How to Compute For Overtime Pay Rate in the Philippines
Have you ever wondered how the accounting department computes your overtime pay? If you’re an employee, you’ve probably wondered if your overtime pay is correct. If you want to know how that works because you don’t want to be fooled and underpaid, you should definitely read on. And in case you’re a new employer, recently launched a startup or a small business, and you’re curious about how all this runs around, you should read on too! Remember, ignorance isn’t bliss!
Table of Contents
The Definition of Overtime Pay
While work hours may differ from one person to another, the regular scheme of work shift lasts for about 8 hours. Despite the “new normal,” of having the privilege to work from the comfort of our homes, we still follow a set work time. And in doing so, sometimes, our work hours exceed the regular 8-hour shift.
In case you’re one of the lucky ones who get to work within the vicinity of their homes, you’d understand the blurred lines between work and personal life. Some of us have pets, technical difficulties, personal issues, and countless distractions. It’s not like we can just construct a four-walled office in our home and block all distractions. It’s clearly inevitable that wherever we work, especially in our homes, there will always be an unlimited number of difficulties and distractions.
Overtime Pay is the computed compensation you get when you exceed your regular work hours. In layman’s terms, this refers to the money that you receive when you are asked to work beyond your normal work hours. This compensation isn’t just magically computed, there is an equivalent amount that corresponds to the hours and minutes exceeded from your regular work hours.
Employers are expected to be honest and transparent with their employees and clients. However, there are instances when mistakes and miscalculations may arise, this is why it is integral to understand how to compute for your overtime pay rate.
Now you might ask, “what’s the difference between overtime and regular pay?”
Regular pay is the rate you receive in monetary amount as a base salary. This means that you are paid the same amount for every shift. This is a daily compensation that is paid to you by your employer in exchange for your services. The difference between regular base pay and an overtime pay rate lies in its computation. As mentioned above, an overtime pay rate depends on the exceeded number of minutes and hours from your regular base pay.
How is Overtime Pay Computed?
Here’s where all the math begins. Fear not, it’s not like what we studied in high school. There is no Physics or Chemistry involved in this computation. You wouldn’t even need a pencil or scratch paper. You can just use your old and reliable calculator or phone.
The formula you can use to compute for Overtime Pay is as follows:
Daily Rate divided by 8 hours = Hourly Rate
Easy right? So, let’s break it down even more.
If you have a minimum wage of Php 18,000 per month, then this would mean your daily rate would be Php 600. So, when using the formula…
Php 600 divided by 8 = Php 75
Once you get your hourly pay rate, you can now compute your hourly overtime rate with this formula:
Hourly Rate x 125% = Overtime Hourly Rate
With our example above, if we compute for an exceeded 5 hours for overtime because your boss asked you to come to work 2 hours earlier before your 10 am shift, and you had to leave 3 hours late because of extra work, your computed overtime would look somewhat like this:
Php 75 x 125% = Php 93.75 (This is now how much your overtime pay rate costs per hour you exceed from your regular shift duration)
Php 93.75 x 5 Hours = Php 468.75
Now, once you’ve finally computed your overtime hourly rate, you’ll never be fooled by anyone when computing for your overtime pay. Remember the formula:
Overtime Hourly Rate x Number of Extra Hours Worked = Overtime Pay Amount
Now, let’s say you had to work another 5 hours extra for 3 more days because you were asked to come early to work and extend. Your team has been working on that one project that you’ve tirelessly hoped to finish because it’s already causing you to feel burned out. And to avoid feeling burned out, you finished the task together with your team on the Thursday before payday.
Another reminder, overtime pay doesn’t just refer to the number of minutes and hours you worked after your shift. Overtime pay may also be applied to hours where you are asked to work hours earlier than your regular clock-in time. Say for example you are asked to report to work at 10 in the morning, but last Monday your team leader asked you to report to work at 7 am. This means that you are already working overtime by 3 hours unless you are asked to leave early 3 hours before your shift ends. In this case, your shift time during that day was only adjusted a few hours earlier than it regularly is.
