One of the most common questions that employees ask is whether or not they are entitled for an overtime pay.
The main reasons why people ask this question is because they want to know what conditions need to be met in order for them to receive extra money from their employers.
Working on an eight-hour shift seems not enough to complete a particular task due to tight deadlines or volume of workload, as such employees will be required to perform overtime work.
When you work beyond the regular working hours, you may be eligible to receive overtime pay.
The employer is responsible for providing extra compensation on top of the basic pay you get. Understanding the general guidelines about overtime pay will help determine your eligibility while allowing you to predict how much you can earn.
This article will give you a basic overview on the topic so that you can decide if you should pursue your claim for an overtime pay.
What is overtime?
Overtime describes the excess number of hours rendered by an employee beyond the standard working hours. In most professions, organizations may require workers to work 40 hours a week, except for internal arrangements common to executive or managerial positions. Overtime usually takes place at the end of the work day or on weekends.
In principle, there’s no limitation on the number of overtime hours an employee may render. However, in practice, workers may want to take a break to maintain high quality of work without compromising personal health. Some specific jobs place a limit on overtime, referring to jobs that puts workers at risk due to longer working hours including security personnel, electric power plant employees, truck drivers, and service frontliners.
Working hours include the time during which employees are required to be at their designated workplaces either in a physical office or home setup. This may also include the time during which employees are permitted to carry out an assigned task as well as rest period of short duration within the working hours.
The overtime pay you receive may vary depending on what day you have extended working. The Philippine Labor Code and Telecommuting Act have given great considerations to workers who are compelled to report on weekly rest days, regular holidays, special holidays, and rest days falling on holidays. The computation for overtime work hours is based only on the basic pay rate. As stated in the Philippine Labor Code, some professions are also exempted from receiving overtime pay due to the nature of work.
Looking carefully at the organization’s overtime policy indicated in an employment contract is very important for workers. The terms and conditions on how to settle overtime pay must be included in the contract. These may include the procedures for requesting, approving, recording, and sending payout of overtime work. There are clients who don’t provide overtime pay, although an employee may be required to perform overtime work in exchange for a higher salary, incentives, and other attractive work benefits. So it is critical to read the contract cautiously before signing any document.
Categories of overtime
1. Compulsory
Workers only have to perform overtime work if it’s specified in their contract. Should employers require workers to work overtime, terms should not be less than the minimum labor standards as stated in the Philippine Labor Code. There are instances where workers are required to work overtime, such as in the case of non-guaranteed overtime. This type of overtime requires workers to render extra working hours without any request from the employer.
2. Voluntary
Voluntary overtime happens if the worker openly agrees to perform work beyond the usual working hours. Employees may perform voluntary work out of gratitude or if the project has a deadline to follow. But the worker has the right to refuse overtime work, especially if this isn’t stated in the employment contract.
3. Time off in lieu (TOIL)
Employers may offer time off in lieu to the worker instead of receiving overtime pay. It’s important that the contract states the number of working hours that can be accumulated and when it can be consumed.
Who are qualified to have overtime pay?
According to Article 87 of the Labor Code of the Philippines, overtime work is defined as:
“Work may be performed beyond eight (8) 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 (25%) thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate of the first eight hours on a holiday or rest day plus at least thirty percent (30%) thereof. “
Filipino workers can work for a maximum of 40 hours per week, however, companies are allowed to hire part-time workers under existing laws, which may be less than eight hours a day. Regular employees are entitled to receive 25% of the hourly rate during the workday, and an additional 30% of the hourly rate during special holidays, regular holidays, Sundays, and rest days. Unfortunately, not all professions are entitled for overtime pay. Below is the list of professions, which is exempted from receiving overtime benefits in accordance with Article 82 of the Philippine Labor Code:
- All government Employees including workers employed by the national government and government-owned or controlled institutions
- Managers who handles an establishment or department
- Managers who supervise two or more employees
- Managers possessing the authority to hire, evaluate, and terminate workers based on recommendations
- Managerial positions whose suggestions offer bearing in the decision making of an organization
- Household service workers covered by the Kasambahay law
- Non-agricultural field personnel with no fixed working hours
- People offering personal services to others (independent contract workers)
- Dependents of the employer
- Workers receiving compensation from piece-work or project bases
For workers in alternative work arrangements, they are entitled to receive overtime pay under the Republic Act No. 11165 or Philippine Telecommuting Act. This may include call center agents, regular employees in remote setups and other work-at-home jobs. The Telecommuting Act states that work provisions should not be less than the minimum labor standards. Workers are entitled to compensable working hours, rest days, and some mandated work benefits such as overtime pay, 13th month pay, social contributions, and leave entitlement.
Temporary and part-time workers
Part-time workers are entitled to overtime pay, unless otherwise stated in the employment contract. Since a part-time worker is only compelled to work for 4 hours, an employer is obligated to pay overtime work if workers are required to render extra hours beyond the agreed working period. If you’re required to work on a graveyard shift, you become eligible to receive night shift differential. Contractual or casual workers are also entitled to overtime pay for work rendered beyond the standard eight-hour shift. Their overtime pay is also computed similar to regular employees, should employers require them to report during rest days, regular holidays, and special holidays.
