What is overtime?

Overtime is work performed beyond an employee's standard working hours, for which the law requires a higher rate of pay. In India it is governed by the Occupational Safety, Health and Working Conditions Code, 2020, which came into force on 21 November 2025 as part of the four Labour Codes, and it is payable at twice the ordinary rate of wages. The trigger is 8 hours in a day or 48 in a week, whichever favours the worker. There is no time-and-a-half tier as in many other markets: the multiplier is a flat 2x. What varies is the wage base the multiplier applies to, who counts as eligible, and how many overtime hours a quarter an establishment may use, which still depends on whether it falls in the central or the state sphere.

When does overtime apply in India?

• Daily limit: 8 hours of actual work in a day. Every hour beyond that is overtime.
• Weekly limit: 48 hours in a week. Work past this counts as overtime even if no single day crossed 8 hours.
• Spread-over: 12 hours maximum, counting rest intervals, so a shift cannot be stretched around the daily cap.
• Whichever favours the worker: the entitlement is computed on either the daily or the weekly basis, whichever gives the employee more.

How is overtime pay calculated in India?

The multiplier is flat, but the base is where payroll errors start. A monthly salary is converted to an hourly figure using a 26-day divisor, not 30. The standard formulas are:

Hourly rate = (basic + dearness allowance + retaining allowance) / 26 / 8.

Overtime pay = hourly rate x 2 x overtime hours.

As a worked example, an employee on 26,000 rupees (about 312 US dollars) a month in basic plus DA has a daily wage of 1,000 rupees (26,000 divided by 26) and an ordinary hourly rate of 125 rupees (1,000 divided by 8). Overtime is therefore 250 rupees an hour, so 10 overtime hours add 2,500 rupees (about 30 US dollars) to that month's payslip.

Two things push that base upward. Under the Code on Wages, basic plus dearness allowance must be at least 50 percent of total remuneration, which lifts the hourly rate for allowance-heavy salary structures.

The second is judicial. In January 2026, in Union of India v. Heavy Vehicles Factory Employees' Union, the Supreme Court held that the ordinary rate of wages for overtime included compensatory allowances such as HRA and transport allowance, excluding only bonus and overtime itself. That ruling interprets the Factories Act, which the OSH Code has since replaced, but it shows how courts read the phrase, so employers computing overtime on a narrow base should take advice.

Central sphere vs state sphere overtime caps

The daily and weekly limits are national, but the quarterly ceiling on overtime hours is not. It depends on whether an establishment falls in the central sphere or the state sphere, and this is the single most common source of confusion for global employers running teams in more than one Indian state.

Who is eligible for overtime pay?

• Workers, not managers: protection covers employees classed as workers. Genuine managerial and supervisory roles sit outside it, and the test is actual duties and authority, not the job title on the contract.
• IT and ITeS: several states exempt software and services establishments from parts of their Shops and Establishments rules, but those exemptions are conditional, notified state by state, and narrower than most employers assume.
• Consent and records: overtime cannot be compelled, and the hours must be recorded and paid rather than absorbed as extra effort.

Common employer pitfalls

• Dividing by 30 instead of 26: converting a monthly salary at 30 days understates the hourly rate, and every overtime payment built on it is short.
• Computing on basic pay alone: leaving out dearness allowance and retaining allowance understates the base, and both the Code on Wages and the January 2026 Supreme Court ruling push in the opposite direction.
• Treating a manager title as an exemption: titles do not decide eligibility. Actual duties and authority do, and a notified minimum wage for the category can bring a role back into scope.
• Applying one quarterly cap everywhere: a multi-state employer on state-sphere caps faces a different ceiling in each location, so a single company-wide number will breach somewhere.
• Paying overtime a cycle late: overtime wages fall due at the end of the wage period in which they were earned, so an approval workflow that closes after payroll creates a breach even when the amount is right.

Overtime is one of the few India payroll items where the rate is simple and the base is not. The flat 2x multiplier rarely causes disputes; the wage base, the eligibility test, and the applicable quarterly cap do, and the OSH Code carries fines of up to 500,000 rupees (about 6,000 US dollars) for getting them wrong. State rules are still being notified through 2026, so confirm the current position for each state you employ in. Our guide to overtime rules in India covers sector detail, register formats, and a full compliance checklist.