1) The two concepts people accidentally mash together

In payroll disputes, “holiday pay” and “tardiness/undertime deductions” get mixed up, but they operate on different ideas:

Holiday pay / holiday premium answers: What rate must be paid because the day is a holiday (and/or rest day), and did the employee work?
Tardiness/undertime answers: How many compensable hours/minutes of work were actually rendered that day?

In Philippine labor standards, the employer generally cannot use tardiness to erase the legal holiday premium. Tardiness can only reduce pay to the extent of the time not worked, and it must not be used as a disguised penalty that deducts more than the value of the lost time.

2) Legal framework in plain terms (Labor Code concepts)

Philippine rules recognize two major “holiday buckets,” with different pay consequences:

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; plus other declared regular holidays)
- If the employee does not work, they may still be entitled to 100% of their daily wage (subject to eligibility rules).
- If the employee works, they are entitled to a premium rate (commonly discussed as 200% for the first 8 hours, subject to rest day combinations and overtime rules).
Special (Non-Working) Days / Special Holidays (e.g., Ninoy Aquino Day, All Saints’ Day, some special days declared by proclamation)
- The default principle is “no work, no pay,” unless a company practice/contract/CBA provides otherwise.
- If the employee works, they receive an additional premium (commonly 130% for the first 8 hours, with different rates if it falls on a rest day, plus overtime rules).

There are also “Special Working Days” that may be declared; these generally behave like ordinary workdays unless a policy/contract says otherwise. Don’t assume every “special day” automatically triggers premium pay—classification matters.

3) Daily-paid employees: what is “basic wage” and the hourly rate?

For daily-paid employees, holiday computations typically start from:

Daily basic wage (and, where applicable, the COLA under the wage order is added in practice).
Hourly rate = daily rate ÷ 8 (for an 8-hour normal workday).

If the employee worked fewer than 8 hours (because of tardiness or undertime), the legally compliant way to handle this is usually:

convert to hourly, then
pay the applicable holiday premium hourly rate × actual hours worked.

This matters because “daily-paid” doesn’t mean “paid the full day regardless of hours.” It means the wage is expressed per day, but lawful proration based on hours worked is still used when the employee did not render a full day’s work.

4) Regular holiday pay rules (daily-paid)

A. Regular holiday, employee does not work

If eligible, the employee receives 100% of the daily wage for that holiday.

Eligibility is commonly tied to being present or on paid leave on the workday immediately preceding the holiday (and sometimes the workday after, depending on the schedule/holiday placement), subject to exceptions. If the employee is on leave without pay or absent without pay on the workday immediately preceding the holiday, the right to the unworked holiday pay can be lost.

Key point: This eligibility rule is mainly about getting paid when you did not work. It should not be twisted to justify underpaying work actually performed on the holiday.

B. Regular holiday, employee works

For work actually performed on a regular holiday, the employee is entitled to premium pay.

Common baseline rule discussed in practice:

First 8 hours on a regular holiday: 200% of the basic wage
Overtime on a regular holiday: add the overtime premium on top of the holiday rate (commonly the “+30% of the hourly rate of the day” concept, applied on the holiday-adjusted base).

If the regular holiday also falls on the employee’s rest day, the premium is higher (because it stacks: holiday + rest day premium).

5) Special (non-working) day rules (daily-paid)

A. Special non-working day, employee does not work

Default is no work, no pay, unless:

company policy,
CBA,
employment contract, or
long and consistent practice grants pay even when unworked.

B. Special non-working day, employee works

The employee receives a premium above ordinary pay (commonly expressed as 130% for the first 8 hours). If it also falls on a rest day, a different premium commonly applies (often taught as 150% for the first 8 hours), plus overtime rules on top.

6) Now the core issue: can an employer “deduct tardiness” from holiday pay?

The lawful principle

An employer may reduce pay only for the time not worked (tardiness/undertime). But the employer may not:

deny the holiday premium for the hours actually worked, or
impose a “tardiness penalty” by deducting more than the value of the time missed, or
treat tardiness as a reason to pay the day like an ordinary day (e.g., paying only 100% instead of the required holiday premium for hours worked).

In other words:

Tardiness affects the number of hours paid.
Holiday rules affect the rate used for those hours.

“Deduction” vs “non-payment for unworked time”

Payroll language can be misleading. Many companies label it a “tardiness deduction,” but legally it is more accurate to describe it as no compensation for unworked minutes (because wages are for work rendered, unless a paid-leave/holiday-pay rule provides otherwise).

What becomes legally risky is when the employer:

deducts an amount greater than the value of the missed time (a disguised fine), or
deducts from statutory entitlements in a way that makes the employee receive less than the legally required premium for the hours actually worked.

Wage deduction limits (important guardrail)

Philippine rules generally prohibit unauthorized wage deductions, except in recognized cases (e.g., legally authorized deductions, employee-authorized deductions, union dues in proper situations, etc.). A company cannot simply “fine” employees by docking wages unless it fits within the allowable rules and due process—especially if the docking exceeds the value of the time not worked.

So, prorating pay due to tardiness is typically fine; punitive deductions are not.

