Overtime Pay For Managerial Staff: What Do Law & Senior Professionals Have To Say

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The proposed labour law code, as documented under the Code of Wages, 2019 not only overhauls the entire gamut of working standards but also brings some changes which can have lasting effects.

As per the new code, if implemented, professionals putting in extra hours at work may come under the purview of overtime pay. And since the market is filled with presumptions, ETHRWorld tried to clear the fog.

Are senior staff entitled to overtime pay?

According to Abe Abraham, Partner, Cyril Amarchand Mangaldas, employees who fall under the definition of ‘worker’ under the Occupational Safety Health and Working Conditions Code, 2020 (OSH Code) would be entitled to overtime.

“But for such employees, their consent would have to be taken before they are required to work overtime and they will be required to be paid overtime wages for such hours, with the appropriate government being empowered to cap the number of overtime hours a worker can be made to work for,” he said.

Till here, it seems to be a clear way for justifications of the speculations, but to senior managerial personnel, it should be borne in mind that the OSH Code would not apply to them since the worker definition excludes such senior staff from its purview.

That said, Abraham said, “do remember the Code on Wages 2019 too prescribes the requirement to pay overtime wages to employees whose minimum rate of wages have been fixed under this Code.”

The employee definition under this Code covers senior managerial personnel, and thus at first blush, it appears that overtime wages may have to be paid to such senior staff and that too at rates calculated on their actual salary.

However, Abraham said, the position reflected in the Code on Wages is not a new concept and is replicated from the Minimum Wages Act, 1948. While interpreting this provision under the Minimum Wages Act, 1948, the Supreme Court had held that the requirement to pay overtime wages under this law was only applicable to those who were in receipt of minimum wages and not on those whose salary is considerably higher than the minimum wages.

“In my view, these principles would equally apply to Code on Wages, and can be relied on when determining whether senior managerial personnel would be entitled to overtime wages under the Code on Wages,” he added.

Similarly, Kritika P Bhandari, Advocate and Member – Board of Governing, Vijaybhoomi University, also guides us to pay a little more attention to what has happened in the definition of worker, under the Industrial Relations Code.

“We need to understand how the Industrial Relations Code has defined the workers. People have come up with a generic definition for the worker. There are a couple of observations, they have made it an all-inclusive definition of the workers. What I mean by that is the fact that they have used the word ‘Worker of any kind’,” she said.

According to her, the word ‘Any’ has made the definition pretty wide which was not the case earlier. In this Act, she said, “it includes people who are performing work in managerial capacity but having said that, it is also important to see in the same definition it has also given the government the power to exclude certain people who are only the employees for managerial or in the administrative capacity.

And the second and more important fact is, she said, this Act does not apply to people who are employed in a supervisory position who are drawing salaries more than Rs 18,000 per month.

So, if we get to the crust of this, people will realize that this overtime allowance for people in senior management, top management, all of that goes out of the window, Bhandari added.

With regards to overtime pay, Section 14 of the Code directs employers to pay the employee if he/she works more than the prescribed number of hours. But, Abhay Vohra, Partner, Burgeon Law, said, the government should first fix the minimum wages for different classes of employees. “The government will also fix a normal working time. If the Code is implemented in its entirety, then employers will be required to pay overtime for managerial employees too,” he said.

In essence, when an employee, whose minimum rate of wages has been fixed under this Code, by the hour, day, or by such any period longer than the prearranged hours, works on any day over these hours, the employer shall pay him/her for every hour or part of the hour worked in excess, Vohra added.

Will the government put a cap on salary?

Experts propound the code has no provision concerning any cap limit beyond which the payment of overtime can be exempted. “It doesn’t clarify whether employees who are paid substantially higher as compared to others who are paid the minimum wage will be exempted from overtime pay,” Abhay Vohra, Burgeon Law, said.

Besides, he said, the code also fails to mention whether employers are to consider the actual salary or the minimum wage fixed by the government when calculating the overtime payment.

According to Bhandari, the government will not put a cap on salary up to which overtime pay becomes applicable since the bill has already been passed in the Lok Sabha and is currently in the Rajya Sabha.

Additionally, she said, “this law isn’t applicable at senior levels but has been passed on employees/workers earning Rs 18,000 per month. In terms of overtime, this law records 8 hours of working time and anything above that is considered overtime and it’s a great move to stabilise overtime and underpaid employees/workers.”

However, Abraham propounds the central government has already brought out draft rules under the OSH Code and the Code on Wages, and there is no cap on the salary that it has proposed for calculating overtime in these draft rules.

“The current laws too do not prescribe such caps, so we will have to wait and see, and assess this situation once the final rules are brought out by the Centre and States,” he added.

So, for now, there appears to be no possibility of the government putting a cap on the salary up to which overtime pay is applicable till the time the Code clearly states the same.

What are senior professionals’ take?

Being into the private sector, employees irrespective of hierarchical positions, often tend to work or ask the employees to work beyond the working hours to achieve the company’s targets. This has no doubt increased during the current WFH scenario, as an example.

On the question of if there should be overtime pay to include all employees, including managerial staff, Kumar Mayank, Co-founder and CEO, Zimyo, said, “Yes, of course, we should. Not all employees choose to ask for the overtime earnings based on the extra time spent beyond their working hours, neither are the employees aware of the same.”

He further said, “Efforts should be recognized and employees should be justly rewarded. This helps to build healthy employer-employee relationships and increase employee trust within the organisation.”

However, not all agree with the above argument. Some think since the benefits of the general and overtime output accentuate into the manager’s coffers, extra cheese on the salary may result in injustice to non-managerial staff.

According to Manoj Kayastha, Country Head, Kryptoblocks, excluding management, all others should be paid for overtime. “The reason is that the non-managerial staff do too much of hard work mentally and physically. Since they are the resource behind all delivery and services, they do lots of overtime to meet the clients’ requirements, which have been committed by the management, but not get paid at all,” he said.

“And, the benefits of the output of the hard work are credited to management. Even for the increment, the non-managerial staff get considered very less compared to the management staff,” he added.

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