Overtime pay in the Philippines refers to the additional compensation given to employees who work beyond eight hours a day. It ensures that extra work is fairly compensated in accordance with national labor standards.

Understanding how overtime pay is computed is crucial not just for employees who want to verify their pay, but also for employers to avoid labor disputes and comply with labor laws.

The legal basis for overtime pay is found in the Labor Code of the Philippines, specifically Article 87, which states that any work beyond eight hours must be compensated with an additional pay of at least 25% of the employee’s regular hourly wage. For work rendered on rest days, special non-working days, or regular holidays, different overtime rates apply. The Department of Labor and Employment (DOLE) further clarifies these rates in various labor advisories and wage orders.

What is Overtime Pay in the Philippines?

Overtime pay is the additional compensation granted to employees who work beyond the standard eight-hour workday. It is mandated under Philippine labor law to ensure fair payment for extended working hours.

When is Overtime Applicable?

Overtime pay applies when an employee performs work:

• Beyond eight hours in a single workday;
• On a rest day, special non-working holiday, or regular holiday, if the employee is required to report for duty;
• During night shifts, in combination with other premium pay situations (e.g., overtime done between 10:00 p.m. and 6:00 a.m.).

To qualify for overtime pay, the overtime work must be authorized by the employer unless otherwise covered by company policy or a collective bargaining agreement.

Maximum Overtime Hours Allowed

Under DOLE Department Order No. 174, Series of 2017, and existing Labor Code provisions:

• The maximum allowable overtime work is not more than 8 hours a day, and
• It must not exceed 48 hours of overtime per week, unless under exceptional circumstances such as national emergencies or business exigencies approved by DOLE.

Exceeding these limits may constitute a violation unless justified by compelling reasons and documented properly.

Overtime Pay Rates in the Philippines

The overtime pay rate in the Philippines depends on the type of day the work is rendered. Employers must apply the appropriate percentage based on whether the overtime falls on a regular workday, rest day, holiday, or during night shift hours.

Standard Overtime Rate in the Philippines

For work done beyond 8 hours on a regular workday, the employee is entitled to:

• 125% of their regular hourly rate
  (Regular hourly rate × 1.25)

Example:
If the daily wage is ₱600, the hourly rate is ₱75.
₱75 × 1.25 = ₱93.75 per overtime hour

OT Rate Philippines Breakdown

1. Regular Day Overtime

• Rate: 125% of hourly wage

2. Rest Day Overtime

• Work done on a rest day is paid 130% of the hourly rate for the first 8 hours.
• Overtime beyond 8 hours on a rest day:
  130% × 1.25 = 162.5% of hourly rate
  (Regular hourly rate × 1.625)

3. Special Non-Working Day Overtime

• First 8 hours: 130% of hourly rate
• Beyond 8 hours: 130% × 1.3 = 169% of hourly rate
  (Regular hourly rate × 1.69)

4. Regular Holiday Overtime

• First 8 hours: 200% of hourly rate
• Beyond 8 hours: 200% × 1.3 = 260% of hourly rate
  (Regular hourly rate × 2.6)

Night Differential (If Applicable to Overtime)

Night differential applies to work done between 10:00 PM and 6:00 AM.

• Additional 10% of hourly rate on top of overtime pay
  (OT rate × 1.10)

Example:
If the regular overtime rate is ₱93.75, the night OT rate becomes:
₱93.75 × 1.10 = ₱103.13 per hour

Night differential must be computed separately and stacked with overtime if the extended work happens during night hours.

How to Compute Overtime Pay in the Philippines

Calculating overtime pay correctly ensures employees are compensated fairly and employers remain compliant with labor laws. Here’s a step-by-step guide to help you compute overtime pay in different scenarios.

Overtime Pay Formula

Overtime Pay = Hourly Rate × OT Multiplier × Number of Overtime Hours

Step-by-Step Overtime Computation (Philippines)

1. Determine the Hourly Rate

If only the daily rate is given:

Hourly Rate = Daily Rate ÷ 8 hours

Example:
Daily Rate = ₱640
Hourly Rate = ₱640 ÷ 8 = ₱80 per hour

2. Apply the Correct Overtime Multiplier

Use the appropriate rate multiplier based on the type of day and time worked:

Examples of Overtime Computation

Example 1: Regular Day Overtime

• Daily Rate: ₱640
• Hourly Rate: ₱640 ÷ 8 = ₱80
• Overtime Hours: 2
• OT Pay: ₱80 × 1.25 × 2 = ₱200

Example 2: Rest Day Overtime (RDOT Computation)

• Daily Rate: ₱640
• Hourly Rate: ₱80
• Overtime Hours: 2
• OT Pay: ₱80 × 1.625 × 2 = ₱260

Example 3: Regular Holiday Overtime

• Daily Rate: ₱640
• Hourly Rate: ₱80
• Overtime Hours: 2
• OT Pay: ₱80 × 2.6 × 2 = ₱416

Example 4: Night Overtime on a Regular Day

• Daily Rate: ₱640
• Hourly Rate: ₱80
• OT Pay: ₱80 × 1.25 × 1.10 = ₱110/hour
• Overtime Hours: 2
• Total OT Pay: ₱110 × 2 = ₱220

Overtime Pay Calculator Philippines

An overtime pay calculator is a convenient tool that automates the computation of overtime wages based on standard DOLE guidelines. This helps both employees and employers avoid manual errors and ensures proper compliance with labor laws.

