Practical legal guide for contractors, staffing agencies, and client-principals. This is general information, not legal advice.

1) The basic setup: who owes what, to whom?

The employment relationship. In a compliant contracting/subcontracting arrangement, the agency/contractor is the employer of the deployed workers. It hires, pays, disciplines, and controls the means and methods of work. The client/principal receives the service and may give site-rules and output specifications.

Solidary liability. Even if the agency is the direct employer, the client/principal is solidarily liable with the contractor for core labor standards (which include holiday pay). If the contractor underpays or fails to pay, the worker can legally pursue either or both contractor and principal.

If the arrangement is labor-only contracting. When the contractor merely supplies warm bodies (no substantial capital or investment; no control over the means and methods), the law treats the client/principal as the direct employer. In that case, the client must pay holiday entitlements as if it hired the workers itself.

Bottom line: Agencies compute and pay holiday pay; clients typically fund it through billing. If payment fails anywhere, the worker can enforce against both.

2) What counts as a “holiday”?

Philippine holidays fall into two broad statutory buckets:

Regular holidays – e.g., New Year’s Day, Maundy Thursday, Good Friday, Araw ng Kagitingan, Labor Day, Independence Day, National Heroes Day, Bonifacio Day, Christmas Day, Rizal Day, Eid’l Fitr and Eid’l Adha (as fixed by proclamations each year).
Special (non-working) days – e.g., Ninoy Aquino Day, All Saints’ Day, last working day of the year (if proclaimed), and other special dates the President proclaims annually.

Tip: Every year, Malacañang issues a Proclamation listing the year’s holidays and special days (with occasional ad hoc proclamations). Payroll and billings should track those proclamations for the specific calendar year of service.

3) Coverage and key exemptions

Covered. Rank-and-file and most non-managerial employees—whether time-rated, piece-rated, or paid by results—are generally covered by holiday pay rules (with adjustments for how their pay is computed).

Common exemptions.

Government employees (covered by the civil service rules, not the Labor Code).
Retail and service establishments that regularly employ fewer than 10 workers (exempt from holiday pay on regular holidays when unworked).
Managerial employees, field personnel whose hours cannot be determined with reasonable certainty and who are unsupervised as to time and performance, and those paid purely on commission/contract coupled with field status, may be outside the holiday pay coverage. (These carve-outs are narrow—apply cautiously.)

Contractual labels don’t control. What matters is the actual work set-up (e.g., supervision, timekeeping, site control), not what the contract calls the role.

4) Statutory pay rules (the quick matrix)

Let DW = employee’s daily basic wage.

A) Regular holiday

No work: 100% of DW (provided the employee is present or on paid leave on the workday immediately preceding the holiday).
Worked (up to 8 hours): 200% of DW.
Overtime on a regular holiday: Additional +30% of the hourly rate on that day for hours beyond 8.
If the regular holiday falls on the employee’s rest day and is worked: 200% × 1.30 = 260% of DW for the first 8 hours; OT beyond 8 still gets the +30% based on the 260% hourly rate.

B) Special (non-working) day

No work: “No work, no pay,” unless there is a favorable company policy, CBA, or consistent practice granting pay.
Worked (up to 8 hours): 130% of DW.
If it falls on the employee’s rest day and is worked: 150% of DW for the first 8 hours.
Overtime on a special day: +30% of the hourly rate on that day beyond 8 hours.

C) Night shift differential (NSD)

Work between 10:00 p.m. and 6:00 a.m. earns +10% of the applicable hourly rate on that day (i.e., on top of 200%, 260%, 130%, or 150% as the case may be).

D) Successive and “double” holidays

Back-to-back regular holidays (e.g., Thu–Fri of Holy Week): Presence (or paid leave) on the workday immediately before the first holiday entitles the worker to both unworked holiday pays.
Two regular holidays coinciding on the same calendar date (“double holiday,” rare): Common practice is 300% of DW for work performed; 200% of DW if unworked, subject to the annual proclamation’s wording. Document your basis.

