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.

Law on Night Shift Differential in the Philippines

WHAT IS NIGHT SHIFT DIFFERENTIAL

Article 86 of our labor provides that every employee shall be paid a night shift differential of
not less than ten percent (10%) of his regular wage for each hour of work performed between
ten o’clock in the evening and six o’clock in the morning.

It is an additional compensation of not less than 10% of an employee's regular wage for every
hour of work done between 10:00 PM and 6:00 AM, whether or not such period is part of the
worker's regular shift.

"not less than 10%" is only the minimum standard prescribed by our labor code, meaning it
could be higher than 10% but should not be lower. If it is lower than 10%, you can always
demand an increase as a matter of right to the employer. If your demand is not honored, then you
can file a complaint against your employer for failure to comply with the minimum standards
provided for by our labor code.

WHO ARE ENTITLED TO NIGHT SHIFT DIFFERENTIAL

All employees are entitled to Night Shift Differential as a general rule.

WHO ARE NOT ENTITLED TO NIGHT SHIFT DIFFERENTIAL

1. Employees of the Gov’t and any of its political subdivisions, including Government owned
and controlled corporation (GOCC)
2. Retail and service establishments regularly employing not more than 5 workers.
3. Includes task and contract basis
4. Domestic helpers and persons in the personal service of another.
5. Field personnel and Employees whose time and performance is unsupervised by the employer
6. Managerial Employees

MAY AN EMPLOYEE WAIVE HIS RIGHT TO NIGHT SHIFT DIFFERENTIAL

The employee cannot waived such right not unless there is higher and bigger benefits being
offered.

SAMPLE COMPUTATIONS OF NIGHT SHIFT DIFFERENTIAL

1. Without Overtime:
[(10% x regular wage per hour) x no. of hours of worked performed between 10PM to 6PM]

Example:
Daily Wage: P800
Work Schedule: 6PM - 2AM

Solution:
1. Get the hourly wage rate first
Daily wage divided by no. of hours worked
e.g. P800 / 8 hours = P100
2. Compute wage between 6PM - 2AM
e.g. 8 hours x P100 = P800
3. Compute Night Shift Differential
[(10% x regular wage per hour) x no. of hours of worked performed between 10PM to 6PM]
e.g. (10% x P100) x 4 hours = P40
4. Your total wage earned or take home pay will be:
Daily Wage + Night Shift Differential
e.g. P800 + P40 = P840

2. With Overtime
[(10% of overtime wage per hour) x no. of hours worked performed between 10PM - 6AM]

Example:
Daily Wage: P800
Work Schedule: 8AM - 5PM
Overtime: 5PM - 12MN
Solution:
1. Get the hourly wage rate.
Daily Wage divided by no. of hours worked
e.g. P800/ 8 hours = P100
2. Compute wage between 8AM - 5PM
e.g. 8 hours x P100 = P800
3. Compute overtime pay between 5PM - 12MN
[(25% x Wage per hour) = wage per hour] x no, of overtime hours]
e.g. (25% x P100) + P100 = P125
P125 x 7 hours = P875
4. Compute Night Shift Differential
[(10% of overtime wage per hour) x no. of hours worked performed between 10PM - 6AM]
e.g. (10% x P125) x 2 hours = P25
5. Your total wage earned or take home pay will be:
8AM - 5PM (8 hours) x P100 = 800
5PM - 12MN (7hours) x P125 = 875
Night Shift Differential Pay (2 hours) = 25
Total wage earned = 1700