Economic Survey 2023-24: How India’s overtime premium beats that of other countries
India has a higher overtime pay rate than most other countries, according to the Economic Survey 2023-2024 that Finance Minister Nirmala Sitharaman presented in Parliament on Monday.
The overtime premium rate in the country is 100 percent. The overtime premium rate is the wage rate paid above the normal wage for working extra hours than normal. On the other hand, countries like China, Vietnam and the United States have an overtime premium rate of 50 percent.
However, this could be a disadvantage for the economy, the Survey said. It is likely to hamper growth in the manufacturing sector “by shifting production to countries with lower overtime costs”.
Other economies do not have a mandate that allows workers and employers to negotiate. India also has a work limit of 10.5 hours per day including overtime. This is lower than Bangladesh’s 11-hour limit and Vietnam’s 12-hour limit. China has no such limit.
An employer may choose to hire workers from a country with a lower overtime rate. This will reduce the “redeemable time for Indian workers, affecting their families and the country’s prosperity”, the Survey said. It said that while the new Labour Codes address these issues, some states are yet to implement them.
Labor laws should “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 found that while high overtime pay incentivizes workers to work more hours, employers’ demand for overtime is likely low given higher wages and stricter regulations.
First print: Jul 23, 2024 | 12:24 PM IST