Overtime Pay Computations And Policies In The Philippines
4/2/2018 | By Kyle Edriel Tomagan
If you are running a business in the Philippines, you must know the policies regarding overtime pay computation, or shift differentials. Knowing the level of compensation your employees should receive if they work the extra hours on regular workdays and holidays helps you establish a reputable image for your business. In line with that, you should pay for their rendered service in accordance with the labor codes.
Frequently Asked Questions
How many hours are allowed for overtime work?
Employees can render up to eight (8) hours of overtime work. Some employees, however, are exempt to this rule. The list includes managers, field personnel, domestic helpers, workers who are hired for personal service of another, members of the employer's family who depend on employees for support, and workers whose compensation is results-based.
Can an employee demand overtime work from the employer?
The employee cannot urge or oblige the employer to let him or her to render overtime work if it is not required by the circumstance or there is no extra work to be done.
Can employers/business owners require their employees to render overtime work?
The law does not encourage employers/business owners to ask their employees to do overtime work. Overtime work may cause unnecessary stress to workers, making it difficult for them to achieve and maintain work-life balance. Under certain conditions and circumstances, however, employers may require overtime work:
- If the country is at war or declared to be under national or local emergency
- If overtime work can help save lives or properties in face of danger to public safety due to emergencies caused by fire, natural disasters, or serious accidents
- If work started before the 8th hour needs to be completed or continued to avoid grave obstruction or to prevent prejudice to the business or operations
- If overtime work is needed to achieve good weather or environmental conditions and the quality of work and performance depend on these conditions
- If urgent work needs to be done on equipment, installations, and machinery to avoid loss or damage
- If work is required to preserve perishable goods or prevent its loss
Can an employee offset his or her filed undertime with overtime work?
The undertime cannot be offset with overtime. The employer cannot use the offset to keep the company from compensating the employee with required overtime rates. The employee will be paid according to the hours of work or rendered service. So if he or she worked for less than 8 hours, the compensation will be adjusted accordingly. The undertime can be deducted through his or her wage or through other means.
What is the computation for overtime pay on a regular work day?
Here's a sample computation based on the given values (monthly rate: Php18,000; factor rate: 258; 246 total regular days + 12 regular holidays):
Daily rate: 18,000 x 12 / 258= Php837.21
Hourly rate (8 hours): 837.21 / 8= Php 104.65
Number of hours in excess of 8 hours (125% x hourly rate x number of hours rendered)
Overtime hourly rate: 1.25 x 104.65= Php 130.81/hour
What is the computation for overtime pay on a rest day?
*same values used in the computation
First 8 hours = 130%; beyond 8 hours = 169% /hour
First 8 hours: ((18,000 x 12) / 258) x 1.3 = Php1,088.37
Beyond 8 hours: [((18,000 x 12) / 258) x 1.69]/8 = Php176.86/hour
What is the computation for overtime pay on a special day?
*same monthly rate applied in the computation
Special day: (130% x basic pay)
18,000 x 1.3 = Php23,400
Special day premium pay: (i.e., 20 working days/month): 23,400/20=Php 1,170/day
Special day that coincided with a scheduled rest day: (150% x basic pay)
18,000 x 1.5 = Php 27,000
Special and rest day premium pay (i.e., 20 working days/month): 27,000/20= Php 1,350/day
What is the computation for overtime pay on a regular holiday?
*same monthly rate applied in the computation
Regular holiday: (200% x basic pay)
18,000 x 2 = Php36,000
Holiday pay (i.e., 20 working days/month): 36,000/20 = Php1,800/day
Regular holiday that coincided on a scheduled rest day: (260% x basic pay)
18,000 x 2.6 = Php46,800
Premium pay (i.e., 20 working days/month): 46,800/20= Php 2,340/day
What is the overtime pay computation for employees working on a night shift during a regular workday?
Monthly rate: Php10,000
Daily rate (20 working days/month): 10,000/20= Php500
Hourly rate (8 hours): 500/8= Php 62.50
110% x number of hours in excess of 8 hours (130% x hourly rate)
Night shift overtime hourly rate: 1.1 x (1.30 x 112.5)= Php 89.375/hour
What is the overtime pay computation for employees working on a night shift during a rest day?
110% x number of hours in excess of 8 hours (130% x hourly rate)
Monthly rate: Php10,000
Daily rate (20 working days/month): 10,000/20= Php500
Hourly rate (8 hours): 500/8= Php 62.50
110% x number of hours in excess of 8 hours (130% x hourly rate)
Night shift overtime hourly rate: 1.1 x (1.30 x 112.5)= Php 89.375/hour
What is the overtime pay computation for employees working on a night shift during a special day?
*same monthly rate applied in the computation
special day: 110% x (130% x basic pay)
10,000 x 1.3 = Php 13,000
Special day premium pay, night shift: (i.e., 20 working days/month): 1.1 x (13,000/20)= Php 715/day
Special day that coincided on a scheduled rest day: 110% x (150% x basic pay)10,000 x 1.5 = Php 15,000
Special and rest day premium pay (i.e., 20 working days/a month): 1.1 x (15,000/20)= Php 825/day
What is the overtime pay computation for employees working on a night shift during a regular holiday?
*same monthly rate applied in the computation
Regular holiday (200% x basic pay)
10,000 x 2 = Php 20,000
Holiday pay (i.e., 20 working days/month): 1.1 x (20,000/20) = Php 1,100/day
Regular holiday that coincided on a scheduled rest day (260% x basic pay)
10,000 x 2.6 = Php 26,000
Premium pay (i.e., 20 working days/a month): 1.1 x (26,000/20) = Php 1,430/day
