With India’s new labour codes in play, the country might just have seen its first overtime pay mandate. “Many organisations in India, including factories, follow a nine-hour workday schedule. With the implementation of the new Labour Code, employers may need to reassess their workforce planning, as any work beyond the prescribed limits will attract overtime obligations,” Aarti Raote, Partner, Deloitte India, told financialexpress.com. “This could result in increased labour costs, given that overtime must be compensated at twice the regular wage rate under the revised framework,” she added.
India’s new labour codes, notified on 21 November 2025, formally cap working hours at eight a day and 48/ week under the Occupational Safety, Health and Working Conditions (OSH) Code, a move that forces businesses to re-evaluate long-standing workday structures and productivity assumptions.
The document suggests, if employees are made to work overtime, they are entitled to an extra portion of their wages. However, experts suggest that there are a few negative attributions that might come with this, one of them being companies wanting to hire fewer human workers and opting for automation instead.
Impact on Companies – Cost pressure, workforce recalibration
The sectors most exposed to disruption include manufacturing, information technology and other private enterprises, where extended working hours have long been embedded into operational culture. These industries will need to adjust shift designs, staffing models and deployment strategies to remain compliant.
Raote said companies will have to move rapidly towards structured reorganisation of work. “A phased approach — Assessment → Strategy → Implementation → Monitoring — will help organisations stay compliant while optimising efficiency and cost control,” she noted.
While the law introduces tighter caps, it does provide some room for flexibility. Under the OSH Code, variations in daily hours are permitted so long as the weekly ceiling of 48 hours is adhered to, with the final structure to be determined by Central and State government rules.
“Normal working hours are set at 8 hours per day with a maximum of 48 hours per week, but the Central / State Governments have the flexibility to permit variations in daily hours, provided the weekly hours cap is maintained,” Puneet Gupta, Partner, People Advisory Services–Tax, EY India, told financialexpress.com. He added that detailed rules on how overtime will be calculated and how flexibility will operate are yet to be notified.
Automation and outsourcing are likely to accelerate
With overtime becoming more expensive, organisations may increasingly view automation or outsourcing not as a strategic choice but as an operational necessity.
“In light of restrictive working hours and increased overtime obligations, organisations may seek to expedite their automation strategies or explore outsourcing opportunities to optimise costs and ensure compliance,” Raote said, pointing to a broader global trend where industries are turning to artificial intelligence to preserve competitiveness.
This shift, she added, could significantly influence hiring decisions for high-intensity and knowledge-based roles, where companies will weigh the trade-offs between hiring more staff, outsourcing workloads or investing in automation. Therefore, companies might just opt for a less human workforce and more automation and AI reliance.
Compensation structures under scrutiny
The tightened regime may prompt firms to reconsider compensation strategies, but the code draws a clear line: wages cannot be reduced merely to offset the employer’s increased obligations. “It is possible that companies would like to revisit the compensation structure to optimise their costs. However, the Code prohibits employers from directly or indirectly reducing wages or benefits of the employee only for reducing their obligations under the Labour Code,” Raote cautioned.
Smaller firms face sharper disruption
Crucially, the new framework applies across large and small businesses, removing several thresholds that previously determined applicability. “The earlier laws provided certain thresholds like wage levels and employee count. These have been done away with in many laws,” Raote said. “It is possible that where some laws were not applied to certain establishments earlier, they will now become applicable.”
While the stated objective of the new code is ‘ease of doing business’, its real test will lie in implementation. Raote notes that its influence on investment and business sentiment will depend on how rules unfold over time. At the same time, the inclusion of emerging workforce categories and modern employment models marks a structural evolution in India’s labour governance.
“The Codes represent a strong step forward in modernising labour regulations,” Raote said, even as companies grapple with the reality of an eight-hour ceiling in a culture long comfortable with stretchable workdays.