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Overtime Policies under Labour Laws in India for Private Companies

Majority of the working sector does not know that for overtime beyond working hours, employees hold certain rights that they need to exercise, as per the labour laws in India. Let us find out about these overtime rules and procedures in India.
Written by:
Swati Shalini
Published on

Labour laws in India refer to laws[1] that relate to the rights and responsibilities of the labor class in India. There are certain rights that every employee and labor has, and in order to protect their interests and rights, under the Constitution of India, articles 14-16, 19(1)(c), 23-24, 38, and 41-43A directly concern with the labor laws in India.

The majority of the working sector is oblivious to employee rights and labor laws in India regarding overtime rules and procedures. Employees in the private sector often have to work overtime, past their working hours in India to increase productivity and achieve the company’s targets.

Since the competitive environment in the corporates and new businesses demand hard work and enthusiasm from the workforce, not many know that overtime policy in India is also seen as the right of private-sector employees in India.

What are the normal working hours & overtime? 

Overtime is the period for which an employee has worked in excess of their working hours. Under the overtime rules and policies defining work hours in India, an employee is subject to 8-9 working hours per day which equals a total of 48-50 hours a week.

The employment laws in India state that any employee who works more than the established working hours is eligible for an overtime remuneration for the period worked beyond mandatory working hours.

To understand the overtime policies in your company, you can either speak to the human resources personnel or consult employment lawyers to know who by law is eligible for overtime pay in India.

How many hours are you legally allowed to work in a day in India?

There are numerous overtime rules and procedures in India stipulating different periods of working hours under the labor law. Section 51 and Section 59 of the Factories Act - 1948[2] states,

“No employee is supposed to work for more than 48 hours in a week and 9 hours in a day. Any employee who works for more than this period is eligible for overtime remuneration prescribed as twice the amount of ordinary wages.”

Additionally, Section 14 of the Minimum Wages Act, 1948[3] states,

“When the minimum wages of an employee are fixed for a particular period of time and the employee works beyond that period, then the employee has to be paid overtime wages for the extra time.”

Every state in India has its own Shops and Establishment Act (SEA)[4] which also lays down overtime rules and procedures for workmen employed in different institutions. The SEA is applicable to all managerial and non-managerial positions, in every Indian shop and establishment.

The overtime rules also state that the employees must be provided at least one break for half an hour between the working hours and the entire working period per day must be calculated in such a way that no working period exceeds 5 hours without an interval.

The total number of working hours in India in a day must be 12 and a half hours, limiting the maximum number of overtime hours in a day at 2 hours.

Overtime rules under the Factories Act, 1948 also specifies the punishment in case an employer violates these provisions.

Any employer found to be contravening these provisions would be liable for punishment of imprisonment up to 2 years and fine of up to Rs. 1 lakh or both. If the employer continues to violate the provisions after conviction, a fine of Rs. 1000 per day is levied for each day of violation.

Under the overtime payment rules in India, overtime wages are paid in two ways – either on a per hour rate or a per piece rate in factories.

  • In the per hour or hourly rate, the per hour wage of an employee is calculated and double the amount is paid for every extra working hour.
  • In per piece method, an employee is paid overtime for every extra piece made during the overtime period.

How overtime is calculated in India?

The Indian employment laws and Indian labor laws are still under-defined when it comes to overtime rules in the private sector in India. The employees in the private sector are often subjected to extra working hours with no remuneration for the overtime work done.

One of the most famous examples is the demonetization period in India. When more than 10,000 bank employees had to work beyond their working hours in both private and public sector banking firms, without getting any overtime wages.

In the private sector, the working hours and timings are stipulated by the employer in the company’s HR policies , drafted in accordance with the overtime rules and procedures in India.

The company's overtime policy must clearly state the reporting time and working hours for all employees along with provisions relating to leaves and holidays. The HR policy must also include the company’s policy about any remuneration for the extra time any employee works.

The overtime work must be voluntarily taken up by the employee and not forced through an involuntarily or fraudulently signed agreement.

The employer has to consider certain factors before allowing overtime for an employee, like any sudden or unpredicted increase in work or demand, where the employee voluntarily wishes to work overtime to increase their productivity.

For this, the employer must have an overtime approval policy in place that states the conditions in which overtime can be approved by the employer.

Every employer is required to maintain a register of attendance for overtime that lays down the details of the employees who work beyond working hours and the amount of remuneration to be paid if any.

With an increasing number of MNCs and BPOs in India, the working hours in an MNC in India are extended to night shifts as well, where employees have to work in accordance with the working hours of the country in which the parent company is located. However, there are no specific laws that deal with night shifts in India.

In the white-collar sector and management level employment, employees rarely raise demand for overtime payment, even though as per Indian employment laws, they are legally entitled to remuneration. However, if no overtime policy is made by the employer, it leaves a chance of unwanted employment disputes in the future.

It becomes important for an employer to get the company overtime policy and employment agreement drafted for overtime calculation in India. You need to have a good employment lawyer to avoid any unnecessary disputes over overtime provisions and laws.

Who can help you?

You can get expert consultations from the best employment lawyers on MyAdvo!

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External Links:

[1] Labour Laws in India - Labour laws in India such as the Industrial Disputes Act, 1947 (“ID Act”) provide protection to workmen such as redundancy/retrenchment compensation. 

[2] Employee Overtime Rules & Procedures - (refer from page 39 - 41) - The majority of the working sector does not know that for overtime beyond working hours, employees hold certain rights that they need to exercise, as per the labor laws in India.

[3] The Minimum Wages Rules, 1950 -  The wages of an employed person shall be paid to him without deduction of any kind except those authorized by or under these rules. 

[4] Shops and Establishment (Regulation of Employment & Conditions of Service) Bill, 2016 - Some of the major reforms this bill seeks to propose are: Working Hours of Employees: Establishments are permitted to operate on all days in a year and can also decide their opening and closing timings.