Employer of RecordJuly 14, 2026by Mukul DixitOvertime Policy in India: Legal Working Hours and Overtime Pay Rules – The 2026 Guide

If you searched for this because someone on your team is asking “wait, is this even legal,” you’re not the only one confused right now. India’s overtime rules on working hours just went through the biggest change in decades, and most of what’s written about this topic online still describes a system that, on paper, no longer exists.

Here’s the short version: for 75 years, working hours in India ran on the Factories Act, 1948, plus a patchwork of state Shops and Establishments Acts. Then, on 21 November 2025, the government activated all four of its long-delayed Labour Codes consolidating 29 separate central laws into one framework. The headline numbers (9 hours a day, 48 hours a week, double pay for overtime) haven’t moved much. What has changed is the quarterly overtime cap, the consent requirement, who’s covered, and how the transition is actually playing out state by state, which is messier than any single number can capture.

This guide walks through what’s legally required right now, what’s still catching up, and where employers most often get it wrong.

• Standard hours: 9 hours a day, or 48 hours a week for most workers

• Overtime pay: Double the ordinary wage rate in simple terms, overtime pay is twice the regular wage rate under the applicable framework

• Quarterly overtime cap: 125 hours under the new OSH Code (up from 50–75 hours under the old Factories Act), though some states allow more

• Consent: Overtime now requires the worker’s written consent under the new Codes

• Who’s exempt: Managers, supervisors, and administrative staff above certain thresholds but only based on actual job duties, not job title

• Where things stand: The Codes are law nationally, but several states are still finalizing their own rules, so the old Acts are running in parallel during the transition, making compliance with labour laws and state rules essential

Now, the longer version because the details are where the compliance risk actually lives.

Until recently, three laws did most of the work here. The Factories Act, 1948 covered manufacturing and set the baseline everyone still quotes: adult workers capped at 9 hours per day and 48 hours per week, a 30-minute break after every 5 continuous hours, and employees who work beyond those limits are entitled to overtime pay at twice the ordinary rate, with rest intervals and weekly off protections still mandatory even when overtime is worked. The Minimum Wages Act, 1948 gave state governments the power to set working-day norms for specific job categories. And every state ran its own Shops and Establishments Act for offices, retail, and commercial establishments similar in spirit to the Factories Act, but not identical. Karnataka capped total hours (including overtime) at 10 a day; other states drew the line elsewhere.

The result was a system where your legal obligations depended heavily on what kind of workplace you ran and which state you ran it in. A factory floor and the accounts office next door could easily sit under two different labour laws and two different overtime rules, since requirements could also vary by state and industry under the relevant Shops and Establishments Acts.

That’s the date India’s four Labour Codes went into effect nationally:

1. Code on Wages, 2019: Sets the rules for wages, and as part of the broader rollout, the Code on Wages framework was brought into full effect by 2025; under it, overtime pay and wage treatment must follow the “not less than twice the ordinary rate” standard for overtime

2. Occupational Safety, Health and Working Conditions (OSH) Code, 2020: The one that actually governs daily/weekly hour caps and overtime limits, replacing the Factories Act’s role here

3. Industrial Relations Code, 2020: Covers disputes, layoffs, and union recognition

4. Code on Social Security, 2020: Covers PF, ESI, gratuity, and (for the first time) gig and platform workers

The government’s framing was that this modernizes a fragmented system built for a different economy. Whatever you think of that pitch, the practical effect for HR teams is real: new definitions of “employee” and “worker,” new appointment-letter requirements, and the part relevant here a standardized quarterly overtime cap of 125 hours under the OSH Code, up from the old Factories Act’s 50 hours (extendable to 75 with special exemption), with overtime laws and overtime regulations now read through this newer framework, including the working conditions code.

One detail worth sitting with: this is a transition, not a switch flipped overnight. The Codes include repeal-and-savings provisions, meaning the old Acts’ registers, forms, and processes stay operative wherever a state hasn’t yet notified its own rules under the new framework, and that legal framework is still seeing rule updates as implementation continues. Some states have finalized their rules. Many are still working from drafts. Practically, that means your compliance with obligations this quarter may look different from your compliance obligations next quarter, depending on which state you’re in and how fast that state’s labour department moves to ensure alignment with labor laws across states. New labour code covers this state-by-state variation in more depth if you’re managing multiple locations.

Strip away the legal citations and the day-to-day rule is simple: 9 hours a day or 48 hours a week, with a mandatory 30-minute break after 5 continuous hours of work. Total time at the workplace  including breaks generally can’t exceed about 10.5 to 12 hours in a day, depending on which act applies, and employees required to work beyond the regular limits move into overtime. Every worker gets one full day off after six days of work, and that day off isn’t something a company policy can quietly override.

