Keeping track of overtime pay in any workplace can be complicated, especially if you are confused or unfamiliar with Philippine wage guidelines. This guide will provide clear instructions on how to compute legal overtime pay for employees working in the Philippines.
What are the Overtime Laws in the Philippines?
The Labor Code of the Philippines stands as the law governing employment practices and labor relations in the Philippines. The Philippine labor laws require employers to pay their employees overtime pay for work performed beyond 8 hours a day with additional 25% of their hourly rate on regular working days and 30% of the hourly rate during rest days, regular, and special holidays.
Undertime cannot be offset by overtime. An employer shall not offset undertime work of an employee by overtime work on the particular day or any other day. This shall not exempt the employer in paying additional compensation to the employee.
When is an Employee Entitled to Overtime Pay?
An employee is entitled to overtime pay when they have worked in excess of eight hours a day. As a general rule, all overtime work must be voluntary, so employers cannot force their employees to work overtime. To ensure compliance with regulations, employers should accurately record and report the amount of time their employees are working each day and keep track of any overtime performed.
Cases for Emergency Overtime Work
General rule is overtime should be voluntary but there are instances wherein an employer may require their employees to work beyond 8 hours a day provided that additional compensation is being paid.
Following are the exceptions:
When the country is at war or when any other national or local emergency has been declared by the National Assembly or the Chief Executive;
When it is necessary to prevent loss of life or property or in case of imminent danger to public safety due to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or calamity;
When there is urgent work to be performed on machines, installations, or equipment, in order to avoid serious loss or damage to the employer or some other cause of similar nature;
When the work is necessary to prevent loss or damage to perishable goods; and
Where the completion or continuation of the work started before the eighth hour is necessary to prevent serious obstruction or prejudice to the business or operations of the employer.
Who are Entitled and Exempted to Overtime Pay?
Overtime pay applies to all employees in all establishment whether profit or non profit but with exception to the following:
1. Government employees, whether employed by the National Government or any of its political subdivisions, including those employed in government-owned and/or controlled corporations with original charters or created under special laws;
2. Those of retail and service establishments regularly employing less than ten (10) workers;
3. Managerial employees provided they met the following conditions:
a. Their primary duty is to manage the establishment in which they are employed or of a department or subdivision thereof;
b. They customarily and regularly direct the work of two or more employees therein; and
c. They have the authority to hire and fire other employees with lower ranks or their suggestions and recommendation as to hiring, firing and promotion are given particular weight.
4. Officers or members of a managerial staff if they perform the following duties and responsibilities:
a. Primarily perform work directly related to management policies of their employer;
b. Customarily and regularly exercise discretion and independent judgment;
c. (i) Regularly and directly assist a proprietor or managerial employee in the management of the establishment or subdivision thereof in which he or she is employed; or (ii) execute, under general supervision, work along specialized or technical lines requiring special training, experience, or knowledge; or (iii) execute, under general supervision, special assignments and tasks; and
d. Do not devote more than twenty percent (20%) of their hours worked in a workweek to activities which are not directly and closely related to the performance of the work described in paragraphs 4.a, 4.b, and 4.c above.
5. Field personnel and other employees whose time and performance is unsupervised by the employer, including those who are engaged on task or contract basis, purely commission basis or those who are paid a fixed amount for performing work irrespective of the time consumed in the performance thereof.
6. Domestic helpers;
7. Persons in the personal service of another;
8. Workers who are paid by results as determined by the Secretary of Labor.
How is Overtime Calculated?
In the computation of overtime pay, COLA is excluded.
Below is a step by step on how to compute the overtime pay. For illustration purposes, let’s assume an employee is receiving a Manila rate of P 570/day.
1. Determine the hourly rate.
Formula:
Daily rate /8 hours= hourly rate
Sample Computation:
570/8 hours = P 71.25/ hour
2. Get the hourly overtime pay rate which is additional 25% rate of the hourly rate or 125%.
Formula:
Hourly rate * 125% = overtime rate/hour or;
Hourly rate * 1.25 = overtime rate/hour
Sample Computation:
P 71.25/hour * 1.25 = P 89.06/ hour
3. Multiply the overtime hourly rate to the numbers of OT hours worked (e.g. 3 hours)
Formula:
Overtime rate/hour * number of OT hours worked
Sample Computation:
P 89.06/hour * 3 hours = P 267.19 total over time
Other Types of Payments Related to Overtime Work
In addition to the overtime rates based on hourly computations, there are other forms of payments related to overtime work that employers must be aware of. Night differential pay, for example, is an additional form of compensation paid to an employee for working during nighttime hours, such as from 10 p.m. to 6 a.m., regardless of how many hours he worked during those times. This differential pay is an additional 10 % premium added on the regular rate of the employee on that day. Others are considered “Premium Pay” wherein additional compensation is paid for work within and beyond 8 hours work on non- working days, such as rest day and special holidays.
Computation for an ordinary day night differential OT following the above sample data is:
Formula: Hourly overtime rate X 110% or
Hourly overtime rate X 1.10
Sample Computation:
P 89.06 X 1.10 = P 97.97
Night Differential OT itself has different computations depending on the regular working hours of an employee or as stipulated on their company policy. To know more about Night Differential rules, you may visit our blog on How to Calculate Nigh-shift Differential Pay in the Philippines.
Payroll computation is indeed complicated considering there are many overtime pays and premium pays to be remembered with different calculations, but with AanyaHR, we made it easier for you by automating it. To know more on other features, visit our website at www.aanyahr.com
Source: DOLE Handbook Worker’s Statutory Monetary Benefits
Labor Code- Book III Conditions of Employment