Overtime Pay & Working Hours Law in India
Overtime is one of the most common compliance gaps for Indian employers. The rule is simple in principle: hours worked beyond the legal limit are paid at twice the ordinary rate of wages. This guide covers what counts as overtime, the rate, the working-hour limits, state-level rules, the new labour codes, and how to calculate overtime pay.
What counts as overtime
Overtime is the time an employee works beyond the standard daily or weekly hours fixed by law or contract. Under the Factories Act 1948, work beyond 9 hours in a day or 48 hours in a week qualifies for overtime wages.
The overtime rate: twice the ordinary rate of wages
Section 59 of the Factories Act 1948 requires overtime to be paid at twice the ordinary rate of wages. The ordinary rate of wages generally means basic plus dearness allowance and the cash value of qualifying allowances, excluding bonus. The new Code on Wages 2019 retains the double-rate principle.
Working hour limits
The Factories Act caps daily work at 9 hours and weekly work at 48 hours, with a spread-over limit of 10.5 hours including rest, a weekly rest day, and a limit of around 50 hours of overtime per quarter in most states. These limits exist to protect health and safety, not only to trigger overtime pay.
Shops & Establishments Acts
Offices, shops and IT/ITES units are usually governed by the relevant state Shops & Establishments Act rather than the Factories Act. Each state sets its own daily and weekly hours and overtime rules, so a multi-state employer manages several schedules at once. Most states also mandate overtime at twice the ordinary rate.
The new labour codes
The Code on Wages 2019 and the Occupational Safety, Health and Working Conditions Code 2020 consolidate the older laws. They keep overtime at double the normal rate, retain daily-hour limits, and allow some flexibility such as a shorter working week as long as the weekly hour ceiling is respected. Roll-out timelines differ by state notification.
How to calculate overtime pay
Work out the hourly wage first: monthly basic plus DA, divided by the number of working days, divided by hours per day. Then overtime pay equals hourly wage, times two, times the overtime hours. For example, ₹26,000 basic plus DA over 26 days and 8 hours is an hourly wage of ₹125, an overtime rate of ₹250, so 20 overtime hours is ₹5,000. The overtime calculator does this for you.
Exemptions and common misconceptions
Employees in genuine managerial or supervisory positions are often outside the overtime provisions, but the test is the actual nature of the work, not the job title. Compensatory off in place of overtime pay is not a clean substitute where the statute requires payment, so check the applicable act before offering comp-off instead of wages. Keep a muster roll, an overtime register, and disclose overtime on the payslip.