Most employees in white-collar office roles fall under their state’s Shops and Establishments Act rather than the Factories Act or OSH Code directly, with overtime and record-keeping rules also varying by state. The numbers are broadly similar  8 to 9 hours a day or 48 hours a week but the specific thresholds, registers, and inspection regimes differ by state. Maharashtra’s rules aren’t Karnataka’s rules aren’t Telangana’s rules. If your company operates in more than one state, this is genuinely one setup per location, not one setup with minor footnotes.

The rate is the easy part: double the ordinary wage for every hour beyond the standard threshold. The harder part is the base you calculate that rate from, and this is where a lot of employers even well-intentioned ones get it wrong. Any overtime calculation should follow the applicable legal formula and the relevant employee categories, especially where employees in operational roles qualify for statutory overtime.

“Ordinary rate of wages” means basic pay plus dearness allowance. It does not include HRA, bonuses, or other allowances, unless a specific state rule says otherwise. In other words, the base comes from basic pay plus DA, not gross salary. The formula looks like this:

Overtime pay = 2 × [(Basic + DA) ÷ (Working days × Daily hours)] × Overtime hours worked

In practice, overtime pay must be calculated at twice the regular hourly wage. So if someone earns ₹1,00,000 basic plus ₹10,000 DA, works 26 days a month at 8 hours a day, and puts in 4 hours of overtime: their hourly rate works out to roughly ₹529, and 4 hours of overtime pays out at double that about ₹4,232 for the month, on top of regular pay, with the regular hourly wage as the basis. That example shows how overtime pay calculated from the correct base depends directly on total overtime hours, and employers should use a clear approval workflow for overtime work to support documentation and accurate payroll processing.

One common and costly mistake in pay and payroll setup: calculating overtime off gross salary instead of basic + DA. That inflates the base and, over time, creates a pay structure that’s hard to walk back once employees get used to it. Another: treating a 1.5x rate that some Shops and Establishments Acts allow for commercial establishments as universal, when factory workers under the OSH Code must be paid twice the regular rate for overtime pay based on the hourly wage. Paying 1.5x to someone who’s legally owed 2x isn’t a rounding error it’s underpayment, and it’s the kind of thing that surfaces in a labour inspection or, worse, an employee complaint. In practice, accurate calculating overtime pay is a core part of payroll management, and automated payroll systems can reduce errors in overtime calculations when the correct state rules and pay bases are configured, which makes overtime pay calculation easier to defend in audits and day-to-day compliance.

This is probably the single most misunderstood part of the law. Managerial, supervisory, and administrative staff above a certain wage threshold are generally exempt from statutory overtime protections under Indian labour laws. But and this matters more than most companies treat it — the exemption depends on actual job duties and decision-making authority, not on what the offer letter, employment contracts, or employment agreements call the role.

Giving someone a “Manager” title so they don’t qualify for overtime, while their day-to-day job looks nothing like management, is a classification risk, not a compliance solution. Labour courts look at what the job actually involves. If it comes down to a dispute, “we called them a manager” isn’t much of a defense. Managerial and supervisory staff are generally exempt from statutory overtime pay in India only if their actual duties place them in a genuine exempt category.

The IT and ITES sector adds another layer. Some employees may still be asked to work extra hours, but exemption analysis depends on function, not title. Employees here typically sit under their state’s Shops and Establishments Act rather than the Factories Act, and many IT companies structure roles so that technical staff architects, senior engineers, tech leads end up classified in ways that reduce statutory overtime exposure. Some of that is legitimate; job design in tech genuinely differs from factory-floor work. Some of it is a workaround. If you’re hiring web developers or engineers in India from outside the country, this classification question is worth getting right from the first offer letter, not retrofitting later.

Central law sets the floor; states can and do adjust the ceiling, and overtime rules plus state exceptions can vary more than many employers expect. A few notable examples:

• Telangana and Maharashtra have amended their factory rules to permit up to 144 hours of overtime per quarter for specific industries, well above the 125-hour standard but only with the worker’s written consent

• Karnataka’s Shops and Commercial Establishments Act caps total working hours (including overtime) at 10 hours a day

• Several states apply a 1.5x overtime rate for commercial establishments under their Shops Acts, while factory workers remain entitled to 2x under the Factories Act and OSH Code

If your business runs teams across multiple states which is common for anyone building a team in India from the US, UK, or EU — this isn’t a detail you can standardize away with one company-wide policy. What’s compliant in Bengaluru may not be compliant in Mumbai.

The legal penalties aren’t symbolic. Under the Factories Act framework (still operative during transition), violating overtime provisions can mean imprisonment of up to two years, a fine of up to ₹1 lakh, or both and continued violation after conviction adds ₹1,000 per day. The Minimum Wages Act carries its own penalties, including up to five years imprisonment for serious violations. Penalties for non-compliance with overtime regulations can include fines and potential imprisonment. Beyond the legal exposure, there’s the practical cost: back-pay liability, damaged trust with your workforce, and if it becomes public reputational fallout that’s harder to fix than the underlying payroll error ever was; unfair pay also hurts retention, with 28% of workers considering quitting over it.