Going back, you counted a total of 4 days with overtime. So, as an example, we’d compute this as:
Php 468.75 x 4 days = Php 1,875.00
This is now your grand total of additional payment for the accumulated number of hours you spent working overtime. Isn’t math so fun? Absolutely! It’s supercalifragilisticexpialidocious! We mean this literally and perhaps with a little bit of sarcasm. It wouldn’t be a long calculation if you don’t have countless overtime days to compute for. However, if you do, then you can just use whichever formula applies to your situation and start counting.
What They Didn’t Tell You About Overtime and Holiday Rates...
Computing for your regular overtime pay is different from computing your work pay on days where you are asked to work on a weekend or on a holiday. Sometimes, even if we don’t want to, we’re asked to work on days that are considered special non-working holidays and weekends, like Sunday.
For you to understand the differences in computing for a regular overtime pay and a rest day or holiday overtime pay, we’ll cite an example. Let’s say Chandler has an hourly rate of Php 100, and he was asked to work for 2 more hours on top of his regular 8-hour shift as a data transcriptionist.
In the Philippines, we’re entitled to receive 30% (or 130% when computing) of our fixed hourly rate each time we are asked to work overtime on rest days and special non-working holidays. So, anchoring back from our example, if Chandler worked 3 more hours on a special non-working holiday, our calculation of his overtime pay would look like this:
Php 100 x 130% x 130% x 2 = Php 338.
Hourly Rate x 130% x 130% x Number of Hours Worked
Now on our calendar, if it happens to be a Sunday and a special non-working holiday at the same time, and we’re asked to come to work, then the computation would be versed differently. Though it may be dreadful to work on a day that is considered a special non-working holiday and a rest day, some of us are firmly requested to attend our shift despite our emotional baggage of disagreement. The formula for this case would look like this:
Hourly Rate x 150% x 130% x Number of Hours Worked
Again, with Chandler as our muse. If Chandler was asked to work 7 hours on Sunday which also happens to be a holiday, then his computed overtime pay would look like this:
Php 100 x 150% x 130% x Number of Hours Worked = Php 1,365
Remember, the indicated 150% in the formula is the additional 50% from the employee’s hourly pay rate.
When it comes to regular holidays, there are some companies that request their employees to continue working on these days.
Say, for example, if Chandler wants a new refrigerator because his roommate Joey broke theirs, he’d agree to work on a regular holiday when his boss asked him to. This means Chandler, and just like any other employee, is entitled to receive 30% more of their original hourly rate. To compute the overtime pay Chandler should receive on a regular holiday, we follow this formula:
Hourly Rate x 200% x 130% x Number of Hours Worked
Note that the 200% in the formula above is the additional pay of the employee for working on a regular holiday. In the example, Chandler will be the employee in place of the situation cited.
So, with Chandler’s hourly rate of Php 100, his computation would look like this:
Php 100 x 200% x 130 % x 3 Hours = Php 780
Refrigerators nowadays cost as much as Php 21,000 up. This means Chandler may have to hustle into work a little more to buy a new refrigerator.
To clarify some questions, you may have in mind...
1. Can I choose to work on a holiday just because I want to?
The straight-up answer is No. And, you can’t just declare a holiday just because you feel like it. Sadly, it doesn’t work that way. We all wish it could just be like that. We also wish we could have mental health days to just recharge. Some women also recommend having “the time of the month” paid leave since it is a challenge to go through each month.
However, even if we want to just wake up and call it a holiday, we’re clearly in no position to do so. But if it happens to be a nationwide declared special non-working or regular holiday, then we’re in for a time to relax – that is if we’re not called to work.
2. Do these computations include living expenses and allowance?
Anchoring from the Labor Code of the Philippines, living expenses and allowance aren’t included in the computation of our overtime pay. It’s fair to say that a lot of us just want to eat gold and ride ponies, but as reality hits us, we have to work for that to happen.
3. Are overtime pay rates included in our labor laws?
Yes! Included in our long list of rules, laws, and regulations, is our right to receive overtime pay that comes on top of our regular base pay. Cited in Book III – Conditions of Employment Article 82, is the information about receiving overtime pay and the qualifications each of us pose in accordance with these laws. You may find this information easy to reach, through the website of the Department of Labor and Employment (DOLE) under Labor Relations.
4. What if I work the night shift overtime?
People who work on the night shift are entitled to receive a different calculation from the regular day’s work hours. To compute the amount you should receive as overtime pay on the night shift, these are the steps to follow:
Step 1: Just as stated above, we Divide the employee’s daily rate by 8 hours to get the hourly rate.
