diff --git a/packages/fiori/cypress/specs/ShellBar.cy.tsx b/packages/fiori/cypress/specs/ShellBar.cy.tsx
index a9bd3011a3045..969f1b8a64bf5 100644
--- a/packages/fiori/cypress/specs/ShellBar.cy.tsx
+++ b/packages/fiori/cypress/specs/ShellBar.cy.tsx
@@ -1189,6 +1189,40 @@ describe("ButtonBadge in ShellBar", () => {
 			.should("exist")
 			.should("have.attr", "text", "42");
 	});
+
+	it("Notification badge and custom-item count badge stay within the ShellBar bounds (#12962)", () => {
+		cy.mount(
+			<ShellBar id="shellbar-badge-bounds"
+				primaryTitle="Product Title"
+				showNotifications={true}
+				notificationsCount="99+">
+				<img slot="logo" src="https://upload.wikimedia.org/wikipedia/commons/5/59/SAP_2011_logo.svg" />
+				<ShellBarItem id="badged-item" icon="accept" text="Item" count="42" />
+			</ShellBar>
+		);
+
+		cy.get("#shellbar-badge-bounds").then($sb => {
+			const sbRect = $sb[0].getBoundingClientRect();
+
+			cy.get("#shellbar-badge-bounds")
+				.shadow()
+				.find(".ui5-shellbar-bell-button ui5-button-badge[slot='badge']")
+				.then($badge => {
+					const bRect = $badge[0].getBoundingClientRect();
+					expect(bRect.top, "bell badge top >= shellbar top").to.be.at.least(sbRect.top);
+					expect(bRect.bottom, "bell badge bottom <= shellbar bottom").to.be.at.most(sbRect.bottom);
+				});
+
+			cy.get("#shellbar-badge-bounds")
+				.shadow()
+				.find(".ui5-shellbar-custom-item ui5-button-badge[slot='badge']")
+				.then($badge => {
+					const bRect = $badge[0].getBoundingClientRect();
+					expect(bRect.top, "custom-item badge top >= shellbar top").to.be.at.least(sbRect.top);
+					expect(bRect.bottom, "custom-item badge bottom <= shellbar bottom").to.be.at.most(sbRect.bottom);
+				});
+		});
+	});
 });
 
 describe("Keyboard Navigation", () => {
diff --git a/packages/fiori/src/themes/ShellBar.css b/packages/fiori/src/themes/ShellBar.css
index a4caa837e630d..b2f882688b472 100644
--- a/packages/fiori/src/themes/ShellBar.css
+++ b/packages/fiori/src/themes/ShellBar.css
@@ -406,11 +406,17 @@ slot[name="profile"] {
 }
 
 .ui5-shellbar-overflow-container-right-child .ui5-shellbar-bell-button [slot="badge"] {
-    inset-inline-end: var(--_ui5-shellbar-notification-btn-count-offset);
+    inset-inline-end: var(--_ui5-shellbar-notification-btn-count-offset, 0);
 }
 
 .ui5-shellbar-overflow-container-right-child .ui5-shellbar-custom-item [slot="badge"] {
-    inset-inline-end: var(--_ui5-shellbar-notification-btn-count-offset);
+    inset-inline-end: var(--_ui5-shellbar-notification-btn-count-offset, 0);
+}
+
+.ui5-shellbar-overflow-container-right-child .ui5-shellbar-bell-button [slot="badge"][design="OverlayText"],
+.ui5-shellbar-overflow-container-right-child .ui5-shellbar-custom-item [slot="badge"][design="OverlayText"] {
+    top: var(--_ui5-shellbar-badge-offset, 0);
+    margin: var(--_ui5-shellbar-badge-margin, -0.5rem);
 }
 
