Overtime pay arises when an employee renders additional hours of work beyond eight hours in a given day. The Labor Code has ensured that correct rates are applied on the computation of different overtime instances. It is computed by multiplying the number of overtime hours by the overtime rate per hour. Thus, the following formula:

**Overtime Pay = Overtime Hours x Overtime Rate Per Hour**

## Computation of Overtime Hours

Overtime hours are determined by counting the number of hours work in a day or in a shift beyond the first 8 hours. The first 8 hours are considered to be the normal hours of work (Article 83) and thus any excess hours thereof is abnormal and treated as overtime, or the “time that is over” the normal time.

**Overtime Hours = Total number of hours worked in a day – 8 working hours**

If an employee works from 8 am to 8 pm, how many overtime hours he had? The answer would be 3 hours. From 8 am to 8 pm is a total of 12 hours minus 8 hours equals 4 hours. Since the 1 hour lunch break is not considered a working hour (Article 85), you should deduct that from 4 hours to get the 3 hours.

## Computation Of Overtime Rate Per Hour

The overtime rate per hour is computed by multiplying the Hourly Rate by the Overtime Rate. At this point, the crucial thing to calculate is the Hourly Rate because it varies on what kind of work day the overtime was rendered. There are 6 kinds of working days.

### 6 Kinds Of Working Days

1. Regular Day

2. Sunday/Rest Day

3. Special Holiday

4. Regular Holiday

5. Special Holiday which is also a Sunday/Rest Day

6. Regular Holiday which is also a Sunday/Rest Day

Hourly Rate is basically the sum of Regular Pay and Premium Pay if any. Premium Pay (which is different from Overtime Pay) is given on top of the Regular Pay in working days other than the Regular Day as shown from the list above. So if it’s not a Regular Day, the computation of Premium Pay comes in. As for Overtime Rate, there are only two percentages involved.

### Overtime Rates

25% – applicable on regular working days, Article 87 of Labor Code

30% – applicable on days other than regular working days, Article 87 of Labor Code

And so the formula for Overtime Rate Per hour is:

**Overtime Rate Per Hour = Regular Hourly Rate + Premium Hourly Rate + Overtime Rate x (Regular Hourly Rate + Premium Hourly Rate)**

The Regular Hourly Rate is considered the 100% and serves as the basis for the Premium Hourly Rate. On the following examples, we will assume a worker has a 466 PHP regular wage per day divided by 8 which means he earns 58.25 PHP per hour. He rendered 4 hours of overtime as a sample figure.

## Overtime Pay On A Regular Day

Overtime Hours = 4

Overtime Rate = 25%

Regular Hourly Rate = 58.25 PHP

Premium Hourly Rate = 0

Overtime Pay = Overtime Hours x Overtime Rate Per Hour

= 4 [Regular Hourly Rate + Premium Hourly Rate + Overtime Rate x (Regular Hourly Rate + Premium Hourly Rate)]

= 4 [58.25 + 0 + .25(58.25 + 0)]

= 4 [58.25 + .25(58.25)]

= 4 [58.25 + 14.56]

= 4 [72.82]

= 291.25 PHP

## Overtime Pay On A Sunday/Rest Day or on a Special Holiday

Overtime Hours = 4

Overtime Rate = 30%

Regular Hourly Rate = 58.25 PHP

Premium Hourly Rate = 17.48 (58.25 multiplied by 30%)

Overtime Pay = Overtime Hours x Overtime Rate Per Hour

= 4 [Regular Hourly Rate + Premium Hourly Rate + Overtime Rate x (Regular Hourly Rate + Premium Hourly Rate)]

= 4 [58.25 + 17.48 + .30(58.25 + 17.48)]

= 4 [75.73 + .30(75.73)]

= 4 [75.73 + 22.72]

= 4 [98.45]

= 393.80 PHP

## Overtime Pay On A Regular Holiday

Overtime Hours = 4

Overtime Rate = 30%

Regular Hourly Rate = 58.25 PHP

Premium Hourly Rate = 58.25 (58.25 multiplied by 100%)

Overtime Pay = Overtime Hours x Overtime Rate Per Hour

= 4 [Regular Hourly Rate + Premium Hourly Rate + Overtime Rate x (Regular Hourly Rate + Premium Hourly Rate)]

= 4 [58.25 + 58.25 + .30(58.25 + 58.25)]

= 4 [116.50 + .30(116.50)]

= 4 [116.50 + 34.95]

= 4 [151.45]

= 605.80 PHP

## Overtime Pay On A Special Holiday which falls on a Sunday/Rest Day

Overtime Hours = 4

Overtime Rate = 30%

Regular Hourly Rate = 58.25 PHP

Premium Hourly Rate = 29.13 (58.25 multiplied by 50%)

Overtime Pay = Overtime Hours x Overtime Rate Per Hour

= 4 [Regular Hourly Rate + Premium Hourly Rate + Overtime Rate x (Regular Hourly Rate + Premium Hourly Rate)]

= 4 [58.25 + 29.13 + .30(58.25 + 29.13)]

= 4 [87.38 + .30(87.38)]

= 4 [87.38 + 26.21]

= 4 [113.59]

= 454.35 PHP

## Overtime Pay On A Regular Holiday which falls on a Sunday/Rest Day

Overtime Hours = 4

Overtime Rate = 30%

Regular Hourly Rate = 58.25 PHP

Premium Hourly Rate = 93.20 (58.25 multiplied by 160%)

Overtime Pay = Overtime Hours x Overtime Rate Per Hour

= 4 [Regular Hourly Rate + Premium Hourly Rate + Overtime Rate x (Regular Hourly Rate + Premium Hourly Rate)]

= 4 [58.25 + 93.20 + .30(58.25 + 93.20)]

= 4 [151.45 + .30(151.45)]

= 4 [151.45 + 45.44]

= 4 [196.89]

= 787.54 PHP

For the rest of payroll illustrations, see Accounting For Payroll: How To Compute Your Salary

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