Overtime Management in India (2026): Rules, Calculation and Software
Overtime is paid at twice the ordinary rate of wages — but only if hours are captured, approved and paid correctly. The rules, the calculation with three worked examples, and how to choose overtime software.
Overtime looks simple: extra hours times a rate. In practice, it's one of the areas where Indian employers most often get pay wrong. The law sets the rate at twice the ordinary rate of wages, limits how many overtime hours are allowed, and expects records. Company policy adds pre-approval, caps and shift rules. Do it on paper or in a spreadsheet, and you end up either underpaying people (a compliance and trust problem) or paying for overtime nobody approved (a cost problem).
This guide explains the overtime rules that apply in India in 2026, how to calculate overtime pay correctly with worked examples, what overtime management software should do, and how to choose one — including an honest note on what PeopleVio does and doesn't do today.
This is general guidance as of 30 September 2026, not legal advice. Overtime rules depend on your state, your industry and which laws cover your establishment. Check your specific position with an employment lawyer or consultant.
The short answer
- Overtime pay in India is at least twice the ordinary rate of wages for eligible workers, under the Code on Wages and the older laws it replaced.
- "Ordinary rate of wages" is generally basic pay plus dearness allowance (and certain allowances), not gross salary including bonus or overtime itself.
- Normal working hours are generally 8 hours a day and 48 hours a week for covered workers; overtime is time beyond the daily or weekly limit.
- Overtime hours are capped — the quarterly limit is set by the state, and several states have raised it significantly in recent years.
- Overtime generally needs the worker's consent under the labour codes, and records must be kept.
- Software should detect overtime from attendance, apply your rate and cap rules, route approvals and push the amount into payroll.
Who is entitled to overtime pay
Overtime rules mainly protect workers — people in manufacturing, warehousing, retail, hospitality, security, construction, and similar roles. Employees in managerial or supervisory roles above certain thresholds are generally outside the overtime provisions.
For shops and offices, the state's Shops and Establishments Act has traditionally set working hours and overtime rules. For factories, the Factories Act did, now largely replaced by the Occupational Safety, Health and Working Conditions Code (OSH Code) and state rules under it. The Code on Wages sets the overtime rate for employees it covers.
In practice: if your employee is a worker (rather than a manager) and works beyond the normal hours, assume overtime pay applies unless you've confirmed otherwise.
Working hours and overtime limits
| Rule | General position | Where to check |
|---|---|---|
| Daily hours | 8 hours a day for covered workers, with spread-over and rest-interval rules | OSH Code and state rules; Shops and Establishments Act |
| Weekly hours | 48 hours a week | OSH Code; state rules |
| Overtime rate | At least twice the ordinary rate of wages | Code on Wages |
| Quarterly overtime cap | Set by the state; the old Factories Act figure was 50 hours a quarter, and several states have since raised it substantially | Your state's notification |
| Consent | Overtime generally with the worker's consent | OSH Code |
| Records | Overtime registers / records maintained | State rules; labour code registers |
State rules differ, and they've changed a lot since the labour codes came in. Check the current notification for each state you operate in.
How to calculate overtime pay
Step 1: Work out the ordinary rate of wages
For a monthly-paid worker, the ordinary rate is usually:
Hourly ordinary rate = (basic + DA) ÷ 26 days ÷ 8 hours
Some companies divide by 30 days, or use the actual working days in the month. Whichever you use, write it into your policy and apply it consistently. Include allowances that count as part of ordinary wages under your applicable law; exclude bonus and overtime itself.
Step 2: Double it
Overtime rate per hour = 2 × hourly ordinary rate
Step 3: Multiply by the approved overtime hours
Overtime pay = overtime rate × approved overtime hours
Worked example 1: a warehouse worker
- Basic + DA: ₹18,200 a month
- Overtime worked in September: 14 hours, all approved
Hourly ordinary rate = ₹18,200 ÷ 26 ÷ 8 = ₹87.50 Overtime rate = 2 × ₹87.50 = ₹175 per hour Overtime pay = ₹175 × 14 = ₹2,450
Worked example 2: a daily-wage worker
- Daily wage: ₹700 for an 8-hour day
- Overtime: 3 hours on each of 4 days = 12 hours
Hourly rate = ₹700 ÷ 8 = ₹87.50 Overtime rate = ₹175 Overtime pay = ₹175 × 12 = ₹2,100
Worked example 3: weekly limit, not daily
A worker does 8 hours Monday to Friday and 10 hours on Saturday, a working day for them. The daily limit is exceeded by 2 hours on Saturday. The weekly total is 50 hours, 2 over the 48-hour limit. Count the overtime once, not twice: 2 hours, under whichever rule your applicable law uses.
Does overtime affect PF, ESI and TDS?
- PF: overtime allowance is generally excluded from "basic wages" for EPF purposes, so it doesn't usually attract PF.
- ESI: overtime is part of "wages" for ESI contribution in the month it's paid. It doesn't, however, change whether an employee is covered — coverage is decided on wages excluding overtime.
- TDS: overtime is taxable salary and must be included in the TDS calculation.
These interactions are exactly where manual calculation breaks. Get them right in payroll, not in a spreadsheet next to it.
Why manual overtime tracking fails
- Hours aren't captured accurately. If attendance is on paper or a punch machine nobody reconciles, overtime is whatever the supervisor writes down.