How to Use an Overtime Pay Calculator

To get accurate results, simply input the following details:

1. Enter Daily Rate
   Input your standard daily wage. This will be used to calculate your hourly rate (daily rate ÷ 8 hours).
2. Enter Overtime Hours Worked
   Indicate the number of hours worked beyond the standard 8-hour workday.
3. Select the Type of Day
   Choose the applicable day classification:
   • Regular Workday
   • Rest Day
   • Special Non-Working Holiday
   • Rest Day Falling on a Special Non-Working Holiday
   • Regular Holiday
   • Rest Day Falling on a Regular Holiday
4. Tick if Work Was Done at Night (Optional)
   Check this option if the overtime was rendered between 10:00 PM and 6:00 AM, so the calculator can add the 10% night differential.

Once these details are filled in, the calculator will compute the total overtime pay based on the correct rate multiplier for the selected day type.

DOLE Overtime Rules and Regulations

The Department of Labor and Employment (DOLE) provides clear guidelines on overtime pay to protect employees’ rights and ensure employers comply with labor laws. These rules are based primarily on the Labor Code of the Philippines, specifically Article 87 and related DOLE issuances.

DOLE Overtime Computation Guidelines

According to DOLE:

• Work beyond eight hours per day must be compensated with an additional 25% of the employee’s hourly wage on regular workdays.
• If overtime occurs on a rest day or special non-working holiday, the employee must receive an additional 30%, and 30% on top of that if the work exceeds eight hours.
• On regular holidays, employees must be paid double the daily rate, and overtime beyond that is paid at an additional 30% of the doubled hourly rate.

DOLE also requires that all overtime must be authorized by the employer, except in emergency cases where the employer requires employees to stay beyond their regular shift.

Employee Rights Under the Labor Code

• Employees have the right to refuse overtime work if it exceeds reasonable limits or violates labor standards, unless required under emergency situations.
• Workers must be properly informed of their schedules and be compensated fairly based on the official overtime rates.
• Night shift differential, rest day premiums, and holiday rates must be paid separately and must not be substituted with offsetting or comp time, unless covered by a collective bargaining agreement.

Employer Obligations

• Employers are legally required to pay correct overtime rates based on the actual hours rendered and type of day worked.
• Overtime pay must be included in the regular payroll and must not be delayed.
• Accurate records of working hours must be kept (e.g., via timesheets or biometric logs) and should be readily available during labor inspections.
• Failure to comply may result in penalties, back pay orders, or labor case filings.

Who Is Not Entitled to Overtime Pay?

While most employees are legally entitled to overtime pay for work rendered beyond 8 hours, there are exceptions under the Labor Code of the Philippines. Certain job roles and employment arrangements are exempt from overtime pay due to the nature of their work, authority level, or compensation structure.

Exemptions from Overtime Pay

Important Note:

Exemption from overtime pay does not mean exemption from fair treatment. Even if overtime pay is not required, employees in these categories may still be covered by other labor protections such as:

• Minimum wage
• Social benefits (SSS, PhilHealth, Pag-IBIG)
• Proper termination procedures

When Can Employers Require Overtime Work?

Under Article 89 of the Labor Code, employers may require employees to render overtime work even without prior consent, but only under exceptional circumstances.

Valid Grounds for Mandatory Overtime

Employers may require overtime work in the following situations:

• National or local emergencies, including times of war or major crises
• Life-threatening situations due to natural disasters such as:
  • Fires
  • Floods
  • Typhoons
  • Earthquakes
• Emergency repairs of machines, equipment, or facilities necessary to prevent serious business loss or property damage
• Urgent work to prevent spoilage or damage to perishable goods
• Work needed to avoid interruption of critical business operations

In all these cases, employers are still legally obligated to pay the corresponding overtime premium, as prescribed by the Labor Code and DOLE guidelines.

Frequently Asked Questions (FAQs)

1. Is overtime pay taxable?

Yes. Overtime pay is subject to withholding tax in the Philippines. It is considered part of the employee’s taxable income and will be included in the computation of income tax unless the employee qualifies for exemptions under Republic Act No. 10963 (TRAIN Law).

2. How much is overtime pay per hour in the Philippines?

It depends on your hourly rate and the type of day the overtime work was done.
Here’s a quick reference:

3. Is overtime included in 13th month pay?

No. Overtime pay is not included in the computation of the 13th month pay.
Under Presidential Decree No. 851, only basic salary is considered in calculating 13th month pay. Overtime pay, holiday pay, and other allowances are excluded.

4. How to compute rest day OT?

Use this formula:

Rest Day OT Pay = (Daily Rate ÷ 8) × 1.625 × Number of OT Hours

Example:
Daily Rate = ₱640
Hourly Rate = ₱80
OT Hours = 2
₱80 × 1.625 × 2 = ₱260

5. How to compute hourly rate in the Philippines?

Use the basic formula:

Hourly Rate = Daily Rate ÷ 8

If you’re a monthly-paid employee, you can also use this formula:

Hourly Rate = (Monthly Salary ÷ 261) ÷ 8

261 is the average number of working days per year divided by 12 months.

Conclusion

Understanding how to compute overtime pay in the Philippines is essential for ensuring that employees are fairly compensated and that employers remain compliant with labor standards.

Key takeaways:

• Overtime applies when work exceeds 8 hours per day and is subject to different rate multipliers based on the type of day.
• The standard OT rate is 125% of the hourly wage, increasing on rest days, holidays, or when done at night.
• Computation must follow the Labor Code and DOLE guidelines to avoid disputes and penalties.

Employers are responsible for applying the correct rates, keeping accurate time records, and paying overtime on time. Employees should monitor their hours and pay slips to ensure their rights are respected.

For questions or concerns about overtime pay:

• Contact your company’s HR department or payroll officer
• Call or visit the nearest DOLE regional office
• Use reliable payroll tools or overtime calculators for accurate computation