Company Policy vs. Philippine Labor Code

Executive Summary

In the Philippines, the Labor Code sets the ceiling—not a floor—on daily hours: the normal hours of work shall not exceed eight (8) hours a day. A company may lawfully set a regular workday shorter than eight hours (e.g., six hours). Whether a 6-hour day counts as “undertime” depends on what was agreed and implemented as the employee’s regular schedule.

If the agreed regular schedule is 8 hours and a worker renders only 6, the 2 hours are undertime (generally unpaid).
If the agreed regular schedule is 6 hours (e.g., part-time or a formally adopted shortened day), it is not undertime—that is the full day for that role.
Undertime cannot be offset by overtime worked on another day.
Shortening hours across the workforce as a cost-saving measure is a flexible work arrangement; it must follow due process, documentation, and DOLE notification rules.

Below is a complete, practice-oriented guide.

I. Legal Foundations

1) Normal hours of work

The Labor Code (Book III, Title I) provides that the normal hours of work shall not exceed 8 hours a day. This sets a maximum, allowing employers to adopt shorter daily hours by contract, policy, or CBA.

2) “Undertime” and the no-offset rule

Undertime is the period an employee fails to work within the scheduled work hours for the day.
The Code expressly states that undertime shall not be offset by overtime on any other day. Paying overtime premiums for excess hours on another day does not erase wage deductions for undertime.

3) Who is covered (and who isn’t)

Hours-of-work rules (overtime, undertime, premiums) generally do not apply to:

Managerial employees and certain supervisory roles vested with management powers,
Field personnel and those whose time cannot be determined with reasonable certainty,
Members of the family dependent on the employer for support, and other specific categories under the Code and its rules. For these employees, “undertime” as a statutory concept usually doesn’t attach, though internal policy may still regulate timekeeping.

4) Meal periods and short shifts

Employees must be given a meal break (traditionally at least 60 minutes) if work exceeds five (5) hours. The meal break is generally unpaid (not hours worked), unless shortened or predominantly for the employer’s benefit.
A 6-hour shift will ordinarily include a meal period; how it is treated (paid/unpaid) depends on policy, practice, or agreement.

II. When a 6-Hour Day Is Undertime

A 6-hour tour of duty is undertime if any of the following applies:

Contract or policy sets 8 hours as the regular day, and the employee renders only 6 without approved leave or prior authorization.
The company uses monthly/daily rates premised on 8 hours, and the worker arrives late, leaves early, or is excused mid-shift (e.g., personal errand) without charging the time to paid leave.
The employee is full-time but unilaterally decides to work shorter hours contrary to the posted schedule.

Pay effect: Under the “no work, no pay” principle, the employer may proportionately deduct pay for undertime hours (or charge against available leave credits if policy allows and the employee consents). The law on unlawful deductions is not violated because this is a non-accrual of wages for hours not worked, not a penalty deduction.

Discipline: Repeated or habitual undertime (like chronic tardiness/early out) may be just cause for discipline under a reasonable code of conduct, subject to due process (notice-and-hearing) and proportional penalties.

III. When a 6-Hour Day is Not Undertime

A 6-hour day is not undertime if it is the regular schedule by agreement or lawful policy:

Part-time employment. The employment contract defines a 6-hour daily schedule (or an equivalent weekly total) as the normal tour of duty. Pay, benefits, and leave follow the pro-rata rule unless a CBA or company policy grants more.
Shortened workday by policy (not merely temporary):
- The employer adopts a 6-hour day as the standard across a role/unit/site.
- Wages and benefits are aligned proportionally or as provided by policy/CBA.
Flexible work arrangements (FWAs). When business exigencies require a period of reduced hours (e.g., six hours per day for several weeks), the employer may implement an FWA with proper documentation, consultation, posting, and DOLE Regional Office notification following DOLE labor advisories. During the effectivity of a duly implemented FWA, the 6-hour day becomes the scheduled day; there is no undertime if employees complete it.

Important: FWAs should be temporary, reasonable, non-discriminatory, and in writing. They should not be used to defeat security of tenure, minimum wage compliance, or to target protected groups.

IV. Pay Computations & Illustrations

A) Daily-paid employee (8-hour regular day)

Daily rate: ₱800 (for 8 hours).
Worked: 6 hours (with the 1-hour meal break unpaid).
Pay: ₱800 × (6/8) = ₱600.
The 2 hours are undertime. They cannot be wiped out by working 2 extra hours the next day (even if the next day’s extra hours earn overtime premium).

B) Monthly-paid employee (8-hour regular day)

Monthly rate: ₱26,400 (assume 22 workdays in the month → ₱1,200/day or ₱150/hour).
Leaves early by 2 hours on a workday with no leave credits:
- Deduction: ₱150 × 2 = ₱300 from the day’s pay or charge to available leave if policy allows.

C) Part-time/shortened-day role (6-hour regular day)

Daily rate stated as 6-hour day: ₱600.
Employee renders the full 6 hours: No undertime; full daily pay is due (subject to wage order minimums prorated for hours actually worked).

D) Employer-initiated temporary FWA (6-hour schedule)

Existing daily rate premised on 8 hours may be pro-rated to a 6-hour basis during the documented FWA period, unless the employer commits to maintain full pay. The arrangement must be formalized and filed with DOLE per advisory.

