Overtime Pay in the Philippines

OVERTIME PAY IN THE PHILIPPINES Basis. All employees required to work beyond eight hours in one workday is entitled to overtime pay. The basis of overtime pay is found in Article 87 of the Labor Code. Article 87. Overtime work. Work may be performed beyond eight hours a day provided that the employee is paid for the overtime work an additional compensation equivalent to his regular wage plus at least twenty-five percent thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate for the first eight hours on a holiday or rest day plus at least 30 percent thereof. Terminology. Overtime Pay.

Overtime pay is the additional compensation payable to employee for services or work rendered beyond the normal eight hours of work. It is computed by multiplying the overtime rate with the number of hours in excess of the regular eight hours of work. Overtime Work.

Any work performed beyond the normal 8 hours of work in one workday is considered as overtime work. Workday.

A workday is the consecutive 24-hour period which commences from the time the employee starts to work and ends at the same time the following day. To illustrate, if the employee regularly works from 8AM to 4PM, his regular workday is the 24-hour period from 8AM to 8AM of the following day. Workdays do not necessarily corresponds to calendar days. Overtime Pay Rates. Overtime pay rates depend upon the day the work is performed, whether it is ordinary working day, special day, holiday or rest day. For ordinary working day, an additional compensation equivalent to his regular hourly rate plus at least 25% thereof. For holiday, special day and rest day, an additional compensation equivalent to the rate for the first eight hours on a holiday or rest day plus at least 30% thereof. Computation of Overtime Pay Assuming that the mininum wage rate is P250, how much is the overtime rate per hour?

On ordinary day

On an ordinary day, the overtime rate per hour is determined as follows: First, compute the hourly rate of the employee: Regular hourly rate = Minumum wage rate ÷ 8 hours = P250 ÷ 8 hours = P31.25 per hour Now to determine overtime rate per hour: Overtime rate = Regular hourly rate + 25% of Regular hourly rate Overtime rate = P31.25 + (25% of P31.25) = P31.25 x 1.25 = P39.06 per hour On rest day and special day

Compute the hour rate of the employee on a rest day or special day: Hourly rate = 130% of Regular hourly rate = P31.25 x 1.30 = P40.625 per hour (Note: The hourly rate on rest day and special day is 130% of the regular rate.) To determine overtime rate per hour: Overtime rate = Hourly rate on rest day + 30% Hourly rate on rest day = P40.625 + (30% of P40.625) = P40.625 x 1.30 = P52.81 per hour On rest day which falls on a special day

Compute the hourly rate of the employee on a rest day which falls on a special day: Hourly rate = 150% of Regular hourly rate = P31.25 x 1.50 = P46.875 per hour To determine overtime rate per hour: Overtime rate = Hourly rate + 30% of Hourly rate = P46.875 + (30% of P46.875) = P46.875 x 1.30 = P60.94 per hour

On a regular holiday

Compute the hourly rate on regular holiday: Hourly rate = 200% of Regular hourly rate = P31.25 x 2 = P62.5 per hour To determine overtime rate per hour: Overtime rate = Hourly rate + 30% of Hourly rate = P62.50 + (30% of P62.50) = P62.50 x 1.30 = P81.25 per hour On a rest day which falls on a regular holiday

Compute the hourly rate: Hourly rate = 260% of Regular hourly rate = P31.25 x 2.60 = P81.25 per hour To determine overtime rate per hour: Overtime rate = Hourly rate + 30% of Hourly rate = P81.25 + (30% of P81.25) = P81.25 x 1.30 = P105.625 per hour Work need not be Continuous. Work performed by the employee need not be continuous as long as it falls within the same work day. For example, an employee who works in two shifts, one from 8AM to 12AM (four hours), and another from 4PM to 8PM of the same work day (another four hours), suffers a total of 8 hours of work. If he is required to work for another hour within the same work day (from 8AM to 8AM of the following day), then such work is subject to overtime pay. Undertime cannot be Offset by Overtime. Some employers has the practice of offsetting undertime and overtime. For example, if an employee work for only 7 hours on any given day (one hour undertime), he will be required to make up for his undertime by requiring him to render additional one hour work on another day. This practice is prohibited under Article 87 of the Labor Code, viz: Article 87. Undertime not offset by overtime. Undertime work on any particular day shall not be offset by overtime work on any other day. x x x

The rationale for provision is quite obvious. Offsetting undertime against overtime is improper because the employee would be deprived of the additional compensation for the overtime work he has rendered. Note that undertime is covered only by the regular hourly rate whereas overtime is subject to additional overtime rate. If the two are to be offset, the employee loses overtime pay to which he is entitled. Emergency Overtime Work. As a general rule, employees may not be compelled to work in excess of eight hours or to render overtime work on any given day against his will. The exception to this rule is found in Artile 89 of the Labor Code. Under the said article, employees may be compelled to perform overtime work in any of the following cases: 1. When the country is at war or under any national or local emergency; 2. When overtime work is necessary to prevent loss of life or property, or in case of imminent danger to public safety; 3. When there is urgent work to be performed on machines, etc., in order to avoid serious loss or damage to the employer; 4. When the work is necessary to prevent loss or damage to perishable goods; 5. When the completion or continuation of work is necessary to prevent serious obstruction or prejudice to the business; or 6. When overtime work is necessary to avail of favorable weather or environmental conditions. Managerial Employees not Entitled to Overtime Pay. Article 82 of the Labor Code states that the provisions of the Labor Code on working conditions and rest periods shall not apply to managerial employees. This includes overtime pay for overtime work. Thus managerial employees are not entitled to overtime pay for services rendered in excess of eight hours a day. Cases 1. Supervisory employees are considered as officers or members of the managerial staff, and hence are not entitled to overtime, rest day and holiday pay. (Nat’l Sugar Refineries Corp. vs. NLRC, G.R. No. 101761. March 24, 1993) Last Edited: Friday, August 19, 2011 Caveat: Subsequent court and administrative rulings, or changes to, or repeal of, laws, rules and regulations may have rendered the whole or part of this article inaccurate or obsolete.