Overtime law in India is designed to ensure that workers are fairly compensated for hours worked beyond the standard workweek. The primary goal is to protect employees from excessively long work hours and to encourage employers to either hire additional staff or pay appropriate overtime rates. These regulations play a crucial role in safeguarding employee welfare while balancing employer demands for extended work hours.
MNCs Circumvent Overtime Law on Technicalities
Despite clear regulations, many multinational corporations (MNCs) in India manage to circumvent overtime laws using legal loopholes. For example, the Factories Act of 1948, which governs overtime compensation, entitles workers to double payment for hours worked beyond 8-9 hours a day or 48 hours a week. However, this law specifically applies to “factory workers” or “workers,” leaving many white-collar employees unprotected.
“In office environments, companies often sidestep overtime laws by designating employees as ‘officers’ or ‘executives,’ categories to which overtime laws for ‘workers’ do not apply. This creates a legal grey area.” This technical classification allows companies to avoid paying overtime, despite many white-collar employees routinely working 12-14 hours per day.
DW, a German news outlet, reached out to several major companies including Meta, Apple, Amazon, and Google regarding their overtime policies in India, but none responded. This lack of transparency highlights the difficulty in holding companies accountable for circumventing overtime regulations.
The shift to remote work has further complicated the enforcement of overtime laws, as it blurs the line between professional and personal time. Many MNC employees find it increasingly difficult to disconnect from work, with companies marketing “work-life balance” as more of a slogan than a practice. Isha, an employee at an Indian multinational conglomerate, remarks, “We are living in a post-pandemic world where if you are working from home, your managers expect you to be available at all times.”
India’s labour laws, drawn up 76 years ago, fail to address these modern work practices, and successive governments have not shown the political will to update them. The result is a growing number of employees, who “put in the never-ending hours” without receiving adequate compensation or protection.
Can the Laws Be Challenged?
There is currently no direct legal precedent for MNC workers to claim overtime pay in India. In a 2023 Supreme Court ruling, the Court denied government employees the right to double overtime pay under the Factories Act, reinforcing the limitations of existing labour laws. This ruling suggests that MNC workers may face similar challenges in claiming overtime, as they fall into the same legal grey area.
However, there is some hope for change. A 2022 ruling by a labour court in Chennai classified an IT analyst as a “workman” under the Industrial Disputes Act, rejecting the employer’s claim that the employee was in a supervisory role. Legal experts like Sophy K.J., director of the Centre for Labour Law Research and Advocacy at National Law University in Delhi, argue that software engineers and other non-supervisory roles could potentially raise industrial disputes over working hours and allowances under this act.
From Economic Liberalisation to Now
India’s economic liberalisation in 1991 spurred the growth of the private sector but also allowed companies to exploit outdated labour laws. “Contractualization and outsourcing became the norm post-liberalization,” weakening the influence of trade unions that traditionally protected workers from exploitation. Contract workers, in particular, are often unable to form or join unions without risking job loss, further reducing workers’ ability to advocate for their rights.
This shift has eroded workers’ rights and entitlements, particularly for white-collar workers in sectors like IT and finance, where union representation is minimal. While smaller independent unions have emerged in the private sector, they are often too weak to make a significant impact, leaving employees vulnerable to long hours and inadequate compensation.
What Does the Industry Say?
According to Prasheel Pardhe, an HR professional with 25 years of experience in the IT sector, most companies in India do not offer overtime pay because they provide “market-competitive compensation.” He explains that instead of overtime, employees receive compensatory time off or performance bonuses, which are seen as sufficient in the industry. Many Indian workers who do not receive overtime pay domestically find themselves regulated by stricter compliance laws when working abroad in countries like Germany or the U.S.
In countries with more compliance-driven compensation structures, overtime payment is mandated by law. In contrast, India’s laws are more lenient, allowing companies to avoid paying overtime as long as they offer competitive salaries and perks. Without stronger regulations, employees like Rohan, Aditi, and Isha continue to face gruelling work schedules, often without the hope of adequate compensation.
A Worker Will Work!!!
Ultimately, in the absence of robust regulations protecting their rights, white-collar workers in MNCs continue to navigate exhausting work schedules with little recourse. As Isha points out, many employees endure the long hours hoping for recognition or rewards, only to switch jobs when those expectations go unmet, repeating the cycle in new roles.