Maintaining proper overtime registers, attendance records, and written consent documentation must be done to ensure legal compliance with overtime laws. It’s the difference between a defensible position and an expensive one if a labour inspector reviewing overtime work records, or a former employee, ever raises a question, and it supports better overtime compliance in day-to-day payroll administration.

If you’re a foreign company building a team in India, all of this compliance detail such as state-specific hour caps, the basic-plus-DA overtime formula, and the managerial exemption test, alongside the ongoing Labour Code transition sits on top of the usual challenges of hiring somewhere you don’t have a legal entity. It’s a lot to track correctly, and the cost of getting it wrong (misclassification, underpaid overtime, non-compliant registers) tends to show up later and more expensively than it would have cost to get right upfront. In practice, this matters because 40% of office workers in India regularly work overtime.

This is the specific problem an Employer of Record model is built to solve: the EOR is the legal employer on paper, so overtime calculations, state-specific Shops Act compliance, and Labour Code updates are tracked and applied by people who do this daily, not bolted onto an HR team already stretched across other markets. If you’re weighing whether an EOR is the right fit for your India hiring, working-hours compliance is one of the more concrete, checkable ways to evaluate a provider ask how they handle state variation, support employee satisfaction through accurate overtime handling, and ensure compliance with labor laws and overtime regulations, not just whether they say “we’re compliant.”

Only transitionally. The OSH Code, 2020 has formally taken over the role the Factories Act played for working hours and overtime, but in states that haven’t yet notified their own rules under the new Codes, the Factories Act’s registers and processes are still what’s being used day to day. Check your specific state before assuming either way.

Since 48 hours per week is the standard, hours beyond that threshold are considered overtime, and overtime is triggered above that level; these weekly working hours limits also sit alongside the 125-hour per quarter cap under the OSH Code, replacing the Factories Act’s old 50-hour limit (75 with exemption). A handful of states Telangana and Maharashtra among them allow up to 144 hours per quarter for specific industries, but only with the employee’s written consent.

It depends on the role, not the paycheck structure. Salaried staff in non-managerial, non-supervisory positions are generally entitled to overtime compensation as per the applicable Act, especially when employees in operational roles cross the legal thresholds. The common exemption is for genuine managerial, supervisory, or administrative roles above a wage threshold — and that exemption is based on actual job duties, not job title.

Only if it’s mutually agreed and documented, and only where the applicable law permits it. Overtime wages are a statutory cash entitlement in most cases — swapping it for time off instead of pay, without that basis, isn’t compliant just because it’s common practice, and working on public holidays does not automatically change the overtime rate unless the applicable law, employment contract, or company policy says otherwise.

Basic salary plus dearness allowance (DA) not gross; overtime pay is based on an hourly wage derived from that base at double the regular rate, which is how overtime pay is calculated under the applicable framework. HRA, bonuses, and other allowances are typically excluded from the base unless a specific state rule says otherwise. Calculating overtime off gross pay inflates the number and is one of the more common compliance mistakes employers make.

Not automatically. Most IT/ITES staff fall under their state’s Shops and Establishments Act rather than the Factories Act, and companies often structure senior technical roles to reduce overtime exposure — but a title alone doesn’t create a legal exemption. The same duties-based test applies. Some tech staff may work night shifts, but night-shift status by itself does not create an overtime exemption; where employees work night shifts, employers should follow applicable employment-contract terms and state rules.

Penalties vary by which Act applies, but they’re not trivial failing to pay overtime can breach core legal requirements, and under the Factories Act framework, violations can mean fines up to ₹1 lakh, imprisonment up to two years, or both, with additional daily fines for continued non-compliance, alongside overtime work records and compliance obligations. Beyond the legal exposure, unpaid overtime claims are also a common source of employee grievances and back-pay disputes, with these rules in India enforced through the applicable Act and supporting records.

Standard hours in India are still 9 hours per day or 48 hours per week, with double pay for overtime — that principle survived the Labour Code overhaul intact, but employers still need to align their overtime policies with the applicable legal rules. What changed is the quarterly overtime ceiling (125 hours, with state exceptions running higher), the requirement for written consent, and the fact that the whole system is mid-transition, with old and new rules running side by side depending on where you operate, so employers must align overtime and payroll practices with applicable labour laws; overtime policies and pay calculations are also subject to change as Labour Code implementation and state updates continue. The employers who get burned aren’t usually the ones ignoring the law outright — they’re the ones applying last year’s rules, or someone else’s state’s rules, without checking which version currently applies to them.

This article is written for general understanding and isn’t legal advice. Labour law in India varies by state and is actively being updated as the new Codes roll out — for a specific compliance question, talk to a labour law professional or an employment partner operating in the relevant state, since correct policy design also supports employee welfare and helps prevent employee exploitation.