Overtime Pay
What is overtime pay?
Overtime pay is additional compensation, typically at a premium rate above someone's standard hourly wage, paid for hours worked beyond a defined threshold within a given workweek. In the US, this threshold is commonly 40 hours per week, with overtime generally paid at one and a half times the regular rate for eligible, non-exempt employees.
Why overtime pay assumptions break down internationally
A company that's only ever managed a US workforce tends to carry a specific mental model of overtime pay: salaried employees generally don't get it, hourly employees do, and the 40-hour threshold is the trigger. None of these assumptions transfer cleanly once you're hiring in a different country, and India is a good example of exactly how much the details can diverge.
How overtime pay actually works in India
India's overtime rules are governed by a mix of central labor codes and state-specific regulations, and they apply more broadly than the US exempt versus non-exempt framework might suggest. Under many state shop and establishment acts, overtime pay is often calculated at double the regular wage rate for hours worked beyond the standard workday or workweek threshold, which is notably more generous than the standard US one-and-a-half-times rate.
The specific thresholds and applicability can vary depending on the state and the nature of the establishment, which is exactly the kind of detail that's easy to get wrong if a company applies its US mental model rather than checking the actual rules that apply to where the employee is based.
Where companies get overtime pay wrong when hiring in India
The most common mistake is assuming that salaried, professional-level employees are automatically exempt from overtime the way they typically would be in the US. India's framework doesn't map cleanly onto the American exempt and non-exempt distinction, and depending on the role, industry, and applicable state law, salaried employees may still have overtime pay obligations that a US-trained HR team wouldn't expect to apply.
The second common mistake is failing to track hours accurately for employees where overtime pay genuinely does apply. If a company isn't monitoring actual hours worked because it assumed the role was exempt by default, it can end up with unpaid overtime liability accumulating without anyone noticing until an employee raises the issue or a labor dispute surfaces it.
Getting overtime pay right for an India-based team
The practical fix starts with actually understanding which specific overtime rules apply to your employees' roles and location within India, rather than assuming a blanket exemption or applying US thresholds. This typically means checking the applicable state shop and establishment act, understanding whether the specific role and industry carry any exemptions, and building accurate time tracking into the payroll process for any roles where overtime pay genuinely applies.
kaam.work builds overtime pay compliance into how payroll gets calculated for employees hired through our EOR service, applying the actual rules relevant to each employee's role and location, rather than defaulting to assumptions carried over from a different country's labor law.
The cost implication companies often miss
Because Indian overtime pay is often calculated at double the regular rate rather than the one-and-a-half-times multiplier common in the US, miscalculating or ignoring overtime obligations there can create a larger liability gap than a company might expect based on domestic experience. A team that's been quietly accumulating unpaid overtime for months, discovered all at once, can represent a genuinely significant unexpected cost, on top of whatever legal exposure comes with the underlying compliance failure.
Frequently asked questions
- Is overtime pay calculated the same way in India as in the US?
- No. Many Indian state regulations calculate overtime pay at double the regular wage rate, compared to the standard one-and-a-half-times rate common under US law.
- Are salaried employees automatically exempt from overtime pay in India?
- Not automatically. India's framework doesn't map cleanly onto the US exempt and non-exempt distinction, so salaried roles may still carry overtime pay obligations depending on role, industry, and state.
- What happens if a company doesn't track hours for overtime pay purposes in India?
- Unpaid overtime liability can accumulate undetected, creating a larger financial and legal exposure than expected once it's eventually identified or raised by an employee.
- Does an Employer of Record handle overtime pay compliance automatically?
- Through kaam.work, overtime pay is calculated according to the actual rules applicable to each employee's role and location, removing the risk of applying incorrect assumptions from a different country.
