Effective management of overtime isn’t only a compliance requirement, it’s evidence of equitable work practices, moral leadership, and correct payroll administration. In 2025, when Indian labour reforms are constantly changing, HR and compliance teams will have to be ahead of the game to prove adherence to the law as well as to employee confidence.
This blog analyzes everything employers must understand regarding overtime regulations in India, from legal terms to salary calculations and industry nuances, so you can remain compliant and assured.
Understanding Overtime in India
According to Indian labour law, overtime is any work done over the approved daily or weekly working hours. The Factories Act, 1948 prescribes the normal workday as 9 hours a day or 48 hours a week. Any work performed beyond this amount is considered overtime and has to be paid accordingly.
But India has no national law on overtime. State-level Shops and Establishments (S&E) Acts govern working hours and overtime for business establishments like retail, IT/ITES, and service sectors. This implies that the principle is the same but the limits and rules for pay differ from state to state.
Who Is Eligible for Overtime?
- Blue-collar or factory workers: Obviously included under the Factories Act.
- White-collar or office workers: Protected by the corresponding state’s S&E Act.
- IT and technology experts: Frequently exempt from overtime, but firms can opt to provide compensatory off or extra pay as per internal policy.
Working Hour Limits:
- Daily cap: 9 hours (Factories Act)
- Weekly cap: 48 hours
- Maximum overtime permissible: Typically restricted to 50–150 hours per quarter, depending on the state and sector.
Overtime Pay Calculation – How It Works in India
For HR and payroll managers, calculating overtime correctly is critical to avoid compliance penalties and payroll disputes.
The Overtime Pay Formula
According to the Factories Act, overtime pay must be twice the ordinary rate of wages.
Formula: (Basic Salary + Dearness Allowance) ÷ 26 ÷ 8 × 2 × Number of overtime hours
Where:
- 26 represents the average working days in a month.
- 8 is the standard working hours per day.
- 2 denotes double pay for overtime hours.
Example
If an employee’s basic + DA = ₹26,000/month and they worked 10 hours of overtime:
Overtime Pay = (26,000 ÷ 26 ÷ 8) × 2 × 10
= (125 × 2 × 10)
= ₹2,500
So, the employee earns an additional ₹2,500 as overtime pay.
Payroll Automation Advantage
Modern payroll and HR software solutions automatically calculate overtime pay by integrating attendance and timesheet data. This reduces manual errors, ensures statutory compliance, and maintains transparent payroll records.
Suggested Read: The Ultimate Guide to Attendance Management – Complete Guide
Key Overtime Regulations Under Indian Labour Laws
Overtime work in India is regulated by a combination of central and state laws that collectively establish the guideline for how additional working time is handled and paid. Familiarity with these regulations is crucial for HR managers and employers to ensure compliance, particularly with increasingly strict regulatory enforcement due to the 2025 labour reforms.
1. Factories Act, 1948
The Factories Act, 1948, is the main law regulating overtime and primarily applies to manufacturing and industrial plants. It imposes that any worker who works more than nine hours a day or forty-eight hours a week should be remunerated at double the usual rate of wages. Employers must also keep systematic records of overtime work, usually through a specified register that can be checked by labour authorities at any time. This Act provides an explicit standard for both the working hour restrictions and compensation rate.
2. Shops and Establishments Acts
For the offices, retail establishments, and service industries, provisions for overtime come under the respective Shops and Establishments Acts, which are state-specific. These Acts typically stipulate a nine-hour daily and forty-eight-hour weekly limit, after which overtime applies. But the overtime rate and limit allowed vary from state to state. Maharashtra, for example, permits a maximum of 125 hours of overtime in a quarter, while Karnataka has its own special provisions. Employers working in several states will thus need to customize their HR and payroll software to conform to each state’s needs.
3. Minimum Wages Act
The Minimum Wages Act is also supportive of overtime regulation. It makes sure that even after overtime has been computed and remitted, a worker’s aggregate earnings should not be below the minimum wage rate applicable for his category of work and area. This avoids underpayment by wage structuring or misclassification.
4. Code on Wages, 2020 (Implementation in 2025)
A major change comes with the Code on Wages, 2020, which is set to be fully enforced by 2025. The Code consolidates several older laws, including the Payment of Wages Act and Minimum Wages Act, and introduces uniformity in definitions, recordkeeping, and compliance obligations.
Industry-Wise Overtime Rules and Practices in India
Overtime norms often depend on the nature of the industry and employee type. Here’s a comparative snapshot:
| Industry | Overtime Limit | Typical Practice | Notes |
| Manufacturing | 48 hrs/week + overtime (100–150 hrs/year) | Paid at 2× rate; strictly monitored by labour authorities | Must maintain Form 10 register |
| IT/ITES | Flexible under State S&E Acts | Often managed via compensatory off | Ensure HRMS-based time tracking |
| Retail | 9 hrs/day, state-specific caps | Paid overtime + digital recordkeeping | Requires approval for extended hours |
| Logistics | 48 hrs/week | Compensatory leave often preferred | Attendance tracking mandatory |
As workplaces adopt hybrid and digital workforce models, HR tech tools like HRMS and time-tracking software have become essential for monitoring working hours, preventing burnout, and ensuring compliance across distributed teams.
Employer Obligations and Penalties for Non-Compliance
Recording and compensating overtime properly is a legal requirement for Indian employers. Neglecting these obligations can result not only in financial losses but also in loss of trust for the organization.
