Working Hours, Overtime Limits & Payroll Compliance Audits

Every working hours audit starts from the same baseline. In Bangladesh, the standard working day for an adult worker is 8 hours and the standard working week is 48 hours, with one weekly rest day. Hours worked beyond the standard day are overtime. Overtime must be voluntary, meaning a worker can refuse it without punishment, and it must be paid at the premium rate required by law. The premium rate is commonly applied as double the ordinary hourly rate in Bangladesh practice, but factories must verify the current premium provision in the Labour Act and in the applicable buyer code before each payroll sign-off, because codes and law are updated and auditors test the current provision, not last year memory.

This baseline is also the ETI Base Code position: working hours must comply with national law and benchmark industry standards, whichever affords greater protection, and in any event workers must not on a regular basis be required to work in excess of 48 hours, with overtime voluntary, not exceeding the applicable limits, and paid at a premium rate. The practical consequence for a compliance manager is simple: the factory needs a written hours policy stating the standard day, the standard week, the rest day, the overtime rule, and the premium rate, and the payroll system must encode exactly that policy.

A payroll sheet alone proves only what the factory claims to have paid. A time card alone proves only what the attendance system recorded. A production record alone proves only what was made. Auditors therefore compare three records for the same workers and the same period: time cards or biometric logs, payroll sheets, and production records or gate entry logs. When all three agree, the hours claim is credible. When they disagree, auditors assume the worst until the factory proves otherwise, because the most common payroll fraud patterns all work by making one record disagree with the others.

The patterns are well known. Overtime appears on gate logs but never reaches the time card, so it is never paid. Overtime reaches the time card but is paid at the normal rate instead of the premium rate. A second informal attendance sheet holds the real hours while the official sheet holds the audited hours. Wages are recorded as paid in full while workers confirm in interviews that they received less. None of these patterns survives a three-way reconciliation combined with confidential worker interviews, which is why auditors run both together.

A payroll audit follows seven steps. First, confirm the legal baseline from the current Labour Act and buyer code, and brief HR and payroll on any change. Second, collect the three records for the same workers and period, covering at least the full audit review period, typically twelve months. Third, reconcile hours record by record: total hours, overtime hours, rest days, and leave days, worker by worker, flagging every mismatch for investigation. Fourth, recompute pay from the reconciled hours: basic pay, overtime pay at the premium rate, deductions, and net pay, and compare with pay actually disbursed. Fifth, check deductions, wage slips, and leave: every deduction must be legally permitted and documented, every worker must receive an understandable wage slip, and leave and festival bonus records must be complete. Sixth, interview a sample of workers confidentially to confirm hours and pay, because documents alone cannot prove workers received what the sheets claim. Seventh, correct, document, and prevent recurrence: pay any shortfall immediately, correct records transparently, and fix the control that failed.

The single most important control is a single source of truth for attendance. One biometric or card system should feed payroll directly, with manual edits logged, dated, and approved by a named person. Every manual edit without an approval trail looks like tampering to an auditor, and in many cases that is exactly what it is.

The most valuable routine a payroll officer can run is the backwards overtime test: start from the time card, recompute the overtime hours, apply the premium rate, and compare with overtime actually paid. Run it monthly on a sample of lines, and run it on every line before any announced audit.

Consider an illustrative month on one sewing line. Worker A shows 24 overtime hours on the time card and 24 overtime hours paid at the premium rate: correct. Worker B shows 32 overtime hours on the time card but only 20 paid: a shortfall of 12 hours to repay immediately. Worker C shows 10 overtime hours paid at the normal rate: a rate error, repay the premium difference. Worker D shows no overtime on the time card but 16 overtime hours paid, while gate logs show night entries: a record error to investigate, because it may hide unrecorded hours elsewhere. Each of these four patterns appears regularly in real audits, and each is found by the same simple recomputation.

Deductions are a frequent secondary finding. Only deductions permitted by law and properly documented are allowed, and no deduction may reduce pay below the legal minimum. Fines for minor mistakes, deductions without worker knowledge, and unexplained deductions from final pay are all non-compliances. Every deduction needs a legal basis, a worker acknowledgement, and a payroll record that matches the wage slip.

Wage slips must be understandable to the worker, not only to payroll staff. A slip should show hours worked, overtime hours, rates applied, each deduction with its reason, and net pay, in plain language. A worker who cannot read their slip cannot detect underpayment, and auditors test slip comprehension in interviews.

Leave records must show annual leave, sick leave, and maternity leave as applicable, with balances that reconcile to attendance. Festival bonus, a customary annual payment to eligible workers in Bangladesh commonly paid around major festivals, must follow the current applicable rules: verify eligibility, timing, and calculation before each festival payroll rather than copying last year practice.

A knitwear factory in Gazipur passed its fire and building safety checks but failed the working hours section of a buyer audit. The auditor compared time cards, payroll, and gate logs for the same month and found that night-shift overtime appeared on gate logs but not on time cards, and overtime on time cards was paid at the normal rate instead of the premium rate. Workers confirmed in interviews that they had worked the overtime and had not been paid the premium.

The factory replaced manual attendance registers with a biometric system feeding payroll directly, retrained HR on overtime premium calculation, repaid the overtime shortfall to all affected workers with a written explanation, and started a monthly three-way reconciliation signed by HR and production. The follow-up verification audit found time, payroll, and gate records in agreement, overtime paid at the correct premium, and no worker interviewed reporting unpaid overtime. The buyer restored the factory to approved supplier status.

Recording overtime on a separate informal sheet that never reaches payroll. Paying overtime at the normal rate. Allowing supervisors to edit attendance without an approval trail. Deducting fines without legal authority. Issuing wage slips workers cannot understand. Keeping two sets of records. Each mistake is a choice of system, and each is fixed by a system: one attendance source, one encoded premium rate, one approval trail, one plain-language slip, one monthly reconciliation.

Working hours compliance is proved by agreement between records, not by any single record. When time cards, payroll sheets, and production or gate records agree, overtime is recomputed correctly, deductions are lawful, and workers confirm their pay in interviews, the payroll audit passes. When records disagree, auditors assume the worst until the factory proves otherwise. The next lesson covers the other half of audit evidence: worker interviews, and the confidentiality rules that make them trustworthy.