When your employee asks for overtime, are you obligated to grant it? If your team does overtime, what are you obligated by law to give? How do we prevent employees from abusing overtime privileges? We tackle these in today's article.
First, let's start by explaining what overtime is so we're all on the same page. Overtime is found in Article 87 of the labor code and it says:
Art. 87. Overtime work. Work may be performed beyond eight (8) hours a day provided that the employee is paid for the overtime work, an additional compensation equivalent to his regular wage plus at least twenty-five percent (25%) thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate of the first eight hours on a holiday or rest day plus at least thirty percent (30%) thereof.
Let's simplify this further. The law basically says that covered employees (those are covered by labor standards in Art. 82) are expected to work 8 hours a day. Any work done beyond that time period should be compensated more because the employees are going the extra mile. They are giving more than what is required.
Let's appreciate the effort!
And what is this "extra compensation" that's expected? It's an additional 25% of what they should be getting per hour. So for example, an employee is being paid Php 100 / hour, if they work beyond 8 hours, then they should be getting Php 125 instead of Php 100. And so on and so forth.
The law provides a special rule when you have your employees work on a rest day or a holiday though. Instead of 25%, since the employees should be resting or spending time with their families, then the law says you "appreciate" them more. How much more? By another 5%. So the rate for overtime during rest days and holidays is 30%. Going back to our example, the employee should be getting Php 130 per hour in this case.
What's a lesson you should take from all this?
The moral of the story is that overtime is expensive. Unless ABSOLUTELY NECESSARY, try to avoid it. It goes double for rest days or holidays. Try to arrange your team's work properly so they finish on time and they don't have to extend the workday to get things cleared up.
Let's put some boundaries in place
Speaking of putting things into order, let's go the second point that I want to make. A lot of clients and students ask me how to prevent employees from abusing overtime privileges.
The best solution I've come up with is to put up proper boundaries so that employees know when they can avail of overtime and what their limits are. In the legal landscape, boundaries are usually demarcated by policies and rules.
So I recommend that my students and clients issue a policy on overtime. And for me to say that this policy should answer 3 questions to be effective.
When can employees avail of overtime?
What circumstances will justify this? Excess work that came in late? A new client coming in? Oppressive deadline?
How can employees apply for overtime?
What is the specific procedure for applying? Do they fill out a form? Where do they get a copy of this form? Is it online? Who has to sign and approve? Once approved, where to they submit it? To HR? To Accounting?
What are they entitled to if approved?
The 25% and 30% percentages are merely minimum requirements. Feel free to add benefits if it makes sense to you. Some employers add more compensation such as 35-45% on top of the hourly rate. Some provide food which the employees can have delivered, or are given an allowance for. It's all up to you as an exercise of management prerogative.
If your policy contains these 3 things, I think it would go a long way towards curbing overtime abuse.
Can I "require" overtime?
You may be thinking, "Attorney, are there circumstances where employees may be obligated to render overtime?" Yes! That's covered by Article 89 of the Labor code under Emergency Overtime Work. Here's a list of circumstances where they can be obligated.
- When the country is at war or when any other national or local emergency has been declared by the National Assembly or the Chief Executive;
- When it is necessary to prevent loss of life or property or in case of imminent danger to public safety due to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or calamity;
- When there is urgent work to be performed on machines, installations, or equipment, in order to avoid serious loss or damage to the employer or some other cause of similar nature;
- When the work is necessary to prevent loss or damage to perishable goods; and
- Where the completion or continuation of the work started before the eighth hour is necessary to prevent serious obstruction or prejudice to the business or operations of the employer.
If the employee refuses to render overtime in these circumstances, they can be charged with willful disobedience or insubordination.
So that's it for this topic. Just to recap, here's what we covered:
- What is overtime? What are you obligated to provide your employees if they render overtime?
- How do you curb overtime abuse?
- When can you require overtime?
Now that we've simplified this for you, go out there and make better choices.