In the Philippine labor landscape, the Labor Code (Presidential Decree No. 442) serves as the primary governing law ensuring workers are justly compensated for labor rendered beyond ordinary hours or during biologically demanding timeframes. Understanding the computation of Night Shift Differential (NSD) and Overtime (OT) pay is critical for both statutory compliance and the protection of workers' rights.
I. Night Shift Differential (NSD)
The Legal Basis: Under Article 86 of the Labor Code, every employee shall be paid a night shift differential of not less than ten percent (10%) of their regular wage for each hour of work performed between ten o’clock in the evening (10:00 PM) and six o’clock in the morning (6:00 AM).
Key Rules for NSD:
- Coverage: It applies to all employees except government employees, retail/service establishments regularly employing not more than five (5) workers, domestic helpers, and managerial employees.
- The 10% Minimum: This is a statutory floor; an employment contract or Collective Bargaining Agreement (CBA) can provide a higher rate.
II. Overtime Pay (OT)
The Legal Basis: Article 87 stipulates that work performed beyond eight (8) hours a day is considered overtime. The premium paid depends on when the overtime is rendered.
1. Ordinary Working Day
Work in excess of eight hours on a regular business day entitles the employee to an additional compensation equivalent to their regular wage plus at least 25% thereof.
2. Rest Day, Sunday, or Special Day
Work performed beyond eight hours on a scheduled rest day or a special holiday entitles the employee to an additional compensation equivalent to the rate of the first eight hours plus at least 30% thereof.
3. Regular Holiday
Work performed beyond eight hours on a regular holiday entitles the employee to an additional compensation equivalent to the rate of the first eight hours on said day plus at least 30% thereof.
III. Computation Matrix and Premiums
The complexity of Philippine payroll often arises when NSD and OT overlap (e.g., working overtime during the graveyard shift). The following table outlines the applicable premiums based on the type of day:
| Type of Work Day | First 8 Hours (Premium) | Overtime (Premium) |
|---|---|---|
| Ordinary Day | 100% | 125% |
| Ordinary Day + NSD | 110% | 137.5% |
| Rest Day / Special Holiday | 130% | 169% |
| Rest Day / Special Holiday + NSD | 143% | 185.9% |
| Regular Holiday | 200% | 260% |
| Regular Holiday + NSD | 220% | 286% |
| Rest Day on Regular Holiday | 260% | 338% |
| Rest Day on Regular Holiday + NSD | 286% | 371.8% |
IV. Step-by-Step Sample Computation
To calculate these values, you must first determine the Hourly Rate.
Formula:
Scenario:
An employee with an hourly rate of PHP 100.00 works 2 hours of overtime on an ordinary day, and those 2 hours fall within 10:00 PM to 12:00 AM (NSD period).
- Identify the Base OT Rate: On an ordinary day, OT is 125%.
*
- Apply the NSD Premium: Since the OT occurred at night, apply the 110% NSD rate to the OT rate.
*
- Total for 2 hours:
*
V. Important Legal Considerations
- Compounding vs. Addition: Note that the NSD premium is applied to the overtime rate (multiplicative), not just added to the base (additive). This ensures the worker is compensated for the "double burden" of working late and working long.
- The "Work Day" Definition: In labor law, a "day" is a 24-hour period which commences from the time the employee regularly starts to work.
- Non-Waiver of Benefits: The right to overtime pay and NSD cannot be waived by the employee. Any agreement or contract stipulating that an employee will not receive these benefits is generally considered "null and void" for being contrary to public policy.
- Managerial Exemption: It is a common point of litigation that "Managerial Employees" (those who lay down management policies or effectively recommend hire/fire actions) are not legally entitled to OT and NSD, though many companies provide them as a matter of policy.