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What the law says about overtime pay

Are you paying your employees right?
By Riva Khristime Maala |

The law requires an employee to work no more than eight hours a day to protect his health and to minimize unemployment by forcing employers to use shifting when they require more work hours to run their businesses efficiently. Nonetheless, an employee may work more than eight hours a day provided he is paid his regular wage plus at least 25 percent of it for overtime work. The reason for the extra compensation is that the employee is made to work longer than the fixed or voluntarily hours provided by law, he exerts more effort, goes home later than usual, may miss certain pre-arranged engagements, and may have little time to relax before the next working day.

In computing for overtime pay using the employee’s regular wage as a basis, the regular wage should include only the employee’s cash wage and exclude his cost-of-living allowance, sick leave, bonuses and other benefits.

If the employee’s overtime work falls between 10 p.m. and 6 a.m., he may claim night differential pay of not less than 10 percent of his regular wage for each hour of work performed. If he works on a holiday or on his rest day, he gets paid 100 percent of his regular rate plus another hundred percent as holiday pay. And if he works beyond eight hours on a holiday or on his rest day, he gets 200 percent pay plus a 30 percent premium or 30 percent of his regular wage for that day. If he works on a Sunday, he gets a 30 percent premium only if that day happens to be his rest day.

The right to overtime pay cannot be waived. Any stipulation in a contract stating that an employee must work beyond eight hours without being compensated for it is illegal.

Finally, under-time work on any particular day cannot be offset by overtime work on any other day—otherwise the employee would be deprived of his overtime premium. The under-time hours represent only the employee’s hourly rate of pay, while the overtime hours reflect both his rate of pay per hour and his overtime premium. Obviously, they are not of equal value.

This article was originally published in the May 2005 issue of Entrepreneur Philippines.


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