1) Why the distinction matters (and what it does not change)

In Philippine labor practice, employees are commonly paid either:

Monthly-paid (fixed amount per month, usually released semi-monthly), or
Daily-paid (a set amount per day worked, sometimes paid weekly/biweekly).

This distinction affects how you compute the “daily equivalent,” deductions for absences, and whether certain days are already “built into” the pay, especially rest days and regular holidays.

But it is equally important to clarify what the distinction does not automatically change:

Being paid monthly does not, by itself, make an employee exempt from overtime. Rank-and-file monthly-paid employees are generally entitled to overtime and premium pay if they are covered by the rules on hours of work.
Overtime entitlement depends primarily on coverage/exemptions under the Labor Code, not the pay frequency.

2) Core legal framework (Philippine context)

The rules commonly applied come from the Labor Code provisions on:

Hours of work (normal hours, overtime, rest periods),
Premium pay for rest days and special days,
Holiday pay for regular holidays,
Night shift differential,
Wage payment rules (timing of payment, authorized deductions),
Plus DOLE issuances, handbooks, wage orders, and jurisprudence interpreting these.

This article is general legal information on Philippine rules and standard computation practice.

3) Definitions: monthly-paid vs daily-paid (in computation terms)

A. Monthly-paid (computation meaning)

A monthly-paid arrangement typically means the employee receives a fixed monthly wage that may be intended to cover either:

All calendar days of the month (including rest days and regular holidays), or
Only certain paid days (e.g., working days only) with other items (e.g., holiday pay) handled separately—this exists in practice but must still comply with holiday pay and premium pay rules.

Key takeaway: You must first determine what the monthly salary is intended to cover (working days only? working days + rest days? includes holiday pay?).

B. Daily-paid

A daily-paid employee’s wage is expressed as a daily rate. Payment often follows the principle of “no work, no pay” for ordinary working days—subject to statutory exceptions like holiday pay (regular holidays) if the employee is covered and qualifies.

4) Coverage: who is (and isn’t) entitled to overtime and related premiums

Overtime, premium pay, and many “hours of work” protections generally apply to employees covered by the Labor Code’s hours-of-work provisions, typically rank-and-file employees.

Common exemptions (often depending on facts and job nature) include employees such as:

Managerial employees (and certain officers/managers with genuine managerial authority),
Members of a managerial staff (under specific criteria),
Field personnel whose actual hours cannot be determined with reasonable certainty,
Certain family members dependent on the employer for support,
Domestic workers (governed by a separate framework),
Employees paid purely by results under conditions that place them outside standard hours-of-work rules (fact-specific).

Practical point: A job title (“Supervisor,” “Officer,” “Team Lead”) does not automatically make one exempt. Actual duties and the ability to control work hours matter.

5) The “regular wage” concept: the base for most computations

Most multipliers apply to the employee’s regular wage (often operationalized as the basic wage rate, and in many payrolls, wage-related allowances treated as part of wage for premium computations). Some items (e.g., certain discretionary benefits) are not part of the regular wage.

Because treatment of allowances can vary (by wage order design, contract language, and practice), employers often compute statutory premiums on the basic wage and treat mandated cost-of-living allowances and certain items consistently with applicable rules. For compliance, what matters is that the resulting pay does not fall below what the law requires.

6) Step 1 in computations: determine the employee’s daily and hourly rate

A. Daily-paid: straightforward

Daily rate = the