive business management solution with outstanding features such as financial and accounting management, warehouse management, production and service management, and customer relationship management (CRM). ,... Along with professional human resource management features, 1C:Company Management is definitely the perfect solution for companies in today's digital age.