7) Correct computation approach when the daily-paid employee is late but still works on the holiday

Below are practical computation patterns widely used to stay compliant with the “hours worked × correct premium rate” idea.

A. Regular holiday worked, with tardiness/undertime

Let:

Daily rate = D
Hourly rate = D ÷ 8
Hours actually worked = H (≤ 8)

Then pay for the day (excluding overtime) is commonly computed as:

Pay = (D ÷ 8) × 2.00 × H

If overtime exists (hours beyond 8), overtime is computed based on the holiday-adjusted hourly rate with the applicable overtime premium.

✅ Compliant: You were 1 hour late, you worked 7 hours → pay 7 hours at 200% hourly. ❌ Not compliant: You were 1 hour late → employer pays only ordinary day rate, or removes the holiday premium entirely.

B. Special non-working day worked, with tardiness/undertime

Let:

Daily rate = D
Hourly rate = D ÷ 8
Hours actually worked = H

Then pay for the day (excluding overtime) is commonly computed as:

Pay = (D ÷ 8) × 1.30 × H

Again, rest day stacking and overtime rules can change the multiplier.

8) Worked examples (regular holiday vs. special day)

Assume:

Daily rate D = ₱640
Hourly rate = ₱640 ÷ 8 = ₱80

Example 1: Regular holiday, employee is 60 minutes late, works 7 hours

Pay = ₱80 × 2.00 × 7 = ₱1,120

Example 2: Regular holiday, employee works full 8 hours

Pay = ₱80 × 2.00 × 8 = ₱1,280 (Equivalent to ₱640 × 2.00)

Example 3: Special non-working day, employee is 60 minutes late, works 7 hours

Pay = ₱80 × 1.30 × 7 = ₱728

What you should not see in a compliant payroll:

paying only ₱80 × 7 = ₱560 for the regular holiday worked (that ignores the holiday premium), or
paying ₱1,280 then “deducting” ₱160 (1 hour × 2.00 × ₱80) and also applying an additional penalty (double counting).

9) “Can we require a complete shift to get holiday premium?”

A common but risky policy is: “Late employees lose holiday premium” or “Must complete 8 hours to be entitled to holiday rate.”

As a labor standards matter, premium pay attaches to work performed on the holiday. Conditioning the premium on perfect attendance or full-shift completion tends to collide with the idea that:

the law sets the minimum rate for holiday work,
employers can discipline tardiness through lawful discipline, but
employers should not reduce statutory pay below the legal minimum premium for actual hours worked.

A company may discipline habitual tardiness (progressive discipline, attendance policies), but discipline should not be implemented by underpaying statutory premiums.

10) Undertime vs overtime: the “no offset” rule (why it matters on holidays)

A separate but related protection is that undertime on one day is not offset by overtime on another day (and even within the same payroll period, many employers get in trouble trying to “net” hours).

On holidays, this shows up when employers try to say:

“You were late, but you stayed late another day, so it cancels out,” or
“Your holiday premium is reduced because you had undertime earlier in the week.”

That approach can create compliance issues because:

overtime has its own premium protections, and
holiday work has its own premium protections, and
“netting” can erase premiums the law intends to preserve.

11) Rest day + holiday stacking (where mistakes multiply)

When a holiday falls on an employee’s rest day, the pay rate is higher than a holiday that falls on a regular workday. The correct approach is still the same:

Determine the right multiplier (holiday + rest day rules), then
apply it to actual hours worked.

Tardiness still only reduces hours paid; it should not reset the day to ordinary rates.

12) Who may be excluded from holiday pay (important for daily-paid coverage)

Holiday pay rules have recognized exclusions in some situations (depending on role/industry/status), such as certain managerial staff and other categories under labor standards rules, and certain small retail/service establishments under specific conditions. Misclassification is common: someone called “supervisor” is not automatically exempt.

For daily-paid rank-and-file employees, holiday premium rules usually apply unless a valid exclusion clearly fits.

13) Documentation and burden of proof (practical litigation reality)

In real complaints, outcomes often turn on records. Employers typically must be able to show:

correct holiday classification (regular vs special),
time records (actual hours worked),
payroll computations (rate multipliers applied correctly),
policy basis for any deductions that go beyond simple proration for unworked time.

Employees typically strengthen claims with:

payslips,
DTR logs,
company memos declaring holiday schedules and required reporting,
proof of work performed (assignments, production logs, messages).

Money claims generally prescribe within a limited period, so delays can reduce recoverable amounts.

14) Bottom-line rules you can treat as “non-negotiables”

If a daily-paid employee works on a regular holiday, the hours worked must be paid at the legal holiday premium rate.
Tardiness/undertime may reduce payable hours, but not the premium rate for hours actually worked.
Employers should not impose punitive wage docking for tardiness (deducting more than the value of time missed, or using docking to defeat statutory premiums).
Eligibility rules about being present the day before mainly affect pay when the holiday is unworked, not the rate for work actually rendered on the holiday.
Correct method is: identify the holiday type → identify the applicable multiplier (and stacking with rest day/OT) → multiply by actual hours worked.