Economic Survey 2023-24: How India's overtime premium dwarfs peers'

This could be a disadvantage for the Indian economy, mentions the survey

India has a higher overtime wage premium than most countries, highlighted the Economic Survey 2023-24 tabled by Finance Minister Nirmala Sitharaman in the parliament on Monday.

The overtime premium rate in the country is 100 per cent. Overtime premium rate is the wage rate paid above the regular wage for working extra hours than normal. On the other hand, countries including China, Vietnam, and the United States have a 50 per cent overtime premium rate.

However, this could be a disadvantage for the economy, the Survey mentioned. It is likely to obstruct the growth of the manufacturing sector “by driving production to nations with lower overtime costs”.

Other economies do not have a mandate which allows employees and employers to negotiate. India also has a working limit of 10.5 hours per day including overtime. This is lower than the limit in Bangladesh of 11 hours and Vietnam of 12 hours. China has no such limit.

An employer might choose to hire workers from a country with a lower overtime premium rate. This will limit the “monetisable time for Indian workers affecting their families and the country’s prosperity”, the Survey noted. It said that while the new Labour Codes address these issues, some states are yet to implement it. 

The labour laws need “to re-evaluate incentives for employers, with a focus on achieving better outcomes for economic growth and prosperity in the manufacturing sector”, it adds.

A 2019 study by the International Labour Organization (ILO) titled ‘Overtime work: A review of literature and initial empirical analysis’ by Dominique Anxo and Mattias Karlsoson concluded that while high overtime premium rates incentivize employees to work more hours, employer demand for overtime is likely to be low considering the higher pay and strict regulations.