Under the new Wage Code, significant changes have been introduced regarding employees’ salaries and overtime regulations. Now, working beyond the stipulated hours will entitle employees to double pay, and even an additional 15 minutes of work will be treated as overtime. Mandating that basic salary constitute at least 50% of the total remuneration will lead to increased PF and gratuity contributions, thereby ensuring a more substantial retirement fund in the future; however, this may result in a slight reduction in the take-home salary.
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Following the updated ‘Code on Wages,’ which came into effect on April 1, 2026, significant changes have been introduced regarding employee salaries and overtime regulations. Now, employees who work beyond their scheduled hours will receive double pay for their overtime work. The objective of this major reform is to bring uniformity to wage-related regulations, enhance transparency, and strengthen the rights of employees across all sectors.
What are the new rules regarding overtime?
Under the new regulations, it is mandatory to maintain a record of any work performed beyond standard working hours, and such work must be compensated at a rate double the regular hourly rate. In practical terms, this means that for every single hour of extra work, you will receive remuneration equivalent to two hours of salary. This change serves as a major relief, particularly for ‘blue-collar’ employees who are often required to work long shifts.
The Code on Wages establishes a maximum working limit of 48 hours per week. Any work performed beyond this limit will be classified as ‘overtime.’ Although companies have been granted the flexibility to determine shift timings (which may extend up to 12 hours, inclusive of breaks), the weekly limit of 48 hours must be strictly adhered to under all circumstances.
How Will Overtime Be Calculated for Just 15 Minutes of Extra Work?
One of the most significant highlights of this new rule is the ’rounding-off’ mechanism for overtime. Now, even small increments of extra work will be taken into account. If an employee works for an additional 15 to 30 minutes after their shift has ended, it will be treated as 30 minutes of overtime. This ensures that employees who stay back after their shift concludes receive fair compensation for their extra time.
When Will Payments Be Received Upon Resignation or Termination?
Under the new framework, the rules regarding wage payments have also been tightened. If an employee resigns or is terminated from their job, the company is required to make full payment of all outstanding dues—including overtime—as soon as possible. The objective of this measure is to minimize disputes and ensure the timely receipt of funds. Furthermore, to enhance corporate accountability, it has been made mandatory for companies to maintain accurate records of working hours.
How will this impact your in-hand salary?
Alongside reforms regarding overtime, a significant change has also been introduced in the Labor Code concerning the salary structure. Under the new regulations, an employee’s basic salary must constitute at least 50% of their total salary (CTC). While this move will undoubtedly enhance transparency, an increase in the basic salary also implies a corresponding rise in your statutory contributions towards the Provident Fund (PF) and Gratuity. Consequently, your in-hand—or take-home—salary may see a slight reduction; however, a major benefit of this change is that you will secure a more substantial retirement fund and better retirement benefits in the future.
Who stands to benefit the most from the new rules?
The impact of this change will vary across different categories of employees. The primary beneficiaries of this rule will be blue-collar workers, as the regulations regarding overtime have now been clearly defined, and double pay for overtime work has been made mandatory. If these rules are strictly enforced, this segment of the workforce could witness a substantial increase in their monthly earnings.
White-collar employees, on the other hand, will derive only limited benefits from this change, as many roles within the corporate sector do not fall under the purview of overtime pay regulations. Working extended hours will not necessarily translate into higher income for them; however, the increased PF deductions will certainly lead to improved retirement savings.
Will this rule be implemented simultaneously across the entire country?
It is important to note here that Labor Codes (labor laws) are implemented at the state level. Although the Central Government has formulated the framework for these codes, their actual implementation will depend on when individual states adopt and notify these rules. States will continue to play their role in this process, which includes setting overtime limits on a quarterly basis—typically ranging between 125 and 144 extra hours over a three-month period.
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