According to Indian labor regulations, the employers are obliged to keep detailed records of:
- Employees’ attendance and working hours.
- Overtime hours and rates paid.
- Wages and payslips for inspection or audit.
The non-compliance will attract fines as per the Code on Wages, 2020 which includes:
- First-time offenders can be fined up to ₹1 lakh.
- Repeating the offence might lead to increased fines or imprisonment.
- Unpaid or underpaid overtime will have to be paid back with interest.
Besides the legal implications, disputes over overtime might also create a negative perception of the company and mistrust among employees.
For this reason, compliance is no longer difficult as many companies are now taking advantage of modern cloud-based HR and payroll systems. These include:
- Attendance and overtime being tracked automatically.
- Digital proof being created for audits.
- Payment being timely and accurate.
Best Practices for Managing Overtime and Workforce Productivity
Overtime management should not only be a matter of compliance but also a way to safeguard productivity and employee health. The intention is to plan ahead instead of being always one step behind and reacting to overtime requests.
Here are the main business leaders in HR who will take it as a challenge:
- Monitor overtime trends: Leverage HR dashboards to single out departments that are understaffed or spot recurring patterns.
- Set up an automatic approval system: Process all overtime requests through the HRMS to maintain uniformity and openness.
- Join attendance and leave systems: Stop unexpected overtime by coordinating shift timetables and leave calendars.
- Make workforce allocation more effective: Apply workforce management tools to evenly distribute shifts and cut back on unnecessary overtime hours.
By following these actions, the organization will be able to manage its expenses, prevent employee fatigue, and treat everyone fairly including the non-compliance teams.
Leveraging Payroll and HR Software for Overtime Compliance
The digital revolution has a big impact on companies’ compliance regarding overtime; it has made it easier and more precise. The human resources departments doing the whole process manually can use an automated system to manage the hours worked, payroll, and even keep records in a clear way all from one platform.
HRMS and payroll automation hold the following major advantages:
- Automatic attendance and overtime hours tracking
- Notification of exceeding limits on working hours for compliance purposes
- Employee type and location based salary calculation
- Digital files for audits and reporting that are easy to handle
For instance, the HR and Payroll software from Asanify supports companies in staying compliant in several states by connecting attendance with payroll, producing reports, and automatically setting the right overtime rates.
The use of these systems implies the employers cutting the risks of non-compliance down, gaining time otherwise spent on administration, and creating an environment where pay and transparency are fair and open.
How Asanify Simplifies Overtime Management and HR Compliance
Asanify assists employers in handling overtime and HR compliance with ease and efficiency thus integrating automation, accuracy, and transparency within one authoritative HR and payroll platform. No matter if you are just a startup, a growing company or a large multinational firm expanding to India, Asanify always keeps your workforce operations compliant and effective.
Let’s look at the way Asanify makes overtime management less complicated:
- Automatic overtime calculations: Get rid of manual mistakes by using automated formulas that determine the payment precisely according to the basic salary, allowances, and applicable labor laws.
- Attendance and payroll integration: Attendance information is transferred to payroll directly, which makes real-time overtime monitoring and payment processing efficient.
- Single compliance dashboard: HR departments have the ability to track employee hours, approvals, and wage compliance across various states or subsidiaries through one interface.
- Assistance for hybrid and remote workers: Take control of flexible work arrangements without any hassle while precise attendance and wage records are being kept.
Asanify empowers employers to transition from compliance management that reacts to being proactive in terms of workforce governance, and thus, it guarantees that every hour worked is properly paid and that every process is ready for an audit.
Suggested Read: Labour Laws in India: A 2025 Compliance Guide
Conclusion
In the year 2025, being compliant is not just a matter of ticking off a box but also a foundation of the respective business acts and their efficient operations. An organization with a reasonable and transparent overtime policy would be in a position to safeguard the well-being of its staff, to create trust and to avoid heavy fines.
With the combination of clarity in policies and digital automation, HR leaders can realize the goals of compliance and productivity at the same time. Asanify is one of the tools that will help the teams by making the process of time tracking easier, automating approvals, and making sure that the wage records are accurate, thus saving time, cutting down mistakes and making the process more open.
As the regulations regarding the workforce in India change, the companies that will implement the smart HR systems now will have the advantage of being the ones with the sustainable growth potential in the future.
FAQs
As per the Factories Act and Shops and Establishments Acts, employees in India cannot work more than 48 hours a week, and overtime is paid for work beyond this limit. The overtime rate is typically twice the regular hourly wage.
Overtime pay is calculated at double the normal hourly rate of wages. For example, if an employee earns ₹200 per hour, the overtime rate becomes ₹400 per hour for extra hours worked.
Employees can work a maximum of 50–54 hours per week depending on state laws, with daily work capped at 9 hours. Beyond this, prior government approval is required.
Yes, many Indian labour laws allow compensatory off in lieu of overtime pay, provided it is agreed upon with the employee and recorded in company policies or HR systems.
Payroll automation tools automatically track work hours, calculate overtime pay, and ensure compliance with labour laws, reducing manual errors and saving HR teams time.
Platforms like Asanify, Zoho People, and Keka offer integrated HRMS solutions that automate attendance, timesheets, and overtime calculations in compliance with Indian labour laws.
Employers violating overtime laws may face fines up to ₹10,000–₹25,000 or prosecution under the Factories Act or state labour laws, depending on the severity and frequency of violations.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.