Overtime Wages in India: Key Laws and Regulations

Overtime work and pay in India are governed by a complex framework of laws at both the central and state levels. Each of these legal provisions outlines specific obligations and associated penalties for employers. It is crucial for employers, particularly HR departments, to be thoroughly familiar with these overtime wage laws to ensure legal compliance and maintain employee welfare.

Understanding their eligibility for overtime compensation and the method of its calculation is equally important for employees. This article explores the key labour laws regulating overtime pay in India, the procedure for calculating overtime wages, and the related obligations and penalties for defaulting employers. 

Laws Governing Overtime Wages in India

Factories Act, 1948

• Applicable to factories and manufacturing units.                                                                                       
• It prescribes working hours of 9 hours per day and 48 hours per week.
• Employees working beyond these limits are eligible to receive compensation at twice their ordinary wages.

Minimum Wages Act, 1948

• Applicable to employees whose minimum wages are fixed under this Act.
• Rule 25 of the Minimum Wages Rules, 1950, outlines the provisions for overtime pay:
• For agricultural work: 1.5 times the ordinary pay
• For other scheduled employment: Twice the ordinary pay
  
  

State-Specific Shops and Establishments Acts

• Applicable to restaurants, shops, and offices.
• This Act varies by state with each state having its own legal framework.

Delhi

• Standard working hours are 9 hours per day and 48 hours per week.
  
  
• Employees must not work continuously for more than 5 consecutive hours without an interval of at least 30 minutes.
  
  
• Women and young persons are prohibited from working between 9:00 PM and 7:00 AM during summer, and between 8:00 PM and 8:00 AM during winter.
  
  

Karnataka

• Total working hours, including overtime, must not exceed 10 hours per day, except on the day of stock-checking and account preparation.
  
  
• Total overtime hours must not exceed 50 hours in a continuous period of 3 months.
  
  
• Women employees are not permitted to work between 8:00 PM and 6:00 AM, with certain exceptions.
  
  

Maharashtra

• Overtime work must not exceed 125 hours in 3 months.
  
  
• The spread-over of a worker must not exceed 10.5 hours per day; in cases of urgent work, it shall not exceed 12 hours per day.
  
  
• Women are not permitted to work between 9:30 PM and 7:00 AM.

Plantation Labour Act, 1951

• This Act applies to any plantation area measuring 5 hectares or more, with 15 or more employees. 
• It stipulates a maximum of 48 working hours per week for adults and 27 hours per week for adolescents, along with a mandatory rest day every seven days.
• The Plantations Labour (Amendment) Act, 2010, enhanced the scope for recognition to be considered as “workers” by raising the wage ceiling limit from ₹750 per month to ₹10,000 per month. 
• It also brought contract workers under the Act, provided they worked for more than 60 days in a year.

Other important laws governing overtime pay in India include:

• The Mines Act, 1952
  
  
• The Building and Other Construction Workers Act, 1996
  
  
• The Contract Labour (Regulation and Abolition) Act, 1970
  
  
• The Working Journalists Act, 1955

Overtime Pay Laws Under Development

The code on Wages 2019 and the Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 were introduced but have yet to be executed by the government. This is owing to delays in finalising their provisions and features.  

Code on Wages, 2019

• The Code on Wages, 2019 consolidates four existing laws—the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976.
• It aims to provide a unified framework for wage payment and extend coverage to a broad section of employees across various sectors.
• This law introduces a new concept, “floor wages,” which sets a minimum wage benchmark below which state governments cannot fix salary standards. This ensures an optimum level of income for workers at all levels.

Occupational Safety, Health and Working Conditions Code, 2020

• It seeks to consolidate 13 existing labour laws into a single comprehensive code to simplify compliance and streamline procedures.
• Key areas covered include working hours, overtime pay, women’s protection, health and safety standards, and the establishment of a social security fund.

How to Calculate Overtime Pay in India?

In India, overtime pay is compensated at twice the regular hourly rate and can be calculated based on the following two steps.

Step 1: Calculate the Regular Hourly Wage
For salaried employees:
Regular Hourly Wage = (Monthly Salary) / (Number of Working Days in a Month × Working Hours per Day)

Example:
If an employee earns ₹30,000 per month, works 22 days a month, and 8 hours a day:
Regular Hourly Wage = ₹30,000 / (22 × 8) = ₹170.45

Step 2: Calculate Overtime Pay
Overtime Pay = Overtime Hours × Regular Hourly Wage × 2

Example:
For 5 overtime hours:
Overtime Pay = 5 × ₹170.45 × 2 = ₹1,704.50

Obligations for Employers on Overtime Pay

Employers are required to provide overtime pay to any employee working beyond the standard working hours (8–9 hours per day or 48 hours per week) at twice their regular hourly rate. The payment must be made within the stipulated timeframe as prescribed by labour laws, without any delay.

Employers are also mandated to maintain detailed records, including:

• Employee attendance registers
  
  
• Overtime pay registers (documenting extra hours and corresponding payments)
  
  
• Pay slips (including details of overtime pay)
  
  
• A tracker for wage disbursements
  
  

These records must be preserved for a minimum period of three years and must be made available for inspection by labour authorities upon request. Employers must comply with all applicable central laws, as well as state-specific regulations, regarding overtime pay and standard working hours.

Penalties for Non-Compliance

• If an employer fails to pay or underpays an employee for overtime work, an initial fine of up to ₹50,000 may be imposed. In the case of a repeated offence, the employer may face imprisonment for up to three months with an additional fine of up to ₹1,00,000, or both.
• Failure to maintain accurate records of employees’ attendance, overtime hours and pay, and wage disbursements can result in a fine of up to ₹10,000. 
• Under the Factories Act, 1948, any violation related to non-payment of overtime wages may lead to imprisonment for up to two years or a fine of up to ₹1,00,000. Repeated violations may incur an additional fine of ₹1,000 per day.
• Penalties may also vary according to state-specific labour laws. For example, the Maharashtra government imposes fines ranging from ₹1,000 to ₹2,00,000, depending on the nature and severity of the offence.

Labour laws at both the central and state levels guide employers in recognising the importance of overtime pay and in fairly compensating employees for their additional efforts. At the same time, employees are empowered to assess their eligibility for overtime compensation and understand the calculation process, enabling them to advocate for their contributions at work.

Overtime pay plays a vital role in ensuring employee satisfaction and supporting sustainable organisational growth.

Frequently Asked Questions