Night shift differential and overtime
The Philippine Labor Code requires a night shift Differential pay for professions like call center agents, security officers, healthcare workers, disaster response workers and logistics. Call center agents, for instance, are required to report for duty on a graveyard shift as most clients are from the US and UK. Any employee who works on a night shift is entitled to an additional 10% of the hourly rate when they work from 10PM to 6AM. Workers receive the night shift differential pay on top of the daily rate, aside from the additional hazard pay that goes with it.
Overtime pay details
There are regular and special holidays implemented in the Philippines. Compelling employees to work during regular and special holidays falls within the discretion of the company. If the company obliges employee to come in for work during regular holidays, they will pay the workers 200% of their daily basic rate. Business processing professionals are used to coming to work during holidays since the industry requires it. Therefore, they will automatically get extra compensation on top of overtime pay if they are urged to render extra working hours. For employees who work on a regular eight-hour night shift, they will get an additional 10% of their daily basic pay and 25% more if they render overtime work.
Workers will earn an additional 25% of hourly rate for each overtime hour rendered on regular work days. Workers will receive an additional 30% of hourly rate if they worked on rest days and special holidays. Special holidays in the Philippines include Ninoy Aquino Day, All Saints Day and 31st of December.
If their rest day falls on a special holiday, employees will get an additional 50% of the daily basic rate. If the regular holiday falls on the employee’s rest day, that worker will get an additional 30% of the hourly rate on top of the 200% regular holiday rate. The no-work-no-pay principle is applied to special non- working holidays and special days proclaimed by the Philippine president. The holiday system of the Philippines may appear confusing for businesses because special holidays are only announced days or weeks before that day, thus affecting the work productivity, holiday rate and overtime pay rate in the process.
As mentioned earlier, you will get 200% of hourly rate and 30% more if you extend work on one of the regular holidays listed below:
- New Year’s Day
- Maundy Thursday
- Good Friday
- Araw ng Kagitingan
- Labor Day
- Independence Day
- National Heroes’ Day
- Eid’l Fitr
- Eid’l Adha
- Bonifacio Day
- Christmas Day
- Rizal Day
Special holidays include the following:
- Chinese Lunar New Year
- EDSA People Power Revolution Anniversary
- Black Saturday
- Designated Election Day
- Ninoy Aquino Day
- All Saints’ Day
- Feast of the Immaculate Conception of Mary
Special working holidays include:
- All Souls’ Day
- Christmas Eve
- New Year’s Eve
Special conditions
As declared in article 88, undertime work cannot be offset by overtime on a regular business day. The law does not encourage offset since the overtime hourly rate is higher than hours missed when the worker only worked for less than eight hours. The company is also not exempted from paying overtime pay to the worker if they require the employee to work while on leave. Workers are not encouraged to request overtime work unless instructions will come from employers or if the task requires additional work hours to be completed.
Overtime work in cases of emergency
Workers may be required to render overtime work for the following reasons:
- When the country is at war or the chief executive declares a national and local emergency
- When work is necessary to prevent imminent danger to public safety caused by flooding, earthquakes, serious accidents, and other disasters
- When work is necessary to perform work on machines, equipment, and installations to avoid heavy loss and damage to the employer
- When work is necessary to prevent loss or damage of perishable goods
- When the nature of work requires continuous operations because any stoppage of work may result in irreparable loss to the employer
How to Compute Overtime pay
If the company requires you to work overtime, here’s how to calculate overtime pay:
1. Regular work days
You determine how much your hourly rate is. For example, if your daily basic pay is PhP 1,200, excluding all types of allowances like COLA, the hourly rate computation should be as follows:
Daily rate ÷ 8 hours = Hourly rate
PhP 1,200 ÷ 8 = PhP 150
Once you’ve determined the regular hourly rate, use the formula below to calculate the overtime hourly rate:
Hourly rate x 125% = Overtime hourly rate
PhP 150 x 125% = PhP 187.50
Next, multiply the overtime hourly rate by the number of hours in excess of your regular hourly rate to get the total overtime pay rate for the day. Check the formula below:
Overtime hourly rate x number of extra hours worked = pay with overtime pay
For example, you rendered three overtime hours, this is how your overtime pay for the day will be calculated:
PhP 187.50 x 3 = PhP 562.50
Finally, calculate the total daily wage using the formula below:
Overtime hourly rate + basic pay rate = total daily wage
PhP 562.50 + PhP 1,200 = PhP 1,762.50
2. Special non-working holidays and rest days
Use the formula below to get overtime pay from rest days and non-working holidays. You can calculate the overtime hourly rate for instance, if you work for three hours:
