For employers in the Philippines, understanding how to compute overtime pay for their employees can be complicated. This guide provides a detailed explanation of Philippine labor laws and what organizations and employers should take into consideration when computing overtime pay.
Understand the Basics of Overtime Pay for Employees in the Philippines
Organizations and employers in the Philippines need to understand basic laws and regulations surrounding employee overtime pay. Overtime pay is issued for hours worked above eight hours a day or 48 hours a week. It is calculated using the employee’s regular wage rate. Employers must also keep accurate time records of their employees’ working hours. Those records must have detailed information on each day’s start, finish, and break times.
Get Familiar with Philippine Labor Laws (You Can’t Skip This Step!)
The Philippines has a comprehensive set of labor laws that organizations and employers need to familiarize when computing overtime pay. Organizations must comply with the requirements of the Fair Labor Standards Act, the Minimum Wage Law, and other relevant regulations in order to properly compute overtime pay for their employees. It is ultimately up to the organizations and employers to comply with these laws during the computation process. Ignorance of these laws will not excuse an organization from responsibility if something goes wrong.
Compute Overtime Pay Based on the Rate Established by Law
If you are employed in the Philippines, it is important to understand that you are legally entitled to overtime pay if you work beyond eight hours a day. However, the computation for overtime wages can be complicated. Overtime pay is not simply calculated by adding hours and multiplying them by a fixed rate; specific laws govern the calculation of these wages. Workers must become familiar with these rules to determine their overtime compensation eligibility accurately.
Ordinary day Overtime
Compute your overtime pay like this: determine your hourly rate, then multiply it by 1.25%. So if your base hourly rate is Php 60.00, then multiply it by 1.25% to get the overtime rate per hour, which would be Php 75.
On Rest day or Special Holiday Overtime
If you are working on a special holiday or rest day, the computation will be your hourly rate x 1.69%. For example, if your hourly rate is PHP 60.00/hour, your overtime rate would equal (PHP 60.00 x 1.69%) = PHP 101.40/hour.
On Special Holiday and at the same time rest day overtime
Start with your hourly rate, let’s say Php 60.00/hour. Then, to determine your overtime rate per hour, multiply your hourly rate on rest days and special holidays by 1.95%. This will give you an overtime rate of Php 117.00/hour.
On Regular Holiday Overtime
Let’s say an employee’s hourly rate is Php 60.00/hour. The overtime rate per hour would then be equal to the hourly rate multiplied by 2.60%, or (Php 60.00 X 2.60%) = Php 156.00/hour.
On Regular Holiday and at the same time Rest day Overtime
Multiply 3.38% by the standard hourly rate. For example, if an employee’s standard rate is Php 60.00/hour, their overtime rate would equal (Php 60.00 X 3.38%) = Php 202.80/hour.
On Double Holiday Overtime
To determine how much you should be paid for overtime, multiply your hourly rate by 3.90%. For example, say you earn Php 60.00 an hour. This means that the overtime rate per hour should be Php 234.00 (60 x 3.90%).
On Double Holiday and at the same time Rest day Overtime
For example, if the employee’s hourly rate is Php 60.00/hour, the overtime rate/hour will be computed by multiplying the employee’s hourly rate on rest days and special holidays by 5.07%. That equates to Php304.2 (Php 60.00 X 5.07%).
Comply With the Guidelines Set by the Department of Labor and Employment (DOLE)
All organizations and employers must comply with the guidelines set by the DOLE when calculating overtime pay. These include basing payments on the applicable legal minimum wage and setting a definite pairing period to balance hours worked with rest days. Employers and organizations should record all hours accurately. They should keep track of overtime hours so employees can be duly compensated for their hard work. As per Philippine labor laws, financial incentives such as bonuses should also be rendered upon completion of a project and other services rendered outside regular working hours.
Keep Record of Hours Worked to Ensure Compliance with Overtime Payment Laws
As part of the Philippine overtime rates laws, all employers and organizations must keep accurate and detailed records of their employees’ overtime hours. This is to make sure that their hard work is recognized and compensated for any such financial incentives that should be made in accordance with labor laws. Employers should also keep track of their workers’ dates clocked-in to ensure compliance with the proper pairing rules and regulations—which include no more than six consecutive days of work, rest day pay, and night shift salary premiums. Keeping accurate monitoring systems can help ensure that employees are rightly compensated for all hours, including overtime.
Enforce Authorized Overtime Policies
Overtime should only be authorized and issued when absolutely necessary in order to keep costs low. It’s important to make sure all employees understand these rules. Employees should also be aware of how overtime pay is calculated. By doing so, they can efficiently complete their tasks within a standard work period.
Let Automation Compute for Overtime Pay
Automating your timesheets is a great way to ensure accuracy and expedite the process. This will help prevent any errors on the part of employees who may be trying to clock more hours than they have worked deliberately. Automation also eliminates the need to wait on employees to fill out timesheets before you can compute how many overtime hours were rendered.
Automatic payroll makes computing overtime pay easier in the Philippines. With automation, you can authorize and schedule whether they can work overtime on non-regular days. Plus, you won’t have to calculate based on different overtime rates since it will be done for you automatically. As the employer, the only thing left is to ensure that all workers can work overtime when necessary.