Overtime rules in India under the labour codes

Overtime was the part of labour law that small offices quietly ignored, on the theory that it applied to factories. The Occupational Safety, Health and Working Conditions Code 2020, in force since 21 November 2025, with central rules notified on 8 May 2026, standardises working hours and overtime across establishments for the first time. The practical effect for a 50-person company is that the question "do we owe overtime?" now has an answer that does not depend on whether you have a shop floor.

The hour limits

The 144-hour figure is in the central rules, which govern establishments where the central government is the appropriate government. For most private companies the state is the appropriate government, and state rules under the Code set their own caps; several states have kept lower figures, and some have moved toward the central number. Check the rules notified by your state before relying on 144.

The old Factories Act had a 50-hour quarterly cap and a 9-hour day; the Code's numbers are the ones that apply now.

The overtime rate

Section 27 of the Code sets overtime at twice the ordinary rate of wages for any work beyond the daily or weekly limit. "Wages" is the Code's definition: basic, DA and retaining allowance, subject to the rule that excluded allowances cannot exceed half of total remuneration. Compute the hourly rate as monthly wages ÷ (26 × 8) unless your state rules prescribe otherwise, and pay double that for each overtime hour.

Worked example. Code wages of ₹26,000 a month give an hourly rate of ₹125. An employee works 10 overtime hours in the month. Overtime pay is 10 × 125 × 2 = ₹2,500, shown as its own line on the payslip and taxed as salary.

Consent

The Code makes overtime subject to the worker's consent. An employee who declines overtime cannot be penalised for it. In practice this means overtime is requested and agreed, ideally in writing or through the attendance system, not imposed by a roster. A standing clause in the appointment letter that the employee "agrees to work overtime as required" is weak evidence of consent to a specific instance; a logged request and acceptance is strong evidence.

Who is covered

The Code's working-hours chapter applies to "workers", a term that broadly excludes people in managerial, administrative or supervisory roles above a wage threshold set by the rules. Most state Shops and Establishments Acts have a similar exclusion for managerial and confidential staff. Two consequences:

• A software engineer, an accountant, a sales executive or a support agent is very likely covered, whatever their designation says. Job content decides, not the title.
• A team lead with genuine supervisory responsibility may be excluded, but "senior" in the title does not make someone a manager.

The threshold and the precise definition vary by state. If you have not looked at this since the Code came into force, the safest assumption is that everyone below a real management layer is covered.

Comp-off versus paid overtime

Compensatory off is a day off granted for working on a weekly off or holiday. It is a separate concept from overtime pay, and the two are routinely confused:

• Work on a weekly off or a holiday earns a comp-off under most state Acts, generally to be taken within a set window. Where the Act or rules require it, overtime pay is due as well for hours beyond the daily limit.
• Hours beyond 8 in a normal day are overtime and must be paid at double rate. A comp-off is not a lawful substitute for overtime pay unless the applicable rules allow it, and most do not.

Write the comp-off rules into the attendance policy: how it is earned, how it is approved, and how long it lasts. Then treat overtime pay as a payroll matter, not an attendance one.

Records

The Code and its rules require a register of workers, a register of hours worked including overtime, and the overtime wages paid. Most states accept electronic registers maintained in the attendance system. What an inspector wants to see is the link between the hours record and the payslip: if the register shows 10 overtime hours and the payslip shows none, that is a finding.

Practically:

1. Capture actual in and out times, not just presence. A time and attendance record that only marks present or absent cannot compute overtime.
2. Flag any day over 8 hours or week over 48 automatically, and require a manager to confirm the overtime was requested.
3. Push approved overtime hours into payroll as a separate earning, computed at the double rate on Code wages.
4. Keep the register for the retention period your state prescribes, generally three years.

Common mistakes

• Treating a flat "overtime allowance" as compliance. A fixed allowance that does not vary with hours is not overtime pay.
• Paying overtime at single rate because "we also give comp-off".
• Asking salaried office staff to work 10-hour days with no record, on the theory that they are not "workers".
• Relying on the central 144-hour cap when the state rules say something lower.

Sources

• FAQs on the OSH Code 2020 and the Central Rules 2026 (Acuity Law)
• India's labour codes enter the compliance phase: key implications of the Central Rules 2026 (Mondaq)
• Working hours and overtime under the labour codes (LawSikho)

This article describes general legal provisions and common practice, not legal advice. Overtime caps, the hourly divisor and the categories of excluded staff depend on the rules notified by the state that is the appropriate government for your establishment; confirm specifics with a professional.