Many time-critical applications require dynamic scheduling with predictable performance. Tasks corresponding to these applications have deadlines to be met despite the presence of faults. In this paper, we propose a technique called dynamic grouping, to be used with backup overloading in a primary-backup based fault-tolerant dynamic scheduling algorithm in multiprocessor real-time systems. In dynamic grouping, the processors are dynamically grouped into logical groups in order to achieve efficient overloading of backups, there by improving the schedulability. We compare the performance of dynamic grouping with that of static grouping and no-grouping schemes through extensive simulation studies and show the effectiveness of dynamic grouping.