Without a significant overhaul of India’s labour laws and a stronger commitment to enforcement, the challenges facing white-collar workers in the private sector will likely persist. Companies will continue to exploit legal grey areas, while employees struggle to find a balance between work and personal life.
Overtime Payment Legislations in India
India has several rules governing overtime work, setting limits on the number of overtime hours allowed and providing methods for calculating overtime compensation. While some sectors benefit from these regulations, many sectors do not yet fall under these protections. This may change as India moves to implement new labour laws in the near future.
Breaks and Daily Working Hours
Overtime laws also specify that employees are entitled to a break of at least 30 minutes between working hours, ensuring that no employee works more than five continuous hours without a break. The total daily working time is also regulated to prevent excessive hours.
Methods for Calculating Overtime Pay
According to Indian overtime payment laws, overtime in factories can be calculated based on either:
- Per-hour rate: The employee’s hourly wage is calculated, and for each extra hour worked, double the amount is paid.
- Per-piece rate: Overtime is paid based on the number of additional pieces produced during the overtime period.
Standard Working Hours and Overtime
An employee is considered to have worked overtime when their scheduled hours exceed the standard limits. Indian laws typically require employees to work 8 to 9 hours per day or 48 to 50 hours per week. Employees who work beyond these limits are entitled to overtime pay, ensuring they are fairly compensated for extra hours worked.
Applicability of Overtime Payment Legislations
Eligibility Criteria
The following categories of employees are eligible for overtime compensation under Indian law:
- Workers in factories
- Employees in mines (underground or above ground)
- Journalists
- Building or construction workers
- Employees in scheduled employment
- Workers in shops or establishments
- Contractual labor
Ineligibility for Overtime Pay
Certain workers are not eligible for overtime payment, including:
- Members of the armed forces
- Employees working beyond permissible overtime limits
- Individuals working overtime without prior authorization
Formula for Calculating Overtime Payment
The amount of overtime pay varies depending on the type of work and location (State or Union Territory). Generally, overtime is paid at double the regular hourly rate, but specific formulas may apply depending on the sector.
Overtime Calculations: Basic or Gross Salary?
Indian overtime payment regulations base overtime pay on basic salary, often including dearness allowances. Bonuses or other incentives are generally not considered in calculating overtime pay. However, employers may voluntarily include additional benefits.
Overtime Payment Provisions Under Different Legislations
1. The Code on Wages, 2019
The Code on Wages, 2019 (not yet implemented) consolidates several wage-related laws, including the Payment of Wages Act, Minimum Wages Act, and Payment of Bonus Act. The Code requires that any employee working beyond the standard hours is entitled to overtime pay at a rate of at least twice the regular wage.
2. Shops and Establishments Act
Each Indian state has its own Shops and Establishments Act (SEA), which regulates working hours and overtime for employees. Overtime is generally paid at twice the regular hourly rate, based on the basic wage plus allowances (excluding bonuses).
3. Factories Act, 1948
Under Section 59 of the Factories Act, 1948, employees are entitled to double their regular pay for working more than 9 hours a day or 48 hours a week.
4. Minimum Wages Act, 1948
Section 14 of the Minimum Wages Act, 1948, entitles workers to overtime pay at double the regular wage for any hours worked beyond the standard workday.
5. Bidi and Cigar Workers Act, 1966
Sections 17 and 18 of the Bidi and Cigar Workers Act limit working hours to 10 hours a day and 54 hours a week, including overtime.
6. Contract Labour Act, 1970
The Contract Labour (Regulation & Abolition) Act of 1970, requires contractors to maintain detailed records of any overtime worked by contract labour.
Factors to Consider in Overtime Policies
When developing overtime policies, employers must consider:
- Clear work schedules, leave policies, and provisions for holidays
- Voluntary acceptance of overtime by employees
- Legitimate reasons for requiring overtime (e.g., increased workload or urgent deadlines)
- Accurate record-keeping for hours worked beyond regular business hours
Conclusion
In India, many workers remain unaware of their rights regarding overtime compensation. It is essential for employers to draft clear overtime policies in compliance with the law. At the same time, the introduction of modern labour laws is necessary to address the evolving nature of work in India, especially with the rise of remote and flexible working arrangements.
Published on September 23, 2024
Drafted by: Shreyashi Chaudhary, 3rd Year B.B.A. LL.B., Symbiosis Law School