Overtime in Indian Corporates: A Reality Check on Labor Law Compliance

Authored by Ramendra Mishra, Research Coordinator, Madhya Pradesh

Overtime work has become a norm in the Indian corporate sector, with employees regularly putting in extra hours to meet deadlines and fulfill business demands. While India's labor laws provide clear guidelines on working hours and overtime compensation, there remains a significant gap between what is mandated by law and what employees actually experience. The mismatch between the provisions of the law and corporate practices often leaves employees overworked and under-compensated, creating an imbalance that needs urgent attention.

Understanding Overtime Regulations in India

The concept of overtime is well-defined in Indian labor laws, particularly under the Factories Act, of 1948 and The Shops and Establishments Act. The Factories Act mandates that any work done beyond 48 hours a week or 9 hours a day qualifies as overtime. Employees working overtime are entitled to receive twice their normal wages for the additional hours. Similarly, The Shops and Establishments Act, which governs many service industries, also has provisions for overtime pay, though the specifics may vary from state to state. However, these laws largely apply to blue-collar workers, and the enforcement in white-collar corporate jobs, especially in sectors like IT, finance, and consulting, is inconsistent. Many employees in these sectors report working well beyond the legally stipulated hours without receiving the mandated compensation. The culture of "grinding" — putting in long hours to prove dedication — is deeply ingrained in Indian corporates, leading to widespread disregard for legal working limits.

Corporate Reality: Long Hours, Less Pay

While labor laws in India are clear on overtime compensation, enforcement in corporate settings is far from ideal. Employees, particularly in industries like IT, finance, and consulting, are often expected to work long hours, with overtime being seen as a regular part of the job. A 2022 report by NASSCOM revealed that nearly 60% of IT employees worked beyond their scheduled hours, and only 20% reported receiving any form of overtime pay. In many cases, employees are asked to stay back and finish tasks that extend well into the evening or weekends, without any additional compensation or acknowledgement of their overtime. The pressure to meet performance targets or deadlines often results in employees working upwards of 50-60 hours a week, with no additional pay for the extra hours. For instance, a study by The Economic Times in 2022 found that 70% of IT sector employees worked overtime, but only 25% received any additional compensation. This trend is also seen in sectors such as banking, consulting, and media, where long working hours are normalized, and employees are expected to go the extra mile without fair pay.

The Exempt Employee Loophole

One of the most prevalent ways corporations evade overtime compensation is by classifying employees as "exempt" from the provisions of overtime laws. This exemption is often applied to those in managerial or professional roles, under the assumption that these employees are salaried and expected to work longer hours. However, in reality, many employees who fall into this category are not truly managerial but are still classified as such to avoid paying overtime. In India, this loophole is widely exploited in the IT sector, where employees are often given titles like "Team Lead" or "Project Manager" to avoid the need to compensate for overtime. According to the Indian IT Industry Overtime Report (2023), nearly 60% of employees classified as "salaried" or "on managerial roles" clocked in an average of 55 hours per week, but were not paid for the additional hours. This practice not only flouts labor laws but also leads to burnout and decreased.

Life Balance and Mental Health Impacts

The culture of working overtime without fair compensation has far-reaching consequences beyond financial exploitation. Long working hours lead to increased stress, burnout, and a poor work-life balance, impacting employees' mental and physical health. A 2021 survey by TeamLease showed that 65% of Indian corporate employees reported burnout due to long working hours and the lack of time for personal life. The pressure to constantly be available, especially in industries like IT and finance, has created a toxic work culture. In a 2022 report by the World Health Organization (WHO), working 55 or more hours per week was linked to a 35% higher risk of stroke and a 17% higher risk of heart disease. In India, where such long hours are common in many corporate environments, the health risks associated with overwork are becoming more apparent.

Compliance vs. Reality: The Billing Conundrum

Another major issue in corporate overtime practices is how companies officially bill hours. While they may follow the law in their official records, employees often report being asked to work beyond their billed hours without any corresponding compensation. In many cases, companies bill clients for a standard 40-hour workweek, but employees are expected to work an additional 10-15 hours to meet project demands.