 .ui5-shellbar-menu-button {
diff --git a/packages/fiori/src/themes/sap_fiori_3/ShellBar-parameters.css b/packages/fiori/src/themes/sap_fiori_3/ShellBar-parameters.css
index 561b4b08c44ad..bafb0c83e18db 100644
--- a/packages/fiori/src/themes/sap_fiori_3/ShellBar-parameters.css
+++ b/packages/fiori/src/themes/sap_fiori_3/ShellBar-parameters.css
@@ -2,4 +2,8 @@
 
 :root {
 	--_ui5_shellbar_button_focused_border: 0.0625rem dotted var(--sapContent_ContrastFocusColor);
+	/* Badge position adjustment for shorter shellbar height in Quartz theme */
+	--_ui5-shellbar-badge-offset: 0.25rem;
+	--_ui5-shellbar-badge-margin: -0.25rem;
+	--_ui5-shellbar-notification-btn-count-offset: 0;
 }
\ No newline at end of file
diff --git a/packages/fiori/src/themes/sap_fiori_3_dark/ShellBar-parameters.css b/packages/fiori/src/themes/sap_fiori_3_dark/ShellBar-parameters.css
index 4a57dfc27dfc3..fd8baab1ae192 100644
--- a/packages/fiori/src/themes/sap_fiori_3_dark/ShellBar-parameters.css
+++ b/packages/fiori/src/themes/sap_fiori_3_dark/ShellBar-parameters.css
@@ -2,4 +2,8 @@
 
 :root {
 	--_ui5_shellbar_logo_outline_color: var(--sapContent_FocusColor);
+	/* Badge position adjustment for shorter shellbar height in Quartz theme */
+	--_ui5-shellbar-badge-offset: 0.25rem;
+	--_ui5-shellbar-badge-margin: -0.25rem;
+	--_ui5-shellbar-notification-btn-count-offset: 0;
 }
\ No newline at end of file
diff --git a/packages/fiori/src/themes/sap_fiori_3_hcb/ShellBar-parameters.css b/packages/fiori/src/themes/sap_fiori_3_hcb/ShellBar-parameters.css
index 2b7f59953cb96..8b747a4e7c261 100644
--- a/packages/fiori/src/themes/sap_fiori_3_hcb/ShellBar-parameters.css
+++ b/packages/fiori/src/themes/sap_fiori_3_hcb/ShellBar-parameters.css
@@ -2,4 +2,8 @@
 
 :root {
 	--_ui5_shellbar_button_focused_border: 0.125rem dotted var(--sapContent_FocusColor);
+	/* Badge position adjustment for shorter shellbar height in Quartz theme */
+	--_ui5-shellbar-badge-offset: 0.25rem;
+	--_ui5-shellbar-badge-margin: -0.375rem;
+	--_ui5-shellbar-notification-btn-count-offset: 0;
 }
\ No newline at end of file
diff --git a/packages/fiori/src/themes/sap_fiori_3_hcw/ShellBar-parameters.css b/packages/fiori/src/themes/sap_fiori_3_hcw/ShellBar-parameters.css
index 2b7f59953cb96..8b747a4e7c261 100644
--- a/packages/fiori/src/themes/sap_fiori_3_hcw/ShellBar-parameters.css
+++ b/packages/fiori/src/themes/sap_fiori_3_hcw/ShellBar-parameters.css
@@ -2,4 +2,8 @@
 
