Overtime work and pay in India were previously governed by multiple laws, both at the central and state levels. Now, with the enforcement of the 4 labour codes, effective November 21st, 2025, the former overtime work laws were consolidated into this framework. The new labour codes in force outline specific obligations and associated penalties for employers in reference to overtime work. It is crucial for companies, 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 penalties for non-compliance.
Laws Governing Overtime Wages in India
1.Occupational Safety, Health and Working Conditions (OSH) Code, 2020
Effective November 21, 2025, the overtime wages in India are primarily governed by the Occupational Safety, Health, and Working Conditions (OSH) Code, 2020. This law, now in force, encompasses the 13 previous independent labour laws, including the Factories Act, Mines Act, Plantations Labour Act, etc.
Key provisions under the OSH Code:
- If a worker works for more than 8 hours in a day or 48 hours in a week, they are eligible for overtime pay. Overtime pay must be compensated at twice the worker’s ordinary wage rate, and payment should be released within the stipulated wage period.
- In certain sectors such as factories, docks, mines, and construction, workers may have extended work time beyond 12 hours under specific operational requirements—including urgent repair work, continuous-process requirements, essential goods supply, and situations declared nationally important by the Central Government.
- Overtime work now requires consent from both stakeholders – the employer and the employee. It no longer happens only at the demand of the employer. The time for overwork is capped at 144 hours in a single quarter of the year.
- The OSH Code standardizes how extra time is computed for overtime pay allowance. Any extra time between 15 and 30 minutes is counted as 30 minutes; extra time beyond 30 minutes is counted as 1 hour.
- While the OSH Code sets the limit for overtime work at the central level, states retain the power to specify daily/weekly overtime working-hour limits for various industries.
2.Code on Wages, 2019
The Code on Wages, 2019, consolidates several previously existing laws, including the Payment of Wages Act and Minimum Wages Act, into a single framework. It introduces uniformity in wage definitions, recordkeeping, and compliance requirements.
Key provisions of the Code on Wages, 2019
- The term ’employee’ now represents officials in supervision, management, administration, etc., at the same level, extending statutory protections, including wage payment timelines and restrictions on deductions.
- It introduces a new definition of “wages”, to only cover base salary, dearness allowance, and retention allowance. It excludes overtime compensation, pension contributions, and HRA. If the excluded components exceed 50% of the total pay, the exceeded amount is considered as “wages” and returned to the employee’s paycheck.
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 wages) / (Number of Working Days in a Month × Working Hours per Day)
Example:
If an employee earns ₹30,000 per month (only Basic + DA), 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
Penalties for Non-Compliance
- If an employer fails to pay or underpays an employee for overtime work, a fine of up to ₹50,000 may be imposed under the Code on Wages, 2019.
- In the case of the employer repeating the offense within five years, imprisonment up to three months, or a fine up to ₹100,000, or both, may be applied.
- If the employer fails to maintain accurate records of employee attendance, overtime hours, wage payments, and statutory registers for at least 5 years, it may incur a fine of up to ₹10,000.
- In sectors governed by the Factories Act, 1948, serious repetitive violations related to overtime working hours may result in imprisonment of up to three years and a fine of up to ₹200,000.
- For other instances of non-compliance with provisions of the Labour Code, a fine of up to ₹20,000 may be levied.
The new Labour laws 2025 guide employers in recognizing 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.
Frequently Asked Questions
1. What are the new overtime rules under the OSH Code, 2020?
2. How is overtime pay calculated in India under the new labour laws?
3. What is included in ‘wages’ as per the Code on Wages, 2019?
4. Is employee consent mandatory for overtime work in India?
5. What are the penalties for not paying overtime wages in India?
