Labour Codes 2026: Maximum Working Hours Increased to Nine Hours and Expanded Employee Definitions

India's four consolidated Labour Codes, which subsume and replace 29 legacy labour laws, have introduced significant changes to the regulation of working hours, overtime, and the definition of employees and commercial establishments. The Code on Occupational Safety, Health and Working Conditions, 2020 (OSH Code) and the Code on Social Security, 2020 (SS Code), read with their respective draft rules notified by various State Governments in 2025 and 2026, increase the maximum daily working hours from 8 to 9 hours (subject to a 48-hour weekly cap), raise the overtime ceiling from 50 hours per quarter to 144 hours per quarter, and expand the definition of commercial establishment and employee to cover categories of workers previously outside the scope of labour regulation. These changes affect employers across all sectors, from manufacturing and IT to healthcare and the gig economy.

Daily Working Hours: From Eight to Nine Hours

Under the legacy Factories Act, 1948 and the Shops and Establishments Acts of various states, the maximum daily working hours for an adult worker were generally capped at 8 hours. The OSH Code increases this to 9 hours per day, while retaining the weekly cap at 48 hours. This means that an employer can now schedule a worker for 9 hours on certain days, provided that the total hours in the week do not exceed 48. For employers who operate on a five-day work week, this allows a daily schedule of up to 9.6 hours (48 divided by 5), though the daily cap of 9 hours would apply, effectively resulting in a maximum of 45 hours over five days. For six-day work weeks, the schedule could be structured as five days of 9 hours and one day of 3 hours, or any other combination that stays within both the daily 9-hour and weekly 48-hour limits. The increase in daily hours provides employers with greater scheduling flexibility, particularly in industries with fluctuating workloads, while the weekly cap ensures that the total quantum of work does not increase beyond what was previously permitted.

Overtime Ceiling Tripled: From 50 to 144 Hours Per Quarter

The increase in the overtime ceiling is one of the most significant changes for employers in labour-intensive industries. Under the old Factories Act, overtime was capped at 50 hours per quarter (approximately 4 hours per week). The OSH Code raises this to 144 hours per quarter (approximately 11 hours per week), and the maximum daily working hours including overtime are increased from 10 to 11 hours. This nearly three-fold increase in the overtime allowance gives employers substantially more flexibility to manage peak demand periods, seasonal fluctuations, and project deadlines without violating labour law limits. However, the overtime rate remains at twice the ordinary rate of wages, as mandated by the Code on Wages, 2019. This means that while employers can now deploy workers for longer overtime hours, the cost of overtime remains a significant financial consideration. Employers should update their attendance and payroll systems to track the new quarterly overtime limits and ensure that overtime payments are calculated at the correct rate.

Expanded Definition of Commercial Establishment and Employee

The Labour Codes broaden the scope of regulation by expanding the definitions of both commercial establishment and employee. The definition of commercial establishment now explicitly includes establishments of medical practitioners, architects, service providers including delivery services, and similar professional and service-oriented businesses. Under the old regime, many of these categories fell outside the scope of shops and establishments legislation, leaving their workers without the protections afforded to employees of registered commercial establishments. The definition of employee has also been widened to include persons engaged through outsourcing agencies for manual, skilled, technical, or clerical work. This is a direct response to the growth of the outsourcing and staffing industry in India, where millions of workers are employed by third-party agencies but work at the premises and under the supervision of the principal employer. By bringing these workers within the statutory definition of employee, the Codes ensure that they are entitled to the same protections regarding working hours, overtime, leave, and social security as directly employed workers.

State-Level Implementation: A Patchwork in Progress

Labour is a concurrent subject under the Indian Constitution, meaning that both the Central and State Governments have legislative competence. While the four Labour Codes have been enacted by the Central Government, their implementation requires each State to notify its own rules under the Codes. As of early 2026, several States including Uttar Pradesh, Madhya Pradesh, Karnataka, Uttarakhand, and Jharkhand have notified draft or final rules under one or more of the four Codes. Other States are at various stages of the rule-making process. This means that the effective date of the new working hours provisions, overtime ceilings, and expanded definitions varies by State. Employers with operations in multiple States must track the implementation status in each State where they have employees and ensure compliance with the applicable State rules. The Central Government has urged all States to expedite rule notification, and it is expected that most States will have their rules in place during 2026, but the transition period creates a compliance challenge for multi-State employers.

Compliance Checklist for Employers

Employers should take five immediate steps. First, review and update employment contracts, standing orders, and HR policies to reflect the new daily working hour limit of 9 hours and the revised overtime ceiling of 144 hours per quarter. Second, reconfigure attendance and payroll systems to track the new limits and calculate overtime at twice the ordinary wage rate. Third, assess whether any workers currently engaged through outsourcing agencies now fall within the expanded definition of employee and ensure they are covered under the applicable social security and working conditions provisions. Fourth, check the implementation status of the Labour Code rules in each State where the company operates and align internal policies with the applicable State-level rules. Fifth, communicate the changes to employees and their representatives, including trade unions where applicable, to ensure awareness of the new working hour arrangements and overtime entitlements.