Step 2: Multiply the resulting hourly rate with 110% to get the night shift hourly rate.
Note: The indicated 10% of the 110% is the employee’s additional 10% pay on top of its hourly rate.
Step 3: The employee’s night shift hourly rate will be multiplied with the number of hours worked.
Step 4: Once you’ve finally reached step 3, you can just overtime pay rate plus the regular working hours.
5. What if I work on a contract basis?
Just as how regular employees work, if you work on a contract basis, then you follow the hours which are indicated in your contract. If your contract indicates that you’re only tasked to work 7 hours each day, then you work within that duration.
6. Do I need to compute my overtime rate all the time?
It’s not like we’re always asked to report to work and exceed our regular work hours. In times when we are and have to come early and clock out late, then we know that it is better to be keen on knowing the right amount of compensation we should receive than just being clueless about it.
7. Can I say “No” to working overtime?
Frankly, yes! Sometimes we have unavoidable moments in our life that we just can’t get out of. Somebody’s christening, somebody’s wedding, or our personal endeavors which include having a day for ourselves to recharge. We don’t always have to agree to working overtime or working on days that are considered to be our rest day or holidays.
We mustn’t be forced to be dragged into our workplaces or to report to work when it’s clearly our day to rest. Remember, we have our duty to our responsibilities, but employers also have a duty to take care of their employees. No means no, never otherwise.
Ensuring Transparency in the Workplace
Whichever side you’re on, whether you’re an employee working a 9 to 5 or part of the human resources team computing for payroll and accounting, ensuring transparency with each person you work with is a critical part of running a business. Building your company’s credibility with your employees takes patience and integrity. Accurate computation of compensation is important for your employees to understand from scratch that the company they’re working with is honest and reliable.
If you’re part of HR and you’re hiring top talent, or you’re a new hire just beginning to work right after you earned your bachelor’s, then you should also understand how computing your basic salary and overtime pay works. You don’t want to be fooled or even miss out on any payment you should receive because sometimes calculators fail in math just as badly as we do.
Understanding the highs and lows of payroll is like that saying “leave no stone unturned.” This means that you try every possible course of action in ensuring that what you should receive is correct, and for employers, what your employers worked hard for, you should provide. Even if each of you works different hours and schedules, the same computation applies for the different cases of overtime.
As an employee, part of your duty is to nurture the trust your employer gives you. By doing so, when there’s a miscalculation of your compensation, you also inform them about it, and do not turn a blind eye to the mistake. Someone over the internet also said something about placing yourself in other people’s shoes. So, be kind to the people whom you work with, and in simpler terms, just be kind to each soul you come across, whether it be your HR Manager or your IT personnel, or perhaps even yourself.
Pro-tip
Your precious takeaway here, other than all the math involved, is to be keen. The formula is already shared above, we shared them in the simplest way possible. We know how difficult it gets when you have to understand a subject matter and you feel like you’re losing sight of who you are already just by computing tons and tons of math.
You don’t have to be a genius with a GWA of 1.00 or 5.00 or 4.00 — whichever the highest was in your school. To make things easier, if it still seems difficult, grab a calculator, or search the web on an automatic overtime pay generator and just input the numbers.
Other than knowing how important it is to compute your overtime pay rate, it’s also important to know whether or not you can perform the duties you have to attend to when you say “yes” to working overtime, on your rest day, on special non-working holidays, or on regular holidays. Gauge how well you can still function when you agree to your boss’ request to work another hour.
If you’re already lacking sleep, dehydrated, and running on the countless energy drinks you’ve had all week, then when you agree to work another hour, even if it’s just 60 minutes, you might just pass out. And nobody wants you to be unhealthy, let alone to pass out. So, if you’re feeling sick, in any kind of way, or tired – not just physically, this includes mental and emotional exhaustion, then say no to working the extra time. Even if you need compensation, sometimes your future self would be the first to thank you when you say no. Placing yourself at the risk of fatigue and other health issues has no consolation. You won’t get happier or more successful if you ignore the basics.
Finally, some words of wisdom, the next time you’re asked to work overtime, on night shift, on a special non-working holiday, or on a regular holiday, ask how many hours they need you for approximately, it’s always good to weigh your choices and know your options.