- No approval trail. Overtime is paid because someone stayed late, not because someone approved it.
- Caps are noticed too late. Nobody realises a worker is over the quarterly limit until an inspection.
- Wrong base. Overtime is calculated on gross salary instead of the ordinary rate, overpaying some people and underpaying others.
- Payroll handover errors. Overtime is calculated in one sheet and typed into payroll in another.
- No records. When a worker disputes their pay, there's nothing to show them.
What overtime management software should do
| Capability | Why it matters |
|---|---|
| Accurate attendance capture (biometric, mobile, geofenced) | Overtime is only as reliable as the check-in and check-out times behind it |
| Shift definitions per employee or group | Overtime is time beyond that employee's shift, not a single office timing |
| Automatic overtime detection | Calculates hours beyond the daily and weekly limits |
| Approval workflow | Only approved overtime is paid; unapproved hours are visible but not paid |
| Rate rules | Twice the ordinary rate, on the right wage base, with daily vs weekly logic |
| Cap tracking and alerts | Warns before a worker crosses the state's quarterly limit |
| Payroll integration | Approved overtime flows into the payslip with the right PF, ESI and TDS treatment |
| Registers and reports | Overtime records for inspections and disputes |
The most important of these is the first. Every overtime calculation starts with trustworthy in and out times.
How to choose overtime management software
- Start with attendance. Does it work with your biometric machines, or give field staff geofenced check-in from their phones?
- Check shift support. Can each employee or group have their own shift timings, including night shifts that cross midnight?
- Test the calculation. Give the vendor your own examples — like the three above — and check their answers.
- Look at approvals. Can supervisors approve overtime on a phone, and can you pay only approved hours?
- Confirm payroll integration. Does approved overtime land on the payslip automatically, with ESI and TDS applied correctly?
- Ask about registers. Can it produce the overtime records your state expects?
Where PeopleVio fits today
We'd rather be direct: PeopleVio doesn't calculate overtime pay automatically yet. There are no overtime rate rules, shift rostering or cap alerts in the product today.
What it does provide:
- Accurate attendance: geofenced GPS check-in and check-out from the browser, and biometric machines (ZKTeco, eSSL and similar) pushing punches directly into attendance.
- Office timings and late rules per company, with regularisation requests for missed punches.
- An hours report: pick a date range, see total hours worked per employee, and export it as a CSV.
- Payroll components: add overtime as an earning in the month's payroll, so it appears on the payslip and flows into TDS and ESI.
So a PeopleVio customer handles overtime by running the hours report, working out approved overtime using the formula above, and adding it as an earning in payroll. That works well for companies with occasional overtime. If overtime is a large, daily part of your operation — shift-based factories, security agencies, logistics — you need a tool with shift rostering and automatic overtime rules today, and PeopleVio isn't that yet.
Frequently asked questions
What is the overtime rate in India? At least twice the ordinary rate of wages for eligible workers, under the Code on Wages.
How do I calculate overtime for a monthly salaried worker? Hourly ordinary rate = (basic + DA) ÷ 26 ÷ 8. Overtime pay = 2 × that rate × overtime hours. Follow your policy if it uses 30 days or actual working days, and apply it consistently.
Is overtime compulsory to pay in India? For workers covered by the overtime provisions, yes. Treating it as discretionary is a compliance risk. Managers and supervisors above the applicable thresholds are usually outside these rules.
What is the maximum overtime allowed in a quarter? It's set by each state. The old Factories Act limit was 50 hours a quarter; several states have raised it considerably. Check your state's current notification.
Is PF deducted on overtime? Generally no — overtime allowance is excluded from basic wages for EPF. ESI and TDS do apply to overtime pay.
Can an employer make overtime compulsory? Under the labour codes, overtime generally requires the worker's consent. Build consent and approval into your process.
Does PeopleVio calculate overtime? Not automatically today. PeopleVio records attendance accurately and has an hours report you can export; overtime is then added to payroll as an earning.
The bottom line
Overtime pay is a legal obligation with a clear formula — twice the ordinary rate — but it only works if the hours are captured accurately, approved properly and paid through payroll with the right statutory treatment. Fix attendance first, then the calculation, then the approvals.
If accurate attendance and payroll are where you want to start, see PeopleVio's pricing or talk to us. If automatic overtime rules are a must-have today, tell us — it helps us prioritise, and we'll point you honestly to the right kind of tool.
Related reading: Attendance software price in India · Biometric attendance machine price in India · Payroll software price in India
Keep reading
HRMS for Office vs Field Employees India 2026: Attendance Solutions
Office: Biometric (99% accurate). Field: Geofencing (20-50m GPS). Hybrid: Both methods. PeopleVio: FREE biometric + geofencing. GreytHR/Keka: Biometric ₹2K/mo e
Switching from Keka HRMS in 2026: Migration Checklist and What to Test
Planning to switch from Keka HRMS? This checklist covers what data to export, how to map payroll components, parallel payroll testing, and how to avoid disrupting your monthly cycle.
Expense Reimbursement Policy in India (2026): Rules, Tax Treatment and a Sample Policy
What to reimburse, limits by grade, bills and GST invoices, when reimbursements become taxable salary, advances and a sample expense reimbursement policy.