Working hour restrictions reduce workers' potential to earn, says Economic Survey

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Working hour restrictions were introduced to protect workers' health and prevent overwork, however, various limits on working hours — daily, weekly, quarterly, and yearly — often conflict, reducing workers' earning potential, the Economic Survey said on January 31.

This follows a debate sparked by L&T Chairman SN Subrahmanyan's suggestion that employees should work on Sundays, and Infosys co-founder Narayana Murthy's proposal last year for millennials to work 70-hour weeks to boost productivity.

“..Section 56 of the Factories Act limits a worker to a maximum of ten-and-a-half hours at a factory daily, equating to around 63 hours in a six-day week. Of these, only 48 hours are considered regular (Section 51), three hours are considered rest intervals, and the remaining 12 hours count as overtime,” the survey noted.

Also Read: L&T chairman advocates 90-hour workweek, wants employees to work on Sundays too: 'I will be more happy'

“Over a 13-week quarter, this would allow for 156 overtime hours. Yet, another provision (Section 65) caps overtime at only 75 hours per quarter. As a result, these laws inadvertently hinder workers' earning potential, ultimately affecting their financial wellbeing”.

Notably, under the new labour laws, seven states — Maharashtra, Haryana, Himachal Pradesh, Odisha, Punjab, Karnataka, and Uttar Pradesh — have increased the ceiling of overtime hours from 75 to 144 hours in any quarter.

The report added, “...these compliance requirements are extensive and elaborate, demanding considerable management bandwidth, which is a scarce resource in small enterprises.”

The survey also said that creating an enabling environment to support business growth is crucial to drive employment and economic development.

“There are instances where labour regulations designed to protect workers' rights inadvertently hinder the growth of firms, especially small and medium enterprises, by restricting their ability to expand operations when needed compared to global peers. This, in turn, dampens employment generation”, the survey said.

The revised labour laws represent a step in the right direction. With the introduction of flexible regulations and effective implementation, these laws could lead to growth for companies, creating more job opportunities. They also safeguard labour rights and allow workers to increase their earnings.

Section 51 of the Factories Act (1948) states, “No adult worker shall be required or allowed to work in a factory for more than forty-eight hours in any week.” This clause limits the number of hours a worker can work in a day, and a week. However, unlike in India, certain countries allow these caps to be averaged over multiple days and weeks.

Regulations Prevent Manufacturers from Meeting Demand

India’s working hour regulations prevent manufacturers from meeting demand surges and participating in global markets, said the survey, adding that manufacturers stay competitive by minimising the time taken to bring a product to market.

“To reduce time-to-market, manufacturers must be capable of temporarily scaling up production. Labour laws in other countries allow manufacturers to average working hour limits across weeks and sometimes months. The International Labour Organisation (ILO) also recommends allowing manufacturers the freedom to average working hour limits across 3 weeks. However, India’s working hour limits may increase the cost, time, and risk of manufacturing,” the Economic Survey said.

Restrictions on overtime for factory workers are also noted. Section 65(3)(iv) of the Factories Act (1948) states, “No worker shall be allowed to work overtime for more than seven consecutive days, and the total number of overtime hours in any quarter shall not exceed seventy-five.” This rule limits the number of overtime hours workers can perform, and the overtime wages they can earn.

“While states may set their own limits, these are generally lower than those established by other countries. The earning potential of workers across countries can be assessed based on the restrictions on overtime hours.”

Also Read: The real reason why Karnataka government is increasing working hours of IT employees

The survey further states that regulations increase the cost of all operational decisions in a business. Factory owners must dedicate time and resources to obtain a 'Change of Land Use' license and ensure compliance with zoning regulations. They must also invest in transportation, additional land, construction of rooms for rest and canteens, along with paperwork to employ women on night shifts. Current regulations discourage innovation and creative destruction, it added. Similarly, Indians cannot undertake apprenticeships while undergoing formal education due to working hour limits on apprentices, said the survey.