Hourly rate x 130% x 130% x number of overtime hours
PhP 150 x 1.3 x 1.3 x 3 = 760.50
Overtime hourly rate + basic pay rate = total wage
PhP 760.50 + PhP1,200 = PhP 1,960.50
But if your rest day falls on the same day as special non-working holiday, you can calculate the overtime hourly rate for instance, if you work for three hours:
Hourly rate x 150% x 130% x number of hours worked
PhP 150 x 150% x 130% x 3 = PhP 877.50
Overtime hourly rate + basic pay rate = total wage
PhP 877.50 + PhP1,200 = PhP 2077.50
3. Regular holidays
If you are required to work for overtime during regular holidays, you can calculate your overtime pay, assuming you have worked for three hours, using the formula below:
Hourly rate x 200% x 130% x number of hours worked
Php 150 x 200% x 130% x 3 = PhP 1,170
Overtime hourly rate + basic pay rate = total wage on regular holidays
PhP 1,170 + PhP1,200 = PhP 2,370
But if you worked beyond the standard 8-hour shift on a regular holiday which also happens to be your rest day, you can calculate your overtime pay using the formula below, assuming you rendered three overtime hours:
Hourly rate x 200% x 130% x 130% x number of hours worked
PhP 150 x 200% x 130% x 130% x 3 = PhP 1,521
Overtime hourly rate + basic pay rate = total wage
PhP 1,521 + PhP1,200 = PhP 2,721
4. Night shift differential
If you’re required to perform overtime work on a night shift, assuming you rendered three hours of overtime work, you can calculate the overtime pay using the formula below:
Hourly rate x 110% – Daily hourly rate on a night shift
PhP 150 x 110% = PhP 165
Total overtime pay for night shift differential pay plus overtime
Hourly rate x 110% x 125% x number of hours rendered on regular work day
PhP 150 x 110% x 125% x 3 = PhP 618.75
Overtime hourly rate + basic pay rate = total wage
PhP 618.75 + PhP1,200 = PhP 1,818.75
Rest day and special holidays on a night shift
Use the formula below to get overtime pay from rest days and non-working holidays done on a night shift. You can calculate the overtime hourly rate for instance, if you work for three hours:
Hourly rate x 110% x 130% x 130% x number of overtime hours
PhP 150 x 1.1 x 1.3 x 1.3 x 3 = PhP 836.50
Overtime hourly rate + basic pay rate = total wage
PhP 836.50 + PhP1,200 = PhP 2036.50
Again, if your rest day falls on the same day as special non-working holiday, you can calculate the overtime hourly rate for instance, if you work for three hours:
Hourly rate x 110% x 150% x 130% x number of hours worked
PhP 150 x 110% x 150% x 130% x 3 = PhP 965.25
Overtime hourly rate + basic pay rate = total wage
PhP 965.25 + PhP1,200 = PhP 2,165.25
Regular holidays on a night shift
Hourly rate x 110% x 200% x 130% x number of hours worked
Php 150 x 100% x 200% x 130% x 3 = PhP 1,287
Overtime hourly rate + basic pay rate = total wage on regular holidays
PhP 1,287 + PhP1,200 = PhP 2,487
Regular holiday falling on your rest day, on a night shift
Hourly rate x 110% x 200% x 130% x 130% x number of hours worked
PhP 150 x 100% x 200% x 130% x 130% x 3 = PhP 1,673
Overtime hourly rate + basic pay rate = total wage
PhP 1,673 + PhP1,200 = PhP 2,873
What Should You Do If Your Employer Does Not Pay You OT
If an employer refuses to pay your overtime work, you can consider the following options:
- Talk directly to your employer or HR manager
You can call the attention of your employer or HR manager about unpaid overtime work through writing a letter of grievance. It may be possible that your employer just made a mistake in calculating wages. Make sure you have supporting documents such as approval of overtime work and recent pay slip to support your claim.
- File a DOLE claim. You may want to read this article: How to File a Complaint at DOLE
If you feel that the non-payment of your overtime work is intentional, you can raise the issue with the National Labor Relations Commission (NLRC), a quasi-judicial body under the Department of Labor and Employment (DOLE), to clear any salary dispute.
The NLRC is tasked in resolving labor and management disputes within an organization. If the complaint appears valid during the initial assessment, an NLRC officer will conduct an investigation to help recover the unpaid wages, including overtime wages.
Apart from unpaid wages, NLRC labor arbiters handle common labor cases such as unfair labor practices, claims for moral damages, termination disputes, and others.
- Seek legal advice
Since the NLRC’s investigation process often takes long, workers are seeking the help of employment lawyers. Workers are consulting employment lawyers if the client refuses to pay back wages. An employment lawyer can guide you in recovering unpaid salary and other work benefits not paid to you.
As Filipino professionals go through the transition to the new normal of remote and hybrid work setup, work integration continues to elevate, especially in work-at-home jobs and field operations, although office-based work environments are slowly being restored as social distancing is becoming less restricted.
Knowing how to calculate overtime pay can help you determine the total wages you can expect to receive before the payout period.
You need to know your right to overtime pay because you truly deserve to receive the extra money you have worked for.
To ensure the correct computation of your salary, overtime work details should be filed correctly in addition to proper coordination with your supervisors or employers.