Time and a Half Pay

A Guide to Time and a Half Pay in India

While the phrase “time and a half” is a familiar term for overtime pay around the world, its application in India comes with a crucial legal twist. It generally means a premium rate for hours worked beyond the standard schedule, but you might be surprised to learn that Indian law often requires an even higher payout.

What Is Time and a Half Pay in India?

Think of overtime pay as a “premium for extra hours”—it’s the extra money an employee earns for working beyond their normal, legally defined workweek. While “time and a half” (1.5 times the regular rate) is the common understanding, Indian labour laws, especially the influential Factories Act, 1948, actually set the bar higher. The law typically mandates double the ordinary wage rate, or 2x, for any overtime hours.

For Chief Human Resources Officers (CHROs), this isn’t just a matter of semantics. It’s a foundational piece of compliance. Confusing the common term with the legal requirement can snowball into major payroll errors, legal challenges, and a tarnished reputation as an employer.

The Legal Foundation of Overtime

The idea of premium pay for extra hours is deeply embedded in India’s core labour regulations. The cornerstone of this framework is the Factories Act, 1948, which draws clear lines around work hours and overtime pay to shield workers from exploitation. This legal structure guarantees that any work done beyond the standard workday or workweek is properly compensated at a higher rate.

To get into the specifics, Section 51 and Section 59 of the Factories Act state that employees should not work more than 9 hours a day or 48 hours a week under normal circumstances. Anything beyond these limits is legally defined as overtime and must be paid at twice the ordinary rate of wages. This is a key detail that’s often missed. You can dive deeper into these working hour laws to see just how they impact scheduling and payroll.

A Note on “Ordinary Rate of Wages”: This is a frequent point of confusion. The “ordinary rate” isn’t just the basic salary. It generally includes basic wages plus any dearness allowance (DA). Crucially, it excludes things like bonuses, travel allowances, or other one-off payments. Miscalculating this base rate is one of the most common—and costly—compliance mistakes.

For a clearer picture, here’s a quick summary of the key regulations under the Factories Act.

Overtime Pay Quick Reference Guide

This table provides a quick summary of standard working hours and the legally mandated overtime pay rates under key Indian labour laws.

Getting these parameters right is non-negotiable for staying compliant and ensuring your payroll is accurate.

Why This Nuance Matters for CHROs

As an HR leader, understanding the difference between the colloquial “time and a half” and the legally required “double time” is more than just a box-ticking exercise. It’s a strategic imperative that touches several core functions of your role:

• Risk Management: Calculating overtime incorrectly is a direct path to legal trouble. It opens the door to employee lawsuits and hefty penalties from labour authorities, creating risks the business simply can’t afford.
• Financial Planning: Labour costs are a significant part of any budget. Accurate forecasting depends on a precise understanding of your overtime obligations, which can dramatically affect project costs and overall operational expenses.
• Employee Relations: A transparent, fair, and legally sound overtime policy is a powerful tool for building trust. It shows your people that you value their time and effort, which is a massive contributor to a positive and productive work culture.

In the end, mastering the fine print of India’s overtime pay rules isn’t just about compliance—it’s a cornerstone of effective, ethical, and strategic human resource management.

Navigating India’s Overtime Legal Framework

Knowing what overtime is is one thing. Actually navigating the tangled web of Indian laws that govern it is a completely different challenge. For CHROs, compliance isn’t about following a single rule; it’s about understanding how multiple, often overlapping, laws create your company’s obligations.

Historically, the overtime landscape has been shaped by a few major pieces of legislation. Think of them as the foundational pillars that have long dictated work hours and how much extra you need to pay for extra work.

The framework has traditionally rested on these key acts:

• The Factories Act, 1948: This has been the cornerstone for manufacturing units. It sets hard limits on work hours and clearly mandates double pay for any overtime work.
• The Minimum Wages Act, 1948: This act establishes the wage floor, which is critical because it directly influences the “ordinary rate” used to calculate overtime across many different types of jobs.
• State-Specific Shops and Establishment Acts: These are the laws that cover everyone else—employees in offices, retail stores, and other commercial businesses. The catch? Every state has its own distinct set of rules.

This fragmented legal structure means that what’s compliant often comes down to your industry and where you’re located. It’s a reality that requires HR leaders to stay on top of both central and state-level laws.

