How Is Overtime Calculated in India Under the Labour Codes?
Overtime pay under India's labour codes: the twice-the-ordinary-rate rule, an hourly rate from a monthly salary, a worked example, and what varies by state.
Short answer: under the labour codes, in force since 21 November 2025, overtime is paid at twice the ordinary rate of wages. You convert monthly wages to an hourly rate, double it, and multiply by the overtime hours. Normal working hours, the maximum overtime allowed and the exact hourly formula are set by state rules, so check your state before you fix a policy.
KEY TAKEAWAYS
- Overtime = hourly ordinary rate × 2 × overtime hours.
- The ordinary rate is built on wages as the Code on Wages defines them, not on CTC.
- Daily hours, weekly hours and the overtime cap depend on your state's rules.
- Record overtime hours and approvals as they happen; reconstructing them at month end causes disputes.
What changed with the labour codes
Under the old laws, the double-rate rule was clearest for factories and shops. The labour codes apply a single standard: work beyond the normal hours is paid at twice the ordinary rate, across the establishments they cover. Several states have notified their own working-hour limits, and some figures that circulate online, such as an overtime cap of 125 hours a quarter, come from draft rules. Treat any cap as your state's notified number, not a national one.
Step 1: find the ordinary hourly rate
Start from wages as the Code on Wages defines them: broadly basic pay, dearness allowance and retaining allowance. HRA, conveyance, bonus and overtime itself are excluded, but if excluded allowances exceed half of total pay, the excess is added back to wages. CTC is never the base.
Many employers then divide by 26 working days and 8 hours (208 hours) to get an hourly rate. Others use the month's actual working hours. Your state's rules may prescribe the method, so confirm it and apply it consistently.
Step 2: a worked example
Kiran's wages are ₹26,000 a month (basic plus DA). His normal day is 8 hours and he worked 12 hours of approved overtime in October.
| Step | Working | Amount |
|---|---|---|
| Ordinary hourly rate | ₹26,000 ÷ (26 × 8) | ₹125 |
| Overtime rate | ₹125 × 2 | ₹250 an hour |
| Overtime pay | ₹250 × 12 hours | ₹3,000 |
The ₹3,000 is added to October's gross pay. It is not reduced by absences elsewhere in the month, because it was earned for specific hours worked.
Who is entitled to overtime
Overtime rules protect workers who fall within the codes' definitions. Supervisory and managerial staff above the wage limits that apply are generally outside them, and many offices pay salaried professionals a fixed salary with no hourly overtime. If you do that, say so in the appointment letter. If you employ people in roles the codes cover, such as technicians, drivers, office assistants or field staff, assume overtime applies until your advisor says otherwise.
Running overtime without disputes
- Approve before, not after. A manager's yes on the day avoids month-end arguments.
- Record hours daily. Check-in and check-out times are the evidence if a claim is disputed.
- Show it separately on the payslip. Hours, rate and amount, so the employee can check it. See our salary slip format guide.
- Watch the cap. If one person regularly needs overtime, you probably need another hire, and you may be close to your state's limit.
How Grovia handles it
Grovia's attendance records check-in and check-out times, which is your evidence of hours worked. Overtime goes on the payslip as an amount HR enters; Grovia does not calculate overtime hours or rates for you. Overtime and bonus are kept out of the attendance proration, so an absence elsewhere in the month never reduces overtime already earned.
Grovia runs attendance and payroll alongside leads, quotations, GST invoices, payments and your team in one place. Start a free 14-day trial (no card needed).
Checked on 3 November 2026. The labour codes came into force on 21 November 2025 and several states are still notifying their rules; confirm your state's position with your CA or labour consultant before you change a policy.
Frequently Asked Questions
What is the overtime rate in India?
Twice the ordinary rate of wages, under the labour codes in force since 21 November 2025. The ordinary rate is worked out from wages as the Code on Wages defines them.
How do you calculate overtime from a monthly salary?
Convert monthly wages to an hourly rate, commonly by dividing by 26 days and 8 hours, double it, and multiply by the overtime hours. Check whether your state prescribes a different method.
Is overtime calculated on basic salary or gross salary?
On wages as the Code on Wages defines them, broadly basic plus dearness allowance, with excluded allowances added back if they exceed half of total pay. It is not calculated on CTC.
Is there a limit on overtime hours?
Yes, but the limit is set by state rules and varies. Figures like 125 hours a quarter come from draft rules, so use the number your state has notified.
Do managers get overtime pay?
Supervisory and managerial staff are generally outside the overtime rules, depending on the definitions and wage limits that apply. State the position in the appointment letter.
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