Updated 15 October 2026
Under the Occupational Safety, Health and Working Conditions Code, 2020, overtime is paid at twice the worker’s rate of wages, and a worker can be asked to work overtime only with their consent. The OSH Central Rules, 2026 set the normal limit at 48 hours a week. A monthly-paid worker earns overtime for hours beyond 48 in a week, and a daily-wage worker for hours beyond 8 in a day. To find the hourly rate, divide monthly wages (basic + DA, plus any allowances added back under the 50% rule) by 26 and then by 8. Total overtime is capped at 144 hours in a quarter, and it must be paid at the end of the wage period. States notify their own rules, so check the limits for your state.
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What are the overtime rules under the new Labour Codes?
Two Codes and one set of rules now govern overtime. Here is what each one says:
| Rule | What it says | Source |
|---|---|---|
| Daily hours | No worker may work more than 8 hours in a day, with intervals and spread-over as notified | OSH Code, section 25 |
| Weekly hours | No more than 48 hours in a week | OSH Central Rules 2026, rule 64 |
| Overtime rate | Twice the rate of wages | OSH Code, section 27; Code on Wages, section 14 |
| Consent | Overtime only with the worker’s consent | OSH Code, section 27 |
| When overtime starts | Daily wager: beyond 8 hours in a day. Others: beyond 48 hours in a week | OSH Central Rules 2026, rule 69(1) |
| Rounding | 15 to 30 minutes counts as 30 minutes; more than 30 minutes counts as a full hour | Rule 69(2) |
| Daily wage of a monthly-paid worker | 1/26th of monthly wages | Rule 69(3) |
| Overtime cap | No more than 144 hours of overtime in a quarter | Rule 69(4), proviso |
| When to pay | At the end of each wage period, with the salary | Rule 69(1) |
The OSH Central Rules apply where the Central Government is the appropriate government. Most private offices, shops and factories fall under their state’s rules, which can set different daily hours, spread-over and quarterly caps. Use the central figures as the baseline and confirm your state’s notification.
How do you calculate overtime pay? (formula and example)
Use four steps:
- Find the wages for overtime. Take basic pay + DA (+ retaining allowance). If allowances such as HRA and conveyance are more than half of total pay, add the excess back. This is the 50% rule in the Codes’ definition of wages.
- Daily rate = monthly wages / 26.
- Hourly rate = daily rate / 8.
- Overtime pay = hourly rate x 2 x overtime hours.
| Step | Example A | Example B (50% rule applies) |
|---|---|---|
| Basic + DA / gross pay | ₹20,000 / ₹32,000 | ₹12,000 / ₹30,000 |
| Wages for overtime | ₹20,000 | ₹15,000 (half of gross) |
| Daily rate (/26) | ₹769.23 | ₹576.92 |
| Hourly rate (/8) | ₹96.15 | ₹72.12 |
| Overtime rate (x2) | ₹192.31 an hour | ₹144.23 an hour |
| Pay for 10 overtime hours | ₹1,923 | ₹1,442 |
Example B shows why structure matters. Without the 50% rule, the overtime rate would be worked out on ₹12,000 and the worker would be underpaid.
Who is entitled to overtime pay?
The overtime provisions protect “workers”. In practice that covers most staff on the shop floor, in warehouses, logistics, retail, BPO operations and support roles. People employed mainly in a managerial or administrative capacity, and supervisors above the wage threshold notified under the Code, generally fall outside the definition of worker. Job titles do not decide this: the actual duties and pay do. If a role is borderline, treat it as covered until your adviser confirms otherwise.
Is overtime part of wages for PF, ESIC and gratuity?
Overtime allowance is listed among the exclusions in the Codes’ definition of wages, so it does not count towards PF or gratuity wages. ESIC’s FAQ says overtime pay is left out when deciding whether an employee has crossed the ₹21,000 coverage ceiling. Confirm with your adviser whether ESIC contribution is due on the overtime amount itself, because ESIC moved to the Code definition of wages in December 2025.
How should employers manage overtime in 2026?
- Take written consent before assigning overtime. Consent is required by section 27 of the OSH Code itself.
- Record hours daily and apply the 15 to 30 minute rounding rule consistently.
- Track the quarterly total for each worker so no one crosses the 144-hour cap (or your state’s cap).
- Pay overtime with the same month’s salary, not in a later cycle.
- Check the salary structure. If allowances exceed half of pay, your overtime base is higher than basic + DA.
- Keep the registers the Codes require, so attendance, overtime and payroll match at inspection.
Most overtime disputes do not come from intent. They come from split ownership between HR and payroll, approvals that are not documented, and inconsistent calculation. Treating overtime as a monthly payroll process, not an exception, prevents repeat errors.
Frequently asked questions
Is overtime pay mandatory in India?
Yes. For workers covered by the OSH Code, any work beyond the prescribed hours must be paid at twice the rate of wages. An employer cannot replace it with a lower flat rate.
Can an employer force an employee to work overtime?
No. Section 27 of the OSH Code says a worker shall be required to work overtime only with their consent.
Is overtime calculated on gross salary or basic salary?
On the rate of wages: basic + DA (+ retaining allowance), plus any allowances added back under the 50% rule. It is not calculated on full gross salary.
What is the maximum overtime allowed in a quarter?
Under the OSH Central Rules, 2026, no worker may work more than 144 hours of overtime in any quarter. States can set their own limits for establishments under them.
Does overtime apply if an employee stays back on their own?
Overtime is normally paid for extra hours the employer requires or approves. Even so, if the employer knowingly lets a worker exceed the legal hours, the employer is still responsible for those hours, so set a clear approval process.
Stay compliant with TMS
Team Management Services helps organisations run overtime as part of a single, compliant payroll workflow that covers attendance, approvals, calculation and payout:
- Statutory compliance: registers, returns and labour-law filings under the Codes now in force.
- Payroll outsourcing: overtime, PF, ESIC and TDS calculated correctly every cycle.
- HR consulting: overtime policies and salary structures that fit the new wage definition.
Sources: Occupational Safety, Health and Working Conditions Code, 2020 (sections 25 and 27); Code on Wages, 2019 (section 14); OSH (Central) Rules, 2026, G.S.R. 345(E) dated 8 May 2026 (rules 64 and 69). Last reviewed: 15 October 2026. General guidance, not legal advice; state rules may differ.