The Shift to New Labour Codes

The regulatory environment is in the middle of a massive shake-up. India is consolidating dozens of old labour laws into a much simpler system, an ambitious reform aimed at making life easier for both employers and employees.

As of 2025, this labour law consolidation has taken 29 legacy laws and replaced them with four straightforward codes covering wages, industrial relations, social security, and occupational safety. The Code on Wages, 2019, is particularly important here. It aims to standardise rules for minimum wage and overtime pay, reinforcing that any work beyond 48 hours a week is overtime, typically paid at double the ordinary wage rate.

However, there’s a wrinkle. While the central government has passed the codes, many states are still operating under the older laws. This creates a tricky dual-compliance situation where you have to juggle both. The goal is to make sure paying time and a half or double pay is applied uniformly, but this transition period demands close attention.

Strategic Takeaway for CHROs: The immediate challenge is managing this dual compliance. Your policies need to be aligned with the existing laws but also be agile enough to pivot as states officially adopt and implement the new codes. This isn’t a “wait and see” situation; it calls for a proactive, forward-looking compliance strategy.

Practical Impact on Your Organisation

This legal evolution isn’t just theoretical; it has direct, practical consequences for your payroll and HR policies. While the new codes aim for consistency, the staggered rollout across states means that what’s compliant in one state might not be in another for some time.

For example, the new codes broaden the definition of “wages,” which could increase the base amount used for overtime calculations. As a CHRO, you need to get ahead of these changes to avoid the steeper penalties for non-compliance that come with the new framework. This is also a chance to strengthen your position as a preferred employer, as robust and transparent compliance is a huge draw for top talent.

Building payroll practices that are not just compliant today but also ready for the future is crucial. This involves:

• Running regular audits of your current overtime policies against both the old and new laws.
• Training your managers on the finer points of authorising and tracking overtime correctly.
• Making sure your HRIS and payroll systems are flexible enough to handle changes in calculation methods.

Ultimately, taking a proactive stance on understanding and adapting to India’s evolving overtime laws will do more than just protect your organisation from risk—it will cement your reputation for fair and lawful labour practices.

How to Calculate Overtime Pay Correctly

On the surface, calculating overtime seems like simple multiplication. But as any experienced CHRO knows, getting it right is far more nuanced. Mastering this calculation is about more than just numbers; it’s fundamental to protecting your organisation from financial risk and ensuring every employee is paid fairly and legally. A tiny mistake in the base rate can snowball into a massive compliance headache.

The entire process pivots on one crucial component: the “ordinary rate of wages”. This is precisely where most payroll errors happen. Indian labour law is very specific about what this rate includes. It isn’t just an employee’s basic salary. It must also fold in allowances that are a regular part of their pay, like the Dearness Allowance (DA).

Just as important, though, is knowing what to leave out. Payments that aren’t part of regular, guaranteed earnings are typically excluded. This means one-off bonuses, statutory bonuses, house rent allowance (HRA), travel allowances, and any contributions to provident or pension funds are not factored into the ordinary rate for overtime calculations.

This infographic breaks down the basic flow of an overtime calculation.

As you can see, the process moves logically from figuring out the regular hourly rate to applying the overtime multiplier—which in India is typically 2x—to get the final pay.

The Step-By-Step Calculation

Let’s demystify this process and break it down into a few straightforward steps. Following this method ensures you’re capturing the right components and applying the legal multiplier accurately every single time.

1. Determine the Ordinary Rate of Wages: First, add up all the earnings that count. This means the employee’s basic salary plus their Dearness Allowance for the wage period.
2. Calculate the Hourly Rate: Now, convert those monthly earnings into an hourly figure. The standard formula is: (Total Monthly Ordinary Wages × 12) / (52 × 48). This formula annualises the wage and then divides it by the standard number of working hours in a year (assuming a 48-hour week).
3. Calculate the Overtime Rate: Under the Factories Act, the overtime rate is double the ordinary rate. So, simply multiply the hourly rate by 2.
4. Calculate Total Overtime Pay: Finally, take this new overtime rate and multiply it by the total number of overtime hours the employee worked in that pay period.

Let’s walk through a realistic example to see this in action.

