New Labour Codes Redefine Overtime Pay and Eligibility in India

The New Labour Codes were officially notified on November 21, 2025 and the central government rules followed in May 2026.

Under the new code, the legal framework broadly retains the standard working hour structure while empowering appropriate governments (central or state) to prescribe detailed rules regarding daily work hours, overtime limits, and rest intervals. The appropriate government has to notify the rules of the New Labour Code for employees working in that state.

How is overwork defined under the new labour code?

Mayank Parashar, Legal Associate at Clasis Law explained to ET Wealth Online that under the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) the revised framework is as follows:

Normal working hours: Normal working hours are generally expected to remain capped at 8 hours per day;

Working hour limit: The total number of working hours continues to be the 48 hours a week; and

Overtime pay: Overtime wages continue to be payable for every hour or part thereof worked in excess of the prescribed working hours, at an overtime rate which shall not be less than twice the normal rate of wages.

Parashar shares some important aspects of overtime pay:

Consent: Overtime work is to be undertaken subject to the consent of the worker, while the appropriate government may prescribe overtime limits.

Working hours: Time spent by a worker in undergoing medical examinations or furnishing information under the framework is treated as working hours for the purpose of overtime calculation.

Time calculation: In calculating overtime, a fraction between 15 and 30 minutes is counted as 30 minutes, while overtime exceeding 30 minutes is rounded off and treated as one hour.

Calculation for daily wage workers: For monthly-rated workers, daily wages for computing overtime are calculated as one twenty-sixth (1/26th) of the monthly wages.

Maximum limits: Overtime is permitted in specified categories of work and exceptional circumstances, subject to a maximum limit of 144 overtime hours in a quarter.

According to Parashar, the revised framework introduces a more standardised definition of "wages", which can impact overtime computation and overtime payouts.

Parashar says that employers are required to maintain prescribed records and registers relating to overtime work, attendance, and wages electronically or otherwise as prescribed by the law.

Who qualifies for overtime pay?

The OSH Code broadly provides overtime protection for "workers", whereas the Wages Code provides overtime entitlement in relation to employees whose minimum rates of wages have been fixed under the Wages Code.

However, according to Parashar, the position becomes more complex in the case of white-collar and salaried employees.

Parashar says: "Historically, managerial and supervisory employees were often excluded from overtime benefits under labour legislations. The same approach is likely to continue under the Labour Codes framework."

In practice, Parashar says overtime entitlement can depend upon:

designation alone not being determinative;

the actual nature of duties performed;

level of managerial authority exercised; and

wage thresholds prescribed under applicable rules.

Parashar says: "Consequently, employees classified as managers or supervisors may still raise claims where their functions are operational rather than managerial in substance."

Thus, Parashar highlights that employers may need to carefully evaluate employee classifications and actual job functions while structuring overtime policies under the Labour Codes framework, as designation alone may not be sufficient to exclude employees from overtime entitlements.

Parashar says: "From an employee perspective, individuals performing substantially operational or non-managerial functions may continue to assert overtime claims notwithstanding managerial or supervisory designations."

Parashar explains the financial impact on employees. Here are some illustrative scenarios:

i. Scenario 1: Wider wage definition increasing overtime pay for an employee earning Rs 30,000 per month and working 20 overtime hours. Earlier, if only Rs 12,000 was considered for overtime calculation, the overtime payout would have been around Rs 2,300.

Parashar says: "Under the revised framework, if Rs 20,000 is treated as "wages" for overtime purposes, the overtime payout for the same 20 hours may increase to around Rs 3,800-4,000."

ii. Scenario 2: Rounding off the overtime hours: Suppose an employee works overtime for 8 hours and 40 minutes. Earlier, some companies may have counted only 8 hours for overtime calculation. Under the revised rules, overtime exceeding 30 minutes may be rounded off to one full hour.

Parashar says: "As a result, the employee may receive overtime wages for 9 hours instead of 8 hours."

iii. Scenario 3: Standardised calculation for monthly-wage employees: Suppose a monthly-rated employee earns Rs 30,000 per month. Earlier, employers often followed different methods for overtime calculations, leading to inconsistent payouts. Under the revised framework, daily wages are generally calculated as 1/26th of monthly wages.

Accordingly, the daily wage would be approximately Rs 1,154, creating a more uniform basis for overtime calculations across establishments. Parashar says that for employees, the changes may result in higher overtime compensation along with a more predictable and clearer framework.