Kayode Ibukunoluwa-Micah's Blog

Overtime Computation

Having established the legitimacy of overtime work, the next question is how is overtime payment determined? It is important to states that the Labour Act does not prescribe the criteria for payment other than the statement that any time worked in excess of the normal working hour should constitute overtime.
Also, citing Section 13 subsection 1 of the Nigerian Labour Act, it was pointed out how official working hour can be determined, by mutual agreement, collective bargaining and by an enactment of a wage board. This implies, therefore, that overtime pay will be determined by any of the above-mentioned procedures.

PRACTICE

The standard practice that determines the computation of overtime in Nigeria is basically through mutual agreement and collective bargaining. However, there are judgments of the National Industrial Court of Nigeria that clarifies and stressed the importance of these two factors in the determination and computation of overtime payment.
Computation
Overtime works for the purpose of payment are divided into 1) ordinary days and 2) special or non-standard work days.

ORDINARY DAYS

The ordinary days works are those that fall within the standard working days of Monday to Friday in Nigeria. Hence, work done in excess of an agreed standard time with the approval of the organization shall constitute an ordinary day overtime work which is computed as time-and-a-half. This means that every extra one hour spent shall be paid as an hour-and-a-half.
Lets take as an example:
Johns gross pay is N 45,000 per month; based on the assumption his basic salary is said N 13,500 which is 30% of his gross earning per month.
If John put in a cumulative 5 hours of overtime in the month of October 2017, Monday to Friday only, his overtime for the period will be computed as:
Basic Pay/working days in October * 1.5*5 hours
13,500/22*1.5*5 = N 4,602.27

SPECIAL DAYS

These are days that fall outside the standard working days in a week, and this will include public holidays, weekends (where the worker normal work days are Monday to Fridays), special duty for example when a worker is requested to make it work during a National strike or during his or her off-duty days.
This is computed as DOUBLE-TIME-WAGE
Taking the example of John still, his special days overtime shall be computed thus:
13,500/22*2*5 = N 6,136.36
NOTE: It is important to state here that the above criteria are the commonly used, and it has come to form the standard practice in most part of the world, however, this does not necessarily mean that organization should and cannot adopt or negotiate a higher percentage as they considered appropriate for their organization.
Thereafter, my position is based on a mostly adopted percentage and method and should not be taken as a prescription for all organization.

MODE OF PAYMENT FOR OVERTIME

Overtime Payment

Overtime is paid along the workers salary at month end. It is required to be shown as an item on the payroll and on the workers pay slip.

IS OVERTIME EARNING TAXABLE?

The Personal Income Tax (Amendment) Act, 2011 (PITA) requires that all income earned by an employee be subject to taxation, including upfront payments and other entitlement. The Act provides that except for expenses incurred by the employee in the course of duties for which the employee does not expect to make profit or gain shall be tax-free. Since overtime is an earning by the employee, is subject to taxation.

CONCLUSION

This article has provided an extensive insight into the rules and practices guiding and regulating overtime, it has looked deeply into the benefits and implication of an unregulated overtime system. Justifications have been made within the ambit of the Nigerian Labour Law to back overtime and we I have looked at measures that can be put in place at ensuring maximum productivity when overtime is done.
It is important to state in closing that overtime is a legal prescription and it must be treated as such because it carries legal consequences as we have seen from the judgment of the National Industrial Court of Nigeria.
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Thank you.

Start Reading from: OVERTIME WORK:THE BASES, THE NIGERIAN LABOUR LAW, COMPUTATION, AND MODE OF PAYMENT.

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