Working extra hours? New labour codes may entitle you to double overtime pay

What the new overtime rules say

Under the new framework, any work done beyond scheduled working hours must be recorded and paid at twice the regular wage rate. In simple terms, employees could now earn double wages for every extra hour worked.

The labour codes also fix a 48-hour weekly work limit. Any work beyond this cap will qualify as overtime.

Employers can still follow flexible work schedules, including shifts of up to 12 hours with breaks. However, the total weekly working-hour limit must be maintained.

One of the key changes is the overtime rounding-off rule:

15–30 minutes of additional work will be treated as 30 minutes of overtime. This means even short periods of extra work beyond a shift may now count toward overtime compensation.

States will continue to decide quarterly overtime limits, which are generally expected to range between 125 and 144 extra hours over three months.

Faster salary payments, tighter compliance

The updated rules also place stricter responsibilities on employers.

Companies must now settle pending dues, including overtime payments, promptly in cases of resignation or termination. The provision is aimed at reducing disputes related to unpaid wages.

Employers are also required to maintain proper records of employee working hours, improving accountability and compliance.

Salary structure may change too

Apart from overtime reforms, the labour codes also introduce changes in salary structuring.

Under the new rules, basic salary must account for at least 50% of an employee’s total compensation or CTC. While this increases salary transparency, it may also raise deductions towards provident fund (PF) and gratuity.

As a result, some employees could notice a slight reduction in monthly take-home salary, even if their overall CTC remains unchanged or increases.

However, the higher PF and gratuity contributions are expected to improve long-term retirement savings.

Who is likely to benefit the most?

Blue-collar workers

Workers in sectors where long shifts and overtime are common are expected to benefit the most from clearly defined overtime rules and mandatory double pay. Monthly earnings could increase significantly if the rules are properly enforced.

White-collar employees

For many white-collar professionals, the gains may be limited since several office-based roles do not fall under overtime provisions. However, higher PF contributions may strengthen long-term savings.

Implementation Will Depend On States

Although the Centre has introduced the labour codes, implementation depends on individual states notifying and enforcing the rules.

This means the rollout may vary across different states.

The bottom line

The consolidation of nearly 29 labour laws into four labour codes is being seen as one of India’s biggest labour reforms in recent years.

While businesses may face short-term payroll and compliance adjustments, the larger goal is to simplify labour laws, improve wage clarity, and strengthen worker protections.

For employees, understanding how overtime is calculated and how the revised salary structure impacts take-home pay and future savings will be key under the new system.