 :root {
 	--_ui5_shellbar_button_focused_border: 0.125rem dotted var(--sapContent_FocusColor);
+	/* Badge position adjustment for shorter shellbar height in Quartz theme */
+	--_ui5-shellbar-badge-offset: 0.25rem;
+	--_ui5-shellbar-badge-margin: -0.375rem;
+	--_ui5-shellbar-notification-btn-count-offset: 0;
 }
\ No newline at end of file
diff --git a/packages/fiori/src/themes/sap_horizon/ShellBar-parameters.css b/packages/fiori/src/themes/sap_horizon/ShellBar-parameters.css
index cba6710bbb893..d1a000e217cc9 100644
--- a/packages/fiori/src/themes/sap_horizon/ShellBar-parameters.css
+++ b/packages/fiori/src/themes/sap_horizon/ShellBar-parameters.css
@@ -27,4 +27,8 @@
 	--_ui5_shellbar_input_border_radius: 1.125rem;
 	--_ui5_shellbar_input_focus_border_radius: 1.125rem;
 	--_ui5_shellbar_input_background_color: var(--sapShell_InteractiveBackground);
+	/* Notification/count badge position adjustment for the OverlayText badge */
+	--_ui5-shellbar-badge-offset: 0.25rem;
+	--_ui5-shellbar-badge-margin: -0.25rem;
+	--_ui5-shellbar-notification-btn-count-offset: 0;
 }
\ No newline at end of file
diff --git a/packages/fiori/src/themes/sap_horizon_dark/ShellBar-parameters.css b/packages/fiori/src/themes/sap_horizon_dark/ShellBar-parameters.css
index cba6710bbb893..d1a000e217cc9 100644
--- a/packages/fiori/src/themes/sap_horizon_dark/ShellBar-parameters.css
+++ b/packages/fiori/src/themes/sap_horizon_dark/ShellBar-parameters.css
@@ -27,4 +27,8 @@
 	--_ui5_shellbar_input_border_radius: 1.125rem;
 	--_ui5_shellbar_input_focus_border_radius: 1.125rem;
 	--_ui5_shellbar_input_background_color: var(--sapShell_InteractiveBackground);
+	/* Notification/count badge position adjustment for the OverlayText badge */
+	--_ui5-shellbar-badge-offset: 0.25rem;
+	--_ui5-shellbar-badge-margin: -0.25rem;
+	--_ui5-shellbar-notification-btn-count-offset: 0;
 }
\ No newline at end of file
diff --git a/packages/fiori/src/themes/sap_horizon_hcb/ShellBar-parameters.css b/packages/fiori/src/themes/sap_horizon_hcb/ShellBar-parameters.css
index fbbeecbee1740..6e552c720e54b 100644
--- a/packages/fiori/src/themes/sap_horizon_hcb/ShellBar-parameters.css
+++ b/packages/fiori/src/themes/sap_horizon_hcb/ShellBar-parameters.css
@@ -11,4 +11,8 @@
 	--_ui5_shellbar_search_field_background_hover: var(--sapShellColor);
 	--_ui5_shellbar_search_field_box_shadow_hover: none;
 	--_ui5_shellbar_menu_button_title_font_size: var(--sapFontHeader5Size);
+	/* Notification/count badge position adjustment for the OverlayText badge */
+	--_ui5-shellbar-badge-offset: 0.25rem;
+	--_ui5-shellbar-badge-margin: -0.375rem;
+	--_ui5-shellbar-notification-btn-count-offset: 0;
 }
\ No newline at end of file
diff --git a/packages/fiori/src/themes/sap_horizon_hcw/ShellBar-parameters.css b/packages/fiori/src/themes/sap_horizon_hcw/ShellBar-parameters.css
index fbbeecbee1740..6e552c720e54b 100644
--- a/packages/fiori/src/themes/sap_horizon_hcw/ShellBar-parameters.css
+++ b/packages/fiori/src/themes/sap_horizon_hcw/ShellBar-parameters.css
@@ -11,4 +11,8 @@
 	--_ui5_shellbar_search_field_background_hover: var(--sapShellColor);
 	--_ui5_shellbar_search_field_box_shadow_hover: none;
 	--_ui5_shellbar_menu_button_title_font_size: var(--sapFontHeader5Size);
+	/* Notification/count badge position adjustment for the OverlayText badge */
+	--_ui5-shellbar-badge-offset: 0.25rem;
+	--_ui5-shellbar-badge-margin: -0.375rem;
+	--_ui5-shellbar-notification-btn-count-offset: 0;
 }
\ No newline at end of file