Overtime compensation is a legal obligation in Pakistan, and calculating it correctly protects both your business and your employees. Whether you run a small workshop or a larger firm, understanding the rules—and automating them—saves time and prevents disputes.

The Legal Framework

Pakistan's labour laws require employers to pay workers for hours beyond the standard working week. The standard working week is typically 48 hours. Any work done beyond this threshold must be compensated at an enhanced rate. This applies to most sectors, though some categories (such as certain senior or managerial roles) may have different terms agreed in writing.

Standard Overtime Rate

The most common overtime rate in Pakistan is double the ordinary wage for additional hours worked. This means if a worker earns 500 rupees per hour, overtime is paid at 1,000 rupees per hour. Some agreements may specify time-and-a-half (1.5×) instead; always check individual employment contracts or collective agreements.

How to Calculate It

The calculation follows a straightforward formula:

  • Identify the ordinary wage: This is the basic hourly, daily or monthly rate agreed in the contract.
  • Count overtime hours: Track hours worked beyond 48 per week (or beyond daily limits, typically 8 or 10 hours per day depending on agreement).
  • Apply the multiplier: Multiply overtime hours by the agreed rate (usually 2×).
  • Add to total salary: Include the overtime amount in the pay period's gross salary before deductions.

Example: A worker on 60,000 rupees per month (based on a standard 48-hour week) works 10 extra hours in a week. The hourly rate is roughly 288 rupees (60,000 ÷ 208 hours per month). Overtime is 10 × 288 × 2 = 5,760 rupees for that week.

Common Pitfalls

Many businesses accidentally underpay overtime by:

  • Using only the base wage and ignoring allowances in the calculation
  • Forgetting to apply the multiplier
  • Not tracking hours accurately
  • Confusing daily and weekly thresholds
  • Treating senior staff as exempt when their contracts don't exclude them

Documentation and Compliance

Keep clear records of hours worked and overtime paid. Labour inspectorates may request these during audits. A payroll system that logs attendance and automatically flags overtime hours reduces errors and disputes. PayTime's payroll software includes overtime tracking and can be configured to match your company's specific rate and threshold rules, making compliance straightforward.

Regional Variations

While the 48-hour week is standard nationally, some provincial labour regulations or industry-specific agreements may differ slightly. Always confirm the exact rules with your local labour department and review employment contracts carefully.

Key Takeaway

Calculating overtime correctly is not just a legal requirement—it builds trust with your team and protects your business from penalties. Document your method, apply consistent multipliers, and use payroll software that handles the maths automatically. This way, you stay compliant, avoid disputes, and your employees know they are fairly compensated for every hour they work.