Overtime Pay

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  • P.D. 442 is the legal basis for overtime pay.
  • Overtime pay is an additional pay of 25% of the hourly rate for work done in excess of eight (8) hours.
  • COLA is excluded from the computation

Legal basis

The legal basis is Presidential Decree No. 442 (“P.D. 442”), otherwise known as the “Labor Code of the Philippines”.

Concept

Overtime pay is an additional pay of 25% of a covered employee’s hourly rate for work performed beyond eight (8) hours a day or for overtime work.

Covered and excluded

The benefit applies to all employees except:

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. Managerial employees, if they meet all of the following conditions:

2.1. Their primary duty is to manage the establishment in which they are employed or of a department or subdivision thereof;

2.1. They customarily and regularly direct the work of two or more employees therein; and

2.3. They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to hiring, firing, and promotion, or any other change of status of other

employees are given particular weight.

3. Officers or members of a managerial staff, if they perform the following duties and responsibilities:

3.1. Primarily perform work directly related to management policies of their employer;

3.2. Customarily and regularly exercise discretion and independent judgment

3.3. (a) 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 (b) execute, under general supervision, work along specialized or technical lines requiring special training, experience, or knowledge; or (c) execute, under general supervision, special assignments and tasks; and

3.4. 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 5.1, 5.2, and 5.3 above;

4. Kasambahay and persons in the personal service of another;

5. Workers who are paid by results, including those who are paid on piece rate, takay, pakyaw, or task basis, and other non-time work, if their output rates are in accordance with the standards prescribed in the regulations, or where such rates have been fixed by the Secretary of Labor and Employment; and

6. Field personnel, if they regularly perform their duties away from the principal or branch office or place of business of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty.

Computation

These are the steps on how to compute for holiday pay.

1. Determine the employee’s hourly rate.

daily rate ÷ 8 hours = hourly rate

Example:

Php800.00 ÷ 8 hours = Php100.00/hour

2. To get the hourly overtime pay, compute for 25% of the hourly rate of a total of 125%.

hourly rate x 125% = overtime hourly rate

Example:

Php100.000/hour x 125% = Php125.00/hour

3. Multiply the overtime hourly rate against the hours worked (e.g. 2 hours).

overtime hourly rate x 2 hours of work = pay with overtime pay

Example:

Php125.00/hour x 2 hours = Php250.00

5. Add pay with overtime pay for ordinary hours rendered (e.g. 6 hours).

pay with overtime pay + pay for ordinary hours = day’s wage

Example:

Php250.00 + Php600.00 = Php850.00

COLA, excluded

Cost of living allowance is excluded in the computation of overtime pay.

Employment contract, company policies, CBA

The above discussion may be superseded by any stipulation favorable to the employee via an employment contract, company policies, collective bargaining agreement, or analogous thereto.

References

  • Presidential Decree No. 442, a.k.a. Labor Code
  • Omnibus Rules Implementing the Labor Code
  • DOLE-BWC Handbook on Workers’ Statutory Monetary Benefits 
  • Jurisprudence or Supreme Court Decisions