5) Presence requirement & common attendance edge cases

Absent on the workday immediately before a regular holiday (and not on paid leave): the employee is not entitled to the unworked holiday pay; but if they actually worked on the holiday, they’re still entitled to the 200% (or 260%) for hours worked.
Suspension of work (e.g., calamity): If government suspends work the day before the holiday, treat affected employees as present for the presence requirement if they would have worked but for the suspension.
New hire or resignee around a holiday: The presence rule applies the same way; entitlement is not “pro-rated by tenure.”

6) Sample computations (for payroll and billing)

Assume DW = ₱600 and the employee works an 8-hour schedule (hourly rate = ₱600/8 = ₱75).

Regular holiday, no work (presence requirement met): Pay to employee = ₱600. Billable cost to client (if bill-through): usually ₱600 + agency margin/fees and statutory on-costs.
Regular holiday, worked 8 hours: Pay = 200% × ₱600 = ₱1,200. If there are 2 hours OT: hourly on the day = 200% × ₱75 = ₱150; OT premium = 30% × ₱150 = ₱45; OT rate = ₱150 + ₱45 = ₱195 × 2 hours = ₱390. Total = ₱1,590.
Regular holiday falling on rest day, worked 8 hours: Pay = 260% × ₱600 = ₱1,560. If with 1 hour OT: hourly = 260% × ₱75 = ₱195; OT premium = 30% × ₱195 = ₱58.50; OT hour = ₱253.50. Total = ₱1,560 + ₱253.50 = ₱1,813.50.
Special non-working day, worked 8 hours: Pay = 130% × ₱600 = ₱780.
Special non-working day on rest day, worked 8 hours: Pay = 150% × ₱600 = ₱900.
Night work on a regular holiday (8 hours all between 10 p.m.–6 a.m.): Base for the day = ₱1,200 (200%). Hourly on day = ₱150; NSD = 10% × ₱150 = ₱15/hour × 8 = ₱120. Total = ₱1,320.

Billing construction. Agencies typically itemize (a) basic service hours, (b) holiday premiums (with the percentage used), (c) overtime premiums, (d) NSD, and (e) statutory contributions/withholding assumed in the rate, then apply the management fee or margin. The client’s MSA/SOW should specify whether the quoted bill rate is all-in or whether holiday premiums are pass-through.

7) Interaction with other pay elements

13th-month pay. Statutory 13th-month is computed from basic salary actually received. Paid regular holidays (unworked or worked) that are part of basic pay count toward the base. Pure premium portions (e.g., the extra 100% on a worked regular holiday) are generally not “basic salary.” Keep a clean segregation in the payroll ledger.
SSS, PhilHealth, Pag-IBIG, and withholding tax. Holiday pay is taxable compensation and forms part of compensation base for contributions (subject to each agency’s rules on what counts in the monthly salary credit; most compensation is counted).
Service incentive leave (SIL) and leave overlays. If a regular holiday coincides with approved paid leave, don’t charge the leave credit; the day should be recorded as a holiday, not leave.

8) Documentation agencies and clients should keep

Agencies

Employment contracts specifying wage, schedule, site assignment, and benefits.
Timekeeping records showing presence/absence around holidays, OT, and night hours.
Payroll registers & payslips that break out base pay, holiday pay, OT, NSD, and deductions.
Proof of remittances (SSS, PhilHealth, Pag-IBIG; taxes).
Billing statements showing the holiday-related line items and the contractual basis.

Clients

Master Service Agreement / Statement of Work that:
- defines whether rates are all-in or exclusive of holiday premiums;
- states who approves OT/night work and how it is billed;
- provides site rules and evidence of control limited to outputs, preserving compliant contracting status.
Counter-signed time sheets and approvals for holiday work and OT.