V. Interaction With Other Rules

1) Overtime

Overtime premium applies only to hours worked beyond 8 in a day (or beyond the threshold set under a compressed workweek agreement). If the regular day is 6 hours, working a 7th or 8th hour is not automatically overtime; it is additional time but overtime premium typically applies only beyond 8 hours (or as agreed in a CBA/policy that is more generous).

2) Rest days, special days, and regular holidays

Premiums for rest day or holiday work are computed on hours actually worked, independent of undertime on other days.
Undertime one day does not reduce the premium due for work rendered on another day with special rates.

3) Minimum wage compliance

Minimum wage orders set daily or monthly minimums based on an 8-hour baseline. For shorter regular days, compliance is tested on a pro-rata basis (i.e., the hourly equivalent of the minimum wage should be met or exceeded for hours actually worked).

4) Leaves and undertime

Employers may, by policy, allow employees to apply leave to cover undertime (e.g., convert 2 hours undertime into VL or half-day leave), provided policies are clear, consistently applied, and not used to defeat statutory leave entitlements.
The Code’s ban on offsetting undertime with overtime does not prohibit covering undertime with available paid leave credits, if allowed.

5) Timekeeping and payroll records

Employers must keep daily time records showing hours worked, undertime, and overtime. Accurate records protect both parties and are essential in DOLE inspections or disputes.

VI. Company Policy Design: How to Do It Right

If you plan to treat a 6-hour day as regular (not undertime):

Put it in writing—contract addendum, policy issuance, or CBA clause.
Define coverage (which roles/units/sites), schedule windows, and meal-break rules (paid or unpaid).
Explain pay (hourly rate, daily rate for 6 hours, overtime triggers, premiums).
Address benefits pro-rata (e.g., leave accrual, 13th month basis, allowances).
Consult employees (or the union) and post the policy.
For FWAs, comply with DOLE advisory requirements: documentation, Regional Office notification, and periodic review.
Non-discrimination: ensure the arrangement isn’t used to target protected categories.

If you intend to treat sub-8-hour work as undertime:

Cite the 8-hour schedule as the regular day for the role.
Define undertime (including early out, late in, long personal breaks).
State the pay treatment (pro-rata deduction; option to charge leave if available).
Set a progressive discipline ladder for habitual undertime, with due process.
Train supervisors on consistent enforcement and proper documentation.

VII. Frequent Edge Cases

Split shifts totaling 6 hours: Not undertime if the total within the day meets the scheduled requirement; observe meal/rest rules.
On-call but not actually working: Hours of engaged-to-wait may count as work; pure standby at home often does not—fact-specific.
Telework/remote: Time that is controlled or suffered/ permitted by the employer counts as hours worked; codify rules on time capture and availability windows to avoid disputes.
Piece-rate/commission: “Undertime” is less meaningful where pay is output-based; still, schedules may be enforced if set by policy.
Health facilities, BPOs, and special industries: Some sectors have special scheduling rules (e.g., compressed workweek approvals, health personnel statutes). Always check sector-specific issuances and CBAs.

VIII. Practical Checklist

To decide if a 6-hour day is undertime, ask:

What do the contract/CBA/policy and posted schedule say—6 or 8 hours?
Is the 6-hour tour part of a documented FWA or part-time arrangement?
How are meal periods treated?
Does the company pro-rate pay and benefits consistently?
Are there DOLE filings (if FWA) and records to support the arrangement?
Are we avoiding offsetting undertime with overtime on other days?
Have we applied discipline (if any) with due process and proportionality?

IX. Takeaways

A 6-hour day is perfectly lawful in the Philippines.
It is undertime only if the regular schedule is 8 hours and the worker renders less without approved coverage.
If the regular schedule is 6 hours (by contract, CBA, policy, or duly-notified FWA), there is no undertime; that is a full day for that role.
No offsetting: undertime one day is not cancelled by overtime another day.
Clear documentation, consistent payroll treatment, and compliance with DOLE advisories are crucial to avoid disputes.

Model Policy Clauses (sample language you can adapt)

Standard Hours. “The regular hours of work for [Role/Unit] shall be six (6) hours per day, exclusive of a one-hour unpaid meal period, from [time] to [time], Monday to Friday.”
Undertime. “Undertime means failure to render the scheduled hours for the day. Undertime shall not be offset by overtime on other days. Pay shall be reduced pro-rata unless covered by approved paid leave.”
Flexible Work Arrangement. “The Company may adopt temporary reduced daily hours due to bona fide business exigencies, subject to written notice to employees, posting, and DOLE Regional Office notification in accordance with applicable advisories.”
Overtime Trigger. “Overtime premium accrues only for hours beyond eight (8) hours in a day (unless a more favorable threshold is provided herein).”
Record-Keeping. “Employees shall accurately record time in/out, including undertime and meal periods; falsification is a disciplinary offense.”

Disclaimer: This article provides general information on Philippine labor standards. Specific outcomes can turn on contracts, CBAs, sectoral rules, and the latest DOLE issuances. For a particular case (e.g., converting an 8-hour shop to a 6-hour day, or handling undertime discipline), consider consulting counsel and checking the most recent DOLE advisories for your region.