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Explained | New Labour Code: Will revised rules for overtime pay benefit employees?

As per the draft rules, the working hours can be extended to up to 12 hours a day from 9 hours allowed earlier. Read on to know how this could prove to be beneficial for employees but not so much for the employers

December 11, 2020 / 02:25 PM IST

In the monsoon session of 2019, the government passed the Code on Wages. The code consolidates four laws relating to wages and bonus, namely - Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and Equal Remuneration Act, 1976. 

It envisages for the minimum and timely payment of wages to the workers. It also introduces the concept of floor wages wherein the rates will be fixed by the central government by taking into account the minimum living standards of the workers. Once the code is implemented, the minimum rates of wages fixed by the various state governments cannot be less than floor wages as determined by the Central Government. 

The code also stipulates the compensation for overtime work should be at least twice the employee’s regular pay. 

In the draft rules issued by the labour ministry in the month of November, it notified the working hours can be extended up to 12 working hours a day higher than 9 allowed earlier under the Code on Occupational Safety, Health and Working Conditions. 

Prashant Singh, Vice President and Business Head- Compliance and Payroll Outsourcing, TeamLease Services said: “As per the draft rules notified in November, 48 hours has been fixed for a week. So as per norm, a regular time frame would be 8 hours which can be stretched up to 12 hours at maximum with the overtime allowance benefit, keeping in mind the capping for regular work in a week.”


“With the upper cap being proposed to 12 hours, the employers and the employees can play between 8 to 12 hours thus giving an opportunity to the workers to earn extra through overtime allowance. So it is a win-win situation for both the employers and the workers,” he added. 

Lohit Bhatia- President, Indian Staffing Federation said, "Ideally this benefit of allowing up to 12 hours is primarily to smoothen operations in all continuous manufacturing , and essential services sectors."

How does it impact employees?

Prashant Singh also noted it is a much-awaited move which would now cover the white-collar workers as well with IT and ITES becoming the biggest beneficiary as they employ the largest chunk of the workforce in the country. The move is expected to motivate the employees to invest extra hours and to be more productive.  

On the flip side, Prashant Singh also noted, “The proposal to earn through overtime pay may not be applicable for employees earning beyond minimum rates of wages as per the code definition.”


How does it impact employers?

While the proposal for overtime is being seen as a welcome move by the workers, the development is expected to add to the payroll and exchequer of the employers. Companies will now have to set up monitoring and tracking mechanisms to check overtime work as most of the employees in the white-collar continue to work remotely. Complexity in compliance is going to be another added burden for the employers, experts noted. 

The codes have not been implemented yet and are expected to come into force before April 2021. 
Shreeja Singh
first published: Dec 9, 2020 05:06 pm
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