9) Common pitfalls (and how to avoid them)

Missing the presence requirement for unworked regular holidays. Fix: Train supervisors and payroll to verify “last working day before” attendance; account for government work suspensions.
Using averaged daily rates that blur what is “basic” vs “premium.” Fix: Keep a clean mapping: DW, 200%/260% premiums, 130%/150% premiums, OT adder, NSD adder. This protects 13th-month and tax computations.
Treating agency workers like direct employees (control over means and methods). Fix: Ensure contractor retains control (deployment, scheduling, discipline). Clients give output standards; agency manages how work is done.
Underbilling/underfunding holiday premiums in fixed-fee engagements. Fix: Use holiday calendars in rate-setting. For fixed monthly rates, embed an assumption on annual holiday hours or include a true-up clause.
Ignoring “double holiday” or ad hoc proclamations. Fix: Maintain a live tracker of proclamations; update payroll and billing for the exact date.

10) Practical billing models for agencies

Time-and-materials (T&M): Bill actual hours at base rate; apply multipliers (e.g., 2.0× for regular holiday work, 1.3× for special) for approved hours; add OT/NSD per law; then agency fee if not embedded.
All-in fixed monthly rate: Rate is calibrated to expected working days per month; add a change-order when actual holiday work deviates from assumptions.
Tiered blended rate: Publish weekday, rest-day, special-day, and regular-holiday rates upfront in the SOW to avoid line-by-line approvals.

11) Compliance checklist (quick use)

Verify holiday type (regular vs special) and date per proclamation.
Confirm presence/paid leave the workday before a regular holiday.
Classify the day accurately: ordinary, rest day, special, regular holiday, or overlap.
Compute: base × statutory multiplier; add OT (30%) beyond 8 hours; add NSD (10%) for 10 p.m.–6 a.m. hours.
Itemize on payslip and client invoice.
Keep approvals for holiday work/OT.
Reconcile for 13th-month, taxes, and contributions.
Audit for solidary liability exposure; ensure contractor compliance; keep indemnity clauses and performance bonds current.

12) Frequently asked questions

Q1: Are agency employees always entitled to pay when they don’t work on a regular holiday? Yes, if they were present or on paid leave the workday immediately preceding the holiday (and the establishment isn’t in the “<10 data-preserve-html-node="true" workers retail/service” exemption).

Q2: Do piece-rate or results-based workers get holiday pay? Generally yes, but their holiday pay is computed from the equivalent of their average daily earnings (or a stipulated daily rate) rather than a time-based DW—unless they fall under a specific exclusion (e.g., true field personnel on pure commission).

Q3: Who pays if the agency goes under? The client/principal can be pursued under solidary liability for unpaid holiday pay arising from the contract’s performance.

Q4: Can we pay a flat monthly rate that already includes all holidays? You can, provided the rate meets or exceeds statutory minima after backing out the required multipliers and you still itemize the statutory components internally for compliance and audit.

Q5: If a special (non-working) day is not worked, must we pay? By default no, unless there is a CBA, company policy, or consistent practice granting pay.

13) Model contract language (snippets you can adapt)

Holiday Work Authorization. “Holiday work (regular or special) and overtime require written approval from Client’s authorized representative. Contractor shall pay statutory premiums (holiday, overtime, night shift) and will invoice Client as a pass-through item per the multipliers set by law or as set out in Annex __.”
All-In Rate Disclosure. “The Parties acknowledge that the All-In Rate includes statutory benefits and premiums, including holiday pay obligations under Philippine law. Contractor will maintain payroll records evidencing compliance and provide redacted copies upon reasonable request.”
Solidary Liability Cooperation. “If any claim is made for underpayment of statutory benefits, the Parties will cooperate in good faith to promptly resolve the claim; Client’s payments do not waive any statutory solidary liability.”

14) Takeaways

Holiday pay is mandatory for covered workers and binds both contractor and client (via solidary liability).
Correct computation depends on holiday type, rest day status, OT/NSD, and the presence rule.
Agencies should pay first, bill precisely; clients should fund and audit based on clear SOW terms.
Clean records and clear rate design avert disputes and protect everyone.

If you want, I can turn this into a one-page payroll/billing calculator and a compliance checklist you can share with your team.