How to Calculate Overtime Pay in the Philippines

The standard workday schedule tends to be a variation of 9 to 6, with around an hour in the middle reserved for lunchbreak. This is in accordance with our Labor Code, which states that the maximum number of hours that we can work in one day is eight hours. Going beyond that would be considered overtime, while rendering less–say, if you’re thirty minutes late for your shift–is called undertime.

When you’re employed in the private sector, how much salary you receive is tied strictly to the number of hours you’ve worked. Doing overtime or undertime will cause a deviation from your usual salary. Contrary to what you’d expect, calculating it isn’t as simple as multiplying your number of extra hours by a fixed rate.

If you’re working extra hours, there are two possible situations:

1. You’re showing up for work on a rest day or a holiday; or
2. It’s a regular day, but you’re already well beyond eight hours

Calculating Pay on Rest Days and Holidays

The main question you have to ask is: what kind of non-working day is this? Is it a rest day, a regular holiday, or a special non-working day? Take note that it can fall into more than one category: it can be both a rest day and a regular holiday, for example.

Weekends–Saturday and Sunday–are usually allotted as rest days. Employees are required by law to have at least one day (a full 24 hours) off every week.

Regular holidays, such as Labor Day and Independence Day, tend to have fixed dates and are present year after year. On the other hand, special non-working days (like Christmas Eve and New Year’s Eve) are more changeable and are under the discretion of the government. Working on a regular holiday, you’ll notice, results in a higher rate than on a special non-working day.

If you need reference, we’ve already prepared a full list of official holidays and special non-working days in the Philippines. Check out this blog post for the 2017 calendar, and this one for 2018.

Here’s a table of the rates for rest days and holidays, assuming you won’t be working for more than eight hours:

Day	Rate
Rest Day	130%
Special Non-Working Day	130%
Special Non-Working Day and Rest Day	150%
Regular Holiday	200%
Regular Holiday and Rest Day	260%

Calculating Overtime Pay

If you’re working for more than eight hours, then that’s considered overtime, whether or not it’s a regular day or a rest day.

Whether your regular shift is at night matters, too: working anytime from 10:00 PM to 6:00 AM would fall under a night shift. This qualifies for Night Shift Differential (NSD), where you get an additional 10%.

Here’s a table of the overtime rates:  

	Non-Night Shift	Night Shift
Normal Day	125%	137.5%
Rest Day	169%	185.9%
Special Non-Working Day	169%	185.9%
Special Non-Working Day and Rest Day	195%	214.5%
Regular Holiday	260%	286%
Regular Holiday and Rest Day	338%	371.8%

As for how we calculated the overtime rates in the table above:

• Normal Work Day: 125% of your hourly rate
• Rest day, special non-working day, regular holiday, and all combinations: 130% of your hourly rate on these days (based on the first table)
• Night shift: 110% of your overtime hourly rate

Sample Calculations

Say that you’re earning P100 per hour.

1.) If you’re planning to put in two hours overtime on a regular day, just multiply your hourly wage by the rate to get your overtime pay per hour:

P100 x 125% = P125 per hour

2.) If you choose to work on a rest day, your hourly wage for the first eight hours will be:

P100 x 130% = P130 per hour

But once you’re on your ninth hour, your hourly wage goes up to:

P100 x 169% = P169 per hour

3.) Finally, if you overtime on a regular night shift:

P100 x 137.5% = P137.5 per hour

But if that night shift also happens to be a rest day:

P100 x 185.9% = P185.9 per hour

Quite complex, isn’t it? And this is just one portion of payroll calculation! Imagine doing this for hundreds of employees in your company every month. Making an error is completely human, what with all the numbers, but then a single error can cost your company a lot of money and result in dissatisfied employees.

This is why it helps so much to automate your payroll processing using technology. With Sprout Payroll, processing time gets reduced to 90%, and you can be sure that your employees always get paid the right amount. To see firsthand how it works, go here.    

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