How do working hour regulations limit what a factory worker can actually earn?

A factory worker’s earnings depend not only on the wage rate but also on the number of hours worked. India’s Factories Act 1948 constrains both how many hours a worker may work and how those hours may be arranged across the day, the week, and the quarter. The combined effect is that workers who want to work more and employers who are willing to pay them are frequently prevented from doing so by rules that were not designed with workers’ incomes in mind.

India’s rules set hard daily and weekly caps on regular working hours. Unlike many economies, India does not permit averaging across weeks or months. A worker cannot work longer during a busy production cycle and shorter during a slow one; each week is evaluated independently. This rigidity matters because manufacturing earnings are rarely smooth: demand is seasonal, orders are uneven, and workers in many other countries can work through a peak period and earn significantly more as a result. Indian workers cannot, because every week resets to the same ceiling, regardless of what the worker needs or what the employer can offer.

Workers’ hours are limited by conflicting legal limits. A worker may work up to nine regular hours a day, which over a six-day week amounts to fifty-four hours. A separate provision caps regular weekly hours at forty-eight. This difference means a worker who works for the full hour limit permitted every day of a six-day week has done 6 hours of overtime. Since the Act requires employers to pay overtime at twice the regular wage, most find it cheaper to hire an additional worker than to pay the premium, and the existing worker loses those hours entirely. At average hourly wage rates, this costs a worker roughly Rs 19,448 a year.

Even where an employer is willing to pay, a ten-and-a-half-hour daily spread-over and a quarterly overtime cap impose a further ceiling. Most states cap quarterly overtime at between seventy-five and one hundred and fifteen hours, while the spread-over alone would theoretically permit around one hundred and forty-four. The worker cannot reach even the limit that the law appears to set.

At twice the regular wage, India’s mandatory premium is among the highest in the world. The ILO recommends a premium of 1.25 times the regular rate, while countries such as Germany and Sweden mandate no premium at all, leaving rates to negotiation. The practical consequence is that employers facing doubled labour costs often find it more rational to halt production entirely than to pay overtime, meaning workers lose even the regular wage, let alone the premium the law promises. Analysis suggests that reducing India’s premium to the ILO-recommended rate of 1.25 times the regular wage could allow workers to earn substantially more, because employers would find overtime economically viable to offer rather than systematically avoid.

Karnataka’s amendment to its Factories Act in 2023 illustrates both what reform can achieve and how demanding it is to achieve it. The state simultaneously extended the spread-over to twelve hours, shifted the mandatory rest break to after six hours of continuous work, and raised the quarterly overtime cap. Amending any one of these provisions without the others produces little practical improvement, because the binding constraint simply shifts to the next rule in the chain. That no other Indian state has replicated Karnataka’s approach suggests that the political economy of labour law reform, rather than ignorance of the problem, remains the deeper obstacle.