Introduction
In the Philippines, tens of thousands of workers are deployed through manpower agencies, recruitment firms, or “contractors/subcontractors” to client companies in industries such as BPO, manufacturing, retail, security services, janitorial, and construction. These workers are commonly referred to as “agency employees,” “contractual employees,” or “project-based employees.”
Despite the label “contractual,” these workers are fully entitled to all labor standards benefits under the Labor Code, including overtime pay, night shift differential, holiday pay, 13th-month pay, service incentive leave, and SSS/PhilHealth/Pag-IBIG contributions. The Supreme Court has repeatedly ruled that legitimate job contracting does not remove these statutory benefits.
Failure to pay overtime is one of the most common violations committed against agency employees. This article comprehensively discusses the legal basis, computation, prescription period, proof requirements, procedural remedies, solidary liability of the principal/client, and relevant jurisprudence.
Legal Basis for Overtime Pay of Agency Employees
Article 82 of the Labor Code – Coverage of labor standards provisions extends to all employees, without distinction as to employment arrangement, except those expressly excluded (government employees, managerial employees, field personnel, members of the family of the employer, domestic helpers, and workers paid by results).
Article 87 of the Labor Code – Work performed beyond eight (8) hours in a day entitles the employee to at least 25% additional compensation of the regular hourly rate on ordinary days.
Department Order No. 174-17 (2017) – Current rules on contracting and subcontracting.
Section 9 explicitly states:“The employees of the contractor or subcontractor shall be entitled to all occupational safety and health standards, all labor-only contracting rights under the Labor Code as amended, including the right to minimum wage, overtime pay, night shift differential, service incentive leave, holiday pay, 13th month pay, separation pay, retirement pay, and contributions to SSS, PhilHealth, and Pag-IBIG.”
Jurisprudence –
- Alilin v. Petron Corporation (G.R. No. 177592, June 9, 2014) – Even employees of legitimate independent contractors are entitled to overtime pay.
- Philippine Fuji Xerox Corporation v. Cresenciano Trajano (G.R. No. 102552, December 10, 1993) – Agency employees performing activities necessary or desirable to the principal’s business are entitled to all benefits accorded to regular employees of the principal.
Who Qualifies as an “Agency Employee” Entitled to Overtime Pay?
- Workers hired and paid by a manpower agency/recruitment firm/contractor but performing work for a principal/client company.
- Workers under “service agreements,” “manpower supply agreements,” or “job contracting agreements.”
- Workers labeled as “project-based,” “seasonal,” “casual,” or “contractual” by the agency or client.
Even if the contract states “no employer-employee relationship with the principal,” the law looks at the real nature of the relationship, not the label. If the worker performs tasks usually necessary or desirable to the principal’s business and has been continuously rehired (the so-called “endo” or 5-5-5 scheme), the worker is almost always considered a regular employee of the principal with full back benefits, including unpaid overtime.
Overtime Rates Under Philippine Law (2025)
| Situation | Premium Rate | Legal Basis |
|---|---|---|
| Ordinary day, excess of 8 hours | +25% of hourly rate | Art. 87 |
| Ordinary day, excess of 8 hours (night shift 10pm–6am) | +27.5% (25% OT + 10% NSD) or higher if stacked | Art. 86 & 87 |
| Rest day (work performed) | +30% of daily rate for first 8 hours | Art. 93(a) |
| Rest day, excess of 8 hours | +30% additional on the OT rate (total 169%–195%) | Art. 93(a) + Art. 87 |
| Special non-working day | +30% for first 8 hours | RA 9849 |
| Special day, excess of 8 hours | +50% of the hourly rate on special day | DOLE Explanatory Bulletin |
| Regular holiday | +100% (200% total) for first 8 hours | Art. 94 |
| Regular holiday, excess of 8 hours | +30% of the 200% hourly rate | Art. 87 |
| Regular holiday falling on rest day | +260% total for first 8 hours | Art. 94(b) |
| Regular holiday + rest day, excess of 8 hours | +30% of the 260% rate | Art. 87 |
Hourly rate = Daily rate ÷ 8
(For monthly-paid: Daily rate = (Monthly rate × 12) ÷ applicable divisor (313, 314, or 365 depending on company policy and DOLE guidelines))
Prescription Period for Overtime Claims
Three (3) years from the time the cause of action accrued (Article 306, formerly Article 291, Labor Code).
Example: Overtime rendered in January 2023 can still be claimed until January 2026.
