Indirect Employee Compensation

What doesn't fall under direct compensation is indirect compensation, of which the employee is the beneficiary, but does not receive directly. Indirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization. They include Leave Policy, Overtime Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement Benefits, Holiday Homes.

Leave Policy

It is the right of employee to get adequate number of leave while working with the organization. The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and maternity leaves, statutory pay, etc.

Overtime Policy

Overtime is the amount of time someone works beyond normal working hours. Normal hours

may be determined in several ways:. Employees should be provided with the adequate allowances and facilities during their overtime, if they happened to do so, such as transport facilities, overtime pay, etc. Overtime pay rates can cause workers to work longer hours than they would at a flat hourly rate. Overtime laws, attitudes toward overtime and hours of work vary greatly from country to country and between different economic sectors. Overtime means extra productivity from employee that should be equal or more than the overtime payment made.

Facts [+]

In the United States, the Fair Labor Standards Act of 1937 applies to employees in industries engaged in, or producing goods for, interstate commerce. The FLSA establishes a standard work week of 40 hours for certain kinds of workers, and mandates payment for overtime hours to those workers of one and one-half times the workers' normal rate of pay for any time worked above 40 hours. The law creates two broad categories of employees, those who are "exempt" from the regulation and those who are "non-exempt". Under the law, employers are not required to pay exempt employees overtime but must do so for non-exempt employees.

European Union (EU) directives

The directives require:

    • maximum average working week (including overtime) of 48 hours over a 17 week reference period

    • minimum daily rest period of 11 consecutive hours in every 24

    • breaks when the working day exceeds 6 hours

    • minimum weekly rest period of 24 hours plus the 11 hours daily rest period in every 7-day period

    • minimum of 4 weeks paid annual leave

    • night work restricted to an average of 8 hours in any 24-hour period

The directives apply to:

    • all sectors of activity, both public and private

    • Doctors in training used to work a maximum week of 58 hours until 2009. From 1 August 2009 their maximum working week fell to 48 hours.

According to The Factories act, 1948 [section 59] in India worker works in a factory for more than nine hours in any day or for more than forty-eight hours in any week, he shall, in respect of overtime work, be entitled to wages at the rate of twice his ordinary rate of wages.

Indian Government decides to discontinue overtime allowance for most employees

PTI | : Jun 26, 2018,

The Central Government has decided to discontinue overtime allowance given to its employees except operational staff, according to an order issued by the Personnel Ministry.

The move follows a recommendation of the Seventh Central Pay Commission in this regard.

It has been clarified by the Department of Expenditure that the government has decided that given the rise in the pay over the years, the recommendations of the Seventh Central Pay Commission to discontinue the overtime allowance for categories other than operational staff and industrial employees who are governed by statutory provisions may be accepted, it said.

Accordingly, it has been decided to implement this decision across all the ministries/departments and attached and subordinate office of the government of India.

The operational staff are all non-ministerial non-gazetted central government servants directly involved in smooth operation of the office including those tasked with operation of some electrical or mechanical equipment.

The administration wing of the ministries/departments concerned have been asked to prepare a list of operational staff with full justification for inclusion of a particular category of staff in the list of operational staff, the ministry said.

Biometric system leads to reduction in sum paid as overtime

INDIA, March, 2012: The amount paid on an average per month as overtime allowance to the employees of Finance Ministry has come down by around one fourth after installation of biometric attendance system, the Ministry has said in response to an RTI query.

The Ministry used to pay an average overtime allowance of Rs 2,26,978 each month, which after installation of biometric attendance system has reduced to Rs 62,600 approximately, the RTI (The Right to Information Act 2005 ) reply.

Biometric attendance system was installed in the Ministry to ensure that the employees and officials come to their office on time and do not leave early.

The application to seek the information on overtime allowance paid by the Ministry was filed by RTI activist Gopal Prasad.

He had also sought information on the modernisation plans undertaken by the Ministry at its offices here.


The employees should be provided allowances to get their regular check-ups, say at an interval of one year. Even their dependents should be eligible for the medi-claims that provide them emotional and social security.


Organizations also provide for accidental insurance and life insurance for employees. This gives them the emotional security and they feel themselves valued in the organization.

Leave Travel

The employees are provided with leaves and travel allowances to go for holiday with their families. Some organizations arrange for a tour for the employees of the organization. This is usually done to make the employees stress free.

Retirement Benefits

Organizations provide for pension plans and other benefits for their employees which benefits them after they retire from the organization at the prescribed age.

Holiday Homes

Organizations provide for holiday homes and guest house for their employees at different locations. These holiday homes are usually located in hill station and other most wanted holiday spots. The organizations make sure that the employees do not face any kind of difficulties during their stay in the guest house.

Flexible Timings

Organizations provide for flexible timings to the employees who cannot come to work during normal shifts due to their personal problems and valid reasons.