Under Philippine law, rank-and-file employees are generally entitled to overtime and night shift differential pay. This entitlement also applies to employees who are required to remain on standby or on call.
Overtime and Night Shift Differential (NSD) Pay
Under the Labour Code, there is a distinction between:
- managerial employees (who are vested with the powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees);
- supervisory employees (who, in the interest of the employer, effectively recommend managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment); and
- rank-and-file employees (who do not fall within the definition of managerial or supervisory employees).
For rank-and-file employees, the normal hours of work must not exceed eight hours per day. Additionally, except for certain excluded employees such as field personnel, persons in the personal service of another, and workers who are paid by results, all rank-and-file employees who are required to work beyond their normal hours of work are entitled to overtime pay as well as NSD pay for any work rendered between 10pm and 6am.
The actual salaries of rank-and-file employees fluctuate depending on the hours worked on overtime, holiday, rest day or night shift. A table summary of the current applicable rates for Overtime Pay and NSD based on the Labour Code is set out below:
|
Work is performed on a… |
Overtime Pay Rate |
NSD Rate |
|
|
NSD Rate for Non-Overtime Work |
NSD Rate for Overtime Work |
||
|
regular working day |
125% of the basic hourly rate
|
110% of the basic hourly rate
|
137.5% of the basic hourly rate
|
|
special holiday or rest day |
169% of the basic hourly rate
|
143% of the basic hourly rate |
185.9% of the basic hourly rate |
|
regular holiday |
260% of the basic hourly rate |
220% of the basic hourly rate |
286% of the basic hourly rate |
|
special holiday falling on a rest day |
195% of the basic hourly rate |
165% of the basic hourly rate |
214.5% of the basic hourly rate |
|
regular holiday falling on a rest day |
338% of the basic hourly rate |
286% of the basic hourly rate |
371.8% of the basic hourly rate |
|
double holiday (where two holidays fall on the same day) |
390% of the basic hourly rate |
330% of the basic hourly rate |
429% of the basic hourly rate |
|
a double holiday falling on a rest day |
507% of the basic hourly rate |
429% of the basic hourly rate |
557.7% of the basic hourly rate |
On call employees
In certain situations, employers may also be required to pay overtime or NSD to employees who are required to remain on standby or on call to work:
|
Scenario |
Outcome |
|
The employee is required to remain on standby or on call in the employer’s premises |
Employer must compensate the employee for the full duration that the employee is on standby or on call, including any overtime or NSD pay (if applicable). |
|
The employee is required to remain on standby or on call in such close proximity to the employer's premises such as that the employee cannot use the time effectively or gainfully for their own purpose |
|
|
The employee is subjected to the employer's absolute control during the period they are required to remain on standby or on call, such their failure to report would justify the employer imposing disciplinary measures |
|
|
The employee is activated while on standby or on call, and is required to perform actual work for the employer |
Employer is only required to compensate the employee for the actual hours worked while on standby or on call, including any overtime or NSD pay (if applicable). |
Key Takeaways
Calculating the actual salaries of rank-and-file employees can be a complex process and any miscalculation could result in a claim for non-payment or underpayment of wages. In case of a finding of deliberate withholding of wages, an employer's potential exposure would be as follows:
- payment of backwages (including interest on any unpaid amount);
- administrative penalties such as fines or suspension of business operations;
- civil liability for damages;
- criminal liability resulting in imprisonment, a fine, or both; or
- payment of a portion of the employee's attorney fees.
Employers should be aware of the applicable overtime and NSD pay rates as well as maintain records of the actual hours worked by rank-and-file employees in order to ensure that accurate payment of salary is made to each employee.
Herbert Smith Freehills LLP has extensive experience in advising on day-to-day employment matters. To find out more, contact fatim.jumabhoy@hsf.com.
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Disclaimer
Herbert Smith Freehills LLP has a Formal Law Alliance (FLA) with Singapore law firm Prolegis LLC, which provides clients with access to Singapore law advice from Prolegis. The FLA in the name of Herbert Smith Freehills Prolegis allows the two firms to deliver a complementary and seamless legal service.