Important: Filing of the claim with DOLE or NLRC interrupts the running of the prescriptive period.
Procedure for Claiming Unpaid Overtime (Step-by-Step)
Gather evidence (daily time records, payslips, biometric logs, e-mails approving overtime, group chat messages, guard logs, CCTV screenshots, co-worker affidavits).
File a Request for Assistance (RFA) under Single Entry Approach (SEnA) at the DOLE Regional Office having jurisdiction over the workplace or agency.
- Mandatory 30-day conciliation period.
- No filing fee.
- Can be filed online via DOLE website in some regions.
If not settled in SEnA, the case is referred to the NLRC for compulsory arbitration.
- Labor Arbiter hears the case.
- No docket fees for claims not exceeding ₱400,000 (as of 2025 amendments).
- Employee can file individually or through a group (class suit).
Execution of judgment – If the Labor Arbiter rules in favor of the employee, a Writ of Execution is issued. The principal and the agency are solidarily liable, so the employee can go after the deeper pocket (usually the principal).
Solidary Liability of the Principal/Client Company
Department Order No. 174-17, Section 23 and Article 106–109 of the Labor Code:
The principal shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor Code, including the failure to pay wages and benefits.
This means the employee can sue both the agency and the client company in one case. The client company cannot hide behind the agency. In practice, most awards are satisfied by the principal because agencies often disappear or have no assets.
Landmark cases:
- Meralco Industrial Engineering Services Corp. v. NLRC (G.R. No. 171173, April 12, 2007)
- San Miguel Corporation v. MAERC Integrated Services (G.R. No. 144672, July 10, 2003)
- BPI Employees Union-Davao Chapter v. Bank of the Philippine Islands (G.R. No. 174912, July 24, 2013)
Evidence Required to Prove Overtime
The burden initially lies with the employer to prove payment (payslips, payrolls). When the employer fails to present complete records (very common with agencies), the Supreme Court applies the rule:
“In cases where the employer’s records are incomplete or unreliable, the employee’s evidence shall prevail if reasonable and probable.”
(Numerous cases: G.R. No. 200575, July 18, 2014 – Legend Hotel v. Realuyo; G.R. No. 222095, February 18, 2019 – Plaza v. Cagayan Electric)
Acceptable employee evidence:
- Biometric logs or manual DTRs
- Security guard logbooks
- E-mails or Viber/WhatsApp messages approving or acknowledging overtime
- Sworn affidavits of co-workers
- Photographs of work site after regular hours
- Delivery receipts, production reports, call logs (for BPO)
Common Defenses Raised by Agencies/Principals (and Why They Usually Fail)
| Defense | Why It Usually Fails |
|---|---|
| “No pre-approved overtime” | Article 89 allows compulsory overtime in certain cases; approval is not always required for entitlement if work was suffered or permitted. |
| “Compressed workweek” | Must be with DOLE approval or voluntary agreement; cannot be unilaterally imposed. |
| “Pakyaw” or task-rate payment | Not applicable if worker is required to stay beyond 8 hours regardless of output. |
| “Employee is project-based” | Project employees are still entitled to overtime pay (DOLE D.O. 19-93, Policy Instructions No. 20). |
| “Employee signed waiver/quitting claim” | Waivers of labor standards benefits are void (Article 6, Labor Code). |
Attorney’s Fees and Damages
- 10% attorney’s fees on the total award (Article 111, Labor Code).
- Moral and exemplary damages may be awarded if bad faith is proven (e.g., deliberate refusal to pay despite demand).
- 6% legal interest per annum on the total monetary award from date of finality until full payment (Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, as modified by Bangko Sentral circulars).
Practical Tips for Agency Employees
- Always keep copies of DTRs, payslips, and contracts.
- Take photos of biometric logs or guard logbooks.
- Save chat messages where supervisors approve or acknowledge overtime.
- File the claim within 3 years.
- Include the principal company as respondent – this is crucial for recovery.
- Consult a labor lawyer specializing in agency cases (many accept cases on contingency basis).
Conclusion
Agency employees in the Philippines enjoy the same overtime rights as direct hires. The law is heavily skewed in favor of the worker, and the solidary liability of the principal company makes recovery realistic even when the agency has no funds. With proper documentation and timely filing, unpaid overtime claims have a very high success rate before the DOLE and NLRC.
Thousands of agency workers have successfully recovered millions in unpaid overtime through the years. If you are an agency employee who regularly works beyond eight hours without corresponding pay, you have a strong, enforceable right under Philippine law.