NOTE ON PAYMENT OF OVERTIME WAGES TO WORKERS IN INDIA

The present note outlines the summary with respect to the payment of overtime wages to workers employed in a factory in accordance with the Factories Act, 1948, the Minimum Wages Act, 1948 and the Contract Labour (Regulation & Abolition) Act, 1970 read with respective rules thereon.

Overtime work and its applicability:

Overtime typically refers to the hours worked by an employee beyond the normal working hours specified under the law or the employment contract.

Overtime is applicable to all workers (including workers engaged through contractor)

Section 59 of the Factories Act, 1948 – Extra wages for overtime work

Where a worker who work more than 9 hours a day or 48 hours per week, shall be entitled to wages at the rate of twice of his ordinary rate of wages, in respect of such overtime work.

Daily limit: not more than 9 hours per day

Weekly limit: not more than 48 hours per day

Maximum limit: Daily work time inclusive of overtime shall not exceed 10 hours which is 60 hours on a weekly basis. Overtime hours cannot exceed 50 hours in a quarter (3month period).

Working Hours and Overtime Exemptions – Section 65

An exemption can be sought to work overtime. However, there is a restriction put by the law which needs to be complied with even when there is approval from the Factories Department. Such restrictions are as detailed below.

In general, the exemption to take overtime for male workers, the consent is granted by the Director of Factories/Chief Inspector of Factories or an authorized officer of the Dept.

Hence, over time for female workers not to be allowed unless there is an express approval.

The daily working hours shall not exceed 12 hours. This means every day 04 hours of overtime can be taken

The spread over, including interval for rest, shall not exceed thirteen hours in one day

The total number of hours of work in a week including overtime shall not exceed 60 hours

The worker shall not be allowed to work overtime for more than seven days at a stretch and total number of overtime work hours shall not exceed 75 in any quarter

“Ordinary rate of wages” means the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of foodgrains and other articles, as the worker is for the time being entitled to, but does not include a bonus and wages for overtime work.

Overtime work on normal working days

For overtime work on normal working days (i.e., days other than weekly off days and public holidays), an employee is entitled to twice the ordinary rate of wages.

Overtime work on weekly off days or public holidays

For overtime work on weekly off days or public holidays, an employee is entitled to twice the ordinary rate of wages plus compensatory leave or additional wages.

Components of salary for calculation of overtime wages:

For calculating overtime wage, salary includes Basic wage, Dearness allowance (DA), House Rent allowance (HRA), City Compensatory allowance (CCA), Special allowance, Fixed component like incentives and commission, which form part of remuneration and regularly and mandatorily paid to all employees shall be included for calculation of overtime wages.

Exclusions:

Bonus: Bonuses that are not linked to the hours worked, such as annual bonuses or production bonuses, are excluded from the calculation of overtime wages under the Factories Act.

Gratuity: Gratuity payable on the termination of employment  

Provident Fund Contributions: Contributions paid by the employer to any pension or provident fund and interest which may have accrued thereon

Travelling allowance or the value of any travelling concession

Compliance:

Both the employer and the contractor shall maintain overtime register mentioning the overtime hours and overtime wages paid to the workmen.

Penalties for non-compliance:

Non-compliance with overtime wage provisions can result in legal penalties, fines, and reputational damages.

Regular Audits: Conducting regular audits and review of wage payments and working hours can help in maintaining compliance, ensures fair labour practices and avoiding legal disputes.

Increase in number of working hours in Telangana

As per G.O.Rt No. 282 dated 05.07.2025 issued by the labour employment training and Factories Department. The Telangana government has recently allowed commercial establishments (excluding shops) to increase daily working hours from 8 to 10 hours. 

Here is a summary of the key points regarding the 10-hour workday notification in Telangana:

Applicability: The increased daily working hours apply to commercial establishments, excluding shops.

Maximum Daily Hours: Employees in these establishments can work up to a maximum of 10 hours per day.

Weekly Limit Remains 48 Hours: The total working hours per week are still capped at 48 hours. This means employers need to adjust work schedules to ensure the weekly limit is not exceeded, even with longer daily shifts.

Overtime Pay: Work beyond the 48-hour weekly limit must be compensated with overtime wages.

Maximum Overtime: Overtime is capped at 144 hours per quarter.

Rest Breaks: Employees working more than six hours at a stretch are entitled to a rest break of at least 30 minutes.

Spread-over Hours: The total duration of work, including rest intervals, should not exceed 12 hours in a day.

Revocation of Exemption: If the specified conditions are violated, the government can revoke the exemption orders without prior notice.

Purpose of the Change: This move is part of the state government's efforts to promote the ease of doing business and provide greater flexibility to companies.