Example Overtime Calculation

Meet Priya, an employee at a factory. Her monthly salary structure looks like this:

• Basic Salary: ₹20,000
• Dearness Allowance (DA): ₹10,000
• House Rent Allowance (HRA): ₹5,000
• Performance Bonus: ₹2,000 (a one-off payment this month)

Step 1: Identify Includable Earnings First, we need to isolate the components that make up her “ordinary rate of wages”. We’ll take her Basic Salary and DA but leave out the HRA and that one-time Performance Bonus.

• Total Ordinary Wages: ₹20,000 (Basic) + ₹10,000 (DA) = ₹30,000 per month

Step 2: Calculate the Hourly Rate Next, we’ll convert her monthly ordinary wage into an hourly rate using the standard formula.

• Calculation: (₹30,000 × 12) / (52 × 48)
• Calculation: ₹3,60,000 / 2,496
• Hourly Rate: ₹144.23

This hourly rate is the foundation of our entire calculation. It represents Priya’s ordinary rate of pay for one hour of work. A mistake here will invalidate the final overtime amount.

Step 3: Determine the Overtime Rate As per the Factories Act, Priya gets double her ordinary rate for any overtime she works.

• Overtime Rate: ₹144.23 × 2 = ₹288.46 per hour

Step 4: Calculate Total Overtime Pay Let’s say Priya worked 10 hours of overtime in a particular week.

• Total Overtime Compensation: ₹288.46 × 10 hours = ₹2,884.60

So, in addition to her regular monthly salary, Priya would receive an extra ₹2,884.60 for her overtime work. This methodical approach makes the calculation accurate and, just as importantly, completely defensible during a labour audit. Adopting a clear, step-by-step process like this across your payroll department is a crucial move toward building a truly robust and compliant compensation system.

Determining Employee Eligibility for Overtime

Once you’ve got the calculation method down, the next critical question lands on your desk: who actually qualifies for this premium pay? Misclassifying an employee is one of the most common and expensive compliance mistakes a company can make. For CHROs, drawing a clear line between eligible and exempt staff isn’t just about rules—it’s about managing risk and ensuring fairness across the organisation.

In India, eligibility for overtime pay isn’t about job titles. It all comes down to an employee’s role and responsibilities. The fundamental split is between “workers” or non-supervisory staff and those holding managerial or administrative positions.

Defining an Eligible Worker

Indian labour laws, especially the Factories Act, 1948, grant overtime protections primarily to individuals classified as “workers.” This group typically covers employees doing manual, skilled, unskilled, technical, operational, or clerical work for hire or reward.

Think of it this way: eligibility is dictated by the nature of the work performed. An employee whose core duties involve hands-on production, operating machinery, or carrying out routine admin tasks is almost certainly eligible for overtime pay. Their job title, whether it’s “Team Lead” or “Senior Associate,” is far less important than their actual day-to-day functions.

This distinction is absolutely vital because a fancy title can create serious legal exposure. If a “manager” spends most of their day doing the same work as their direct reports, they might still be entitled to overtime pay, no matter what their designation says on paper.

Identifying Exempt Employees

On the other side of the coin, certain employee categories are usually exempt from statutory overtime. The law acknowledges that people with significant authority and autonomy work under different structures.

The main types of exempt employees include:

• Managerial Staff: Individuals whose main job is managing the business or a department, which includes hiring, firing, and directing other employees.
• Administrative Staff: Employees doing non-manual work directly related to management policies or general business operations, who use their own discretion and independent judgment.
• Supervisory Staff: Those whose primary function is to oversee and direct the work of other employees, often with the authority to influence personnel decisions.

To help clarify these distinctions, here’s a quick-glance table.

Eligibility for Overtime Pay at a Glance

As the table shows, there are clear-cut cases and some definite grey areas.

A key takeaway here is that actual job duties trump job titles. A formal job description is just a starting point. Labour authorities will dig into the reality of an employee’s role to determine if they’re eligible. Proactive job classification audits are a CHRO’s best defence against misclassification disputes.

The Grey Area of Contract and Gig Workers

The status of contract and gig workers adds another layer of complexity. As a rule, individuals who aren’t on the company’s direct payroll as full-time employees are not covered by the overtime provisions of laws like the Factories Act. Independent contractors are essentially in business for themselves, responsible for their own hours and pay as outlined in their agreements.

