Overtime and working hours under the OSH Code

One set of hours rules, replacing many

The Occupational Safety, Health and Working Conditions (OSH) Code has 14 chapters and 143 sections. It replaces the fragmented hours rules that used to sit across the Factories Act and various state Shops and Establishments Acts.

The core structure: an 8-hour day, a 48-hour week, with the daily-hours and spread-over detail set by Central or state rules. Final Central Rules landed 8 May 2026 and carry the operational detail for the central sphere. Most state OSH rules are still drafts, so establishments under state jurisdiction should keep checking their specific state’s rules rather than assuming the central position applies to them.

The overtime rate: same multiplier, different base

The overtime premium itself has not changed in principle. Code on Wages §14 sets overtime at not less than twice the normal rate of wages. This 2× floor is now uniform across sectors, replacing the Factories Act and Minimum Wages Act patchwork that set different rates for different industries.

What has changed is what “normal rate of wages” means. Overtime pay itself is excluded from the “wages” definition. But the rate it is calculated on is deemed wages — the same base the 50%-rule guide walks through in detail. For allowance-heavy pay structures, that base is now higher than the old basic-plus-DA figure used to be.

Illustrative overtime cost

Take a worker on ₹40,000/month gross, with basic pay of ₹15,000/month, working a standard 208-hour month.

Old basis — hourly rate from basic alone: ₹15,000 ÷ 208 hours ≈ ₹72/hour. Overtime rate: 2 × ₹72 ≈ ₹144/hour.

Applying the 50% deeming rule to this worker’s pay structure re-bases deemed wages to ₹20,000/month. The exact figure depends on how the remaining ₹25,000/month splits between excluded components. This example assumes the exclusions push deemed wages to the 50% floor.

New basis — hourly rate from deemed wages: ₹20,000 ÷ 208 hours ≈ ₹96/hour. Overtime rate: 2 × ₹96 = ₹192/hour, a 33% increase over the old rate.

At 20 overtime hours a month, that is roughly ₹960/month extra per worker — about ₹11,500/year. Across an overtime-heavy shift operation, this grows quickly: the same 33% increase applies to every overtime hour paid, not just this one worker’s.

Who this reaches

Overtime under the Code on Wages applies to “workers” — the narrower of the Codes’ two population definitions. Supervisory staff above the notified wage threshold fall outside “worker” status. Managerial or administrative staff generally also fall outside it. Neither group is entitled to statutory overtime, regardless of how many hours they work.

Accurate worker/supervisor classification directly decides who is eligible for the recomputed overtime rate. Getting that classification wrong in either direction creates a problem. Treating a supervisor as a worker creates unbudgeted overtime liability. Treating a worker as a supervisor creates a compliance gap.

Operations with material overtime exposure — manufacturing shifts, logistics, retail floor staff — see the largest combined effect: a higher hourly base, multiplied by the unchanged 2× floor.

Payroll data implications

The change puts pressure on time-capture systems in two ways.

First, accuracy of the hourly base. If your payroll system still calculates the overtime hourly rate from basic pay alone, it understates the statutory rate. This affects any employee whose deemed wages have risen under the 50% rule. It needs a system-level fix, not a manual adjustment at payroll close.

Second, accuracy of hours captured. A higher per-hour cost makes under-recorded or unauthorised overtime more expensive to get wrong — both as a compliance exposure and as a budget line. Tightening overtime authorisation controls now, before state rules on daily hours and spread-over fully harden, reduces both risks at once.

The tax side

Overtime pay is fully taxable salary under the Income-tax Act 2025’s charging and inclusive-salary provisions (§15/§16), in the year it is due or received. There is no new shelter for it. The labour-cost uplift from the re-based overtime rate passes directly into employees’ taxable pay. It also passes into TDS obligations under the Act’s §392-series withholding provisions.

Employer actions

Re-price the overtime budget on deemed wages, not on basic pay, for every affected employee category.

Fix the overtime-rate calculation in your payroll system to reference deemed wages, not basic alone.

Tighten overtime authorisation and time-capture controls, ahead of state OSH rules finalising the daily-hours and spread-over detail.

Confirm worker-versus-supervisor classification for every overtime-eligible role — it decides who this entire calculation even applies to.

General guidance, not legal advice — confirm your specific hours and overtime position with India counsel or your payroll provider.