Labour Code may lead to overtime pay for white-collar employees

You are currently viewing Labour Code may lead to overtime pay for white-collar employees

Today I bring to you a news about labour code bill 2020 that might bring cheer to many contractors and white collar employees. According to the new Labour code, most workers who work over forty hours during a 7-day week should be paid overtime. Overtime pay should be a minimum of 1.5 times the employee’s regular hourly rate. Alternative overtime rates, with the exception of sure structure comes; workers cannot waive their right to overtime pay.

What happened in this Labour Code change?

Professionals who put in more hours at work would be eligible for overtime. Once the Labour Code on Wages, comes into force. The Code widens the ambit of overtime pay to include all workers, together with social control workers.

The skilled employees so far had not been among the ambit of overtime wage payment. Thus the govt. is trying to amend that with these codes.

The code states that the compensation for overtime ought to be ; a minimum of double that of the employees’ regular pay. At present, the skilled employees are not among the ambit of overtime wage payment.

The Code on Wages conjointly has provisions for minimum and timely payment of wages to any or all or any the employees in Republic of India. It consolidates four laws regarding wages and bonus, particularly:

  1. Payment of Wages Act, 1936.
  2. Minimum Wages Act, 1948.
  3. Payment of Bonus Act, 1965.
  4. Equal Remuneration Act, 1976.

It introduces the thought of floor wages whereby the rates are about to be mounted by the central government. By taking into account the minimum living standards of the employees.

What’s happening now with the new Labour Code?

Currently, there are many laws giving numerous thresholds and completely different definitions of ‘wages’ for relevancy of overtime pay which is able to all be efficient beneath the new codes.

While it’s going to be a welcome development for several of the workers. For organizations, this suggests additional expenses and compliance burden.

For instance, organizations will need to return with new frameworks so that such overtime is monitored. They’re going to have to confirm that no worker logs in additional than a threshold variety of overtime hours:

  • During a day,
  • Week or
  • Quarter

This is as notified within the labor codes.

The exercise becomes a lot of difficult within the current state of affairs whereby majority of the pink-collar staff is operating remotely. Calculating work hours becomes difficult in sectors where the staff work for long hours throughout off-site assignments.

Note that contractor payments can get very complex very soon. Asanify supports fully compliant contractor payments  – get started for free.

What this means for the white-collar, managerial employees?

Section fourteen of the Code in Wages, reads:

Where AN worker whose minimum rate of wages has been fastened underneath this Labour Code; works on any day in more than the quantity of hours constituting a traditional operating day. The leader shall pay him for each hour or for a part of AN hour. Thus, worked in excess, at the overtime rate that shall not be but doubly the traditional rate of wages.

The new definition of ‘employee’ has been extended to incorporate all professionals who are:

  • accomplished,
  • semi-skilled or unskilled,
  • manual,
  • operational,
  • higher-up,
  • managerial,
  • body,
  • technical or clerical work.

Some legislations such the Outlets and institution Act exempt social control personnel from overtime pay that the interaction of the Wage Code with these legislations must be seen.

What You Can/Should Do Now with the new Labour Code?

As an HR, your responsibility is to ensure transparency in communication. HR can make certain changes in policy like the below

‘any overtime done by the employee may initially be remunerated against this price of bonus and variable pay that they’ve earned’

Workers might not be too keen to declare overtime given. As is common across Asian countries, operating with extended work hours is often seen as an advantage.

Labour law are influenced by both states and central jurisdictions.


It is not clear whether or not this rule can apply to all or some wages. Or are applicable on top of an explicit wage threshold.

Also, the other Acts, such as PF Act have their wage threshold, it remains to be seen whether or not those wage thresholds can apply or not.

Moreover, labour code could be a subject within the constitution and thus, the Act associated with wages got to be amended by the state governments.

The Labour department within the State and therefore the social control enforcement bodies within the Central Government got to be restructured to create certain that there is clarity and harmony whereas enforcement. We tend to expect these to happen over subsequent three-four months. Only then, we might grasp the implications, needless to say.

These measures will be administered by state governments. However, there is a bit of uncertainty whether overtime hours are applicable for all workers. We shall keep you updated once the exact implications become clearer.

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.