However, this is a significant minefield of legal risk. If your company treats a “contractor” like an employee—dictating their work hours, methods, and tasks—they could be legally reclassified as a misclassified employee. This could expose the organisation to hefty back-pay claims for overtime, plus other statutory benefits. It’s crucial to structure contracts with non-permanent workers meticulously to reflect a genuine independent contractor relationship.

The reliance on overtime is quite high across Indian industries. Data suggests that between 30-40% of factory and manufacturing workers regularly get overtime pay. While this reflects compliance with the law, it also underscores how heavily these sectors depend on time and a half structures to meet production targets. You can explore more about these trends in the findings on overtime prevalence in India.

Building a Compliant Overtime Policy

Think of your overtime policy as more than just a document tucked away in an HR folder. It’s your company’s frontline defence against messy legal disputes and the very foundation of fair, transparent labour practices. For a CHRO, drafting this policy isn’t just an administrative chore—it’s a strategic move. The goal is to build a bulletproof system that stops conflicts before they start, keeps a tight rein on costs, and makes sure every single manager and employee knows their rights and responsibilities.

Without a formal policy, you’re essentially winging it in a high-stakes grey area. This leaves your company exposed to inconsistent enforcement, payroll nightmares, and expensive legal battles. A documented policy shifts your posture from reactive to proactive, setting up clear, defensible rules for one of the trickiest parts of compensation. It becomes the single source of truth for everyone.

Core Components of a Bulletproof Policy

A truly effective overtime policy leaves no room for confusion. It needs to be a complete playbook that maps out the entire overtime process, from getting approval to keeping records. See it as the blueprint for your whole overtime management system.

To be robust and compliant, your policy must have these essential elements nailed down:

• Clear Definition of the Workweek: You need to specify the exact start and end day and time of your company’s official workweek (for example, Sunday at 12:00 AM to Saturday at 11:59 PM). This is the non-negotiable starting point for calculating weekly overtime.
• Standard Working Hours: Clearly state the normal daily and weekly working hours for different employee groups. Make sure these align with legal limits, like the 9-hour day and 48-hour week laid out in the Factories Act.
• Overtime Eligibility: Explicitly define which employee categories are eligible for overtime pay and which are exempt (like managerial staff). This decision should always be based on actual job duties, not just job titles.
• Authorisation Procedure: Detail the official process for approving overtime. It must be crystal clear who has the authority to approve it and that it must be approved in advance and in writing to be considered valid.

A policy that lacks a formal, pre-approval process is a recipe for uncontrolled costs and disputes. The requirement for written, advance authorisation is your strongest tool for managing overtime expenditure and preventing claims of unapproved work.

Procedures for Authorisation and Record-Keeping

A policy is only as good as its execution. The day-to-day procedures for authorising and tracking overtime are where your policy comes to life, turning principles into solid actions. These processes have to be designed meticulously to guarantee accuracy and create an airtight audit trail.

When it comes to authorisation, the process should be simple but firm. Managers need to be trained to understand that a quick verbal “okay” or an informal chat won’t cut it. A digital request and approval system is the gold standard here, as it automatically creates a time-stamped record, removing any doubt about when overtime was requested and approved.

Meticulous record-keeping is absolutely non-negotiable. Your system must accurately track:

• The exact hours each employee worked every single day.
• The total hours worked each week.
• The specific hours that are classified as overtime.
• The total overtime wages paid to each employee for each pay period.

These records aren’t just for running payroll; they are your primary evidence of compliance if a labour inspector shows up or a legal dispute arises. Maintaining these detailed logs shows due diligence and a solid commitment to lawful pay practices. For organisations looking to streamline their talent functions, exploring the advantages of an RPO partner can provide strategic advantages in attracting top talent who value compliant and transparent employers.

Communicating the Policy Effectively

Creating the policy is only half the battle. Its real success rides on how well you communicate it and train your people. Every single employee, from the factory floor to the C-suite, must understand how this policy affects them.

Start the rollout through multiple channels—think company-wide emails, intranet announcements, and team meetings. Use simple, clear language and ditch the legal jargon wherever you can. If you have a multilingual workforce, providing translated versions is a must.

Most importantly, you need to conduct mandatory training sessions for all managers and supervisors. They are the gatekeepers of your overtime process, and their understanding is critical. This training should cover:

• Their responsibility in authorising overtime.
• How to correctly track and report their team’s hours.
• The legal risks of allowing informal overtime arrangements.
• How to handle common questions from their direct reports about the policy.

By investing in clear communication and thorough training, you empower your managers to enforce the policy consistently. This helps build a culture where everyone understands and respects the rules around working hours and time and a half pay. This proactive approach ensures your policy isn’t just a document sitting on a server, but a living, breathing part of your company’s DNA.

Common Questions About Overtime Pay in India

Even when you have a solid overtime policy on paper, you know that real-world situations can get complicated. As an HR leader, navigating those grey areas with confidence is what separates a good policy from a great one. So, let’s tackle some of the most frequent—and frankly, tricky—questions that come up around overtime rules in India.

Our goal here is to give you direct, practical answers. By getting ahead of these common points of confusion, you can prevent disputes before they start and ensure your company handles every scenario with fairness and full compliance.

Can an Employee Refuse to Work Overtime?

This is a classic point of friction. Generally, an employee is expected to cooperate with a reasonable request to work overtime, especially if their employment contract mentions it. But that expectation isn’t a blank cheque.

The law draws a clear line in the sand. According to the Factories Act, an employee’s total work, including overtime, cannot go beyond 12.5 hours in a single day or 60 hours in a week. You simply cannot legally force an employee to work past these limits. Beyond the legal maximums, an employee’s refusal is also likely to be seen as reasonable if it’s due to genuine health issues, major personal commitments, or if the requests are just consistently excessive.

Key Takeaway: While you can ask for cooperation, you can’t compel an employee to exceed legal working hours. The best practice is to have a clear policy that outlines how overtime is requested and, just as importantly, how an employee can decline it under reasonable circumstances. This creates a transparent process for everyone.

How Is Pay for Holidays and Weekly Offs Handled?

This is a special case. Asking someone to work on a public holiday or their designated day off isn’t treated like standard overtime. The Factories Act and various state-level Shops and Establishment Acts are firm on guaranteeing employees a weekly rest day.

If an employee does have to work on their weekly off day, they must be given a compensatory day off. This is usually required within a few days before or after the day they worked. The exact window can vary by state, so it’s important to check your local rules.

Pay for working on a national or festival holiday is another matter entirely and is usually governed by state regulations or your internal policy. It’s often paid at a higher rate than even standard overtime. For instance, an employee might get double their regular daily wage plus a substitute holiday. It’s crucial to consult your state’s specific rules, as they differ quite a bit across India.

What Are the Penalties for Incorrect Overtime Pay?

Getting overtime pay wrong can lead to consequences that go far beyond just cutting a cheque for the difference. With the new Code on Wages, 2019, the penalties for non-compliance have become much tougher.

The potential fallout includes:

• Substantial monetary fines levied directly against the company.
• Imprisonment for the employer or the responsible manager, especially if the non-compliance is repeated or seen as deliberate.
• Legal claims from employees, who can go to the labour authorities to recover all unpaid wages, often with an additional penalty on top.

For a CHRO, getting this right isn’t just about dodging fines. It’s about protecting your company’s reputation, maintaining employee trust, and avoiding lengthy, damaging legal battles.

Does Overtime Apply to Remote Employees?

This is a very modern and relevant question. The short answer is yes. In principle, India’s labour laws apply based on the nature of the work, not where it’s done. If a non-exempt employee working from home is asked to work beyond their standard hours, they are absolutely entitled to overtime pay.

The real challenge here isn’t about eligibility; it’s about accurate time tracking. As the employer, you have a legal duty to monitor the hours your remote teams are working. This means putting reliable time-tracking systems in place and having a crystal-clear remote work policy. That policy needs to spell out expected hours, break times, and the official process for authorising any overtime to keep you compliant and avoid future claims. As work models evolved, many companies also revisited their pay structures; you can read more about how the pandemic spurred businesses to raise the variable pay component in salaries.

Navigating the complexities of recruitment and compliance can be a significant challenge. Taggd specialises in Recruitment Process Outsourcing, helping CHROs like you build world-class teams while ensuring every aspect of your talent strategy is efficient and compliant. Discover how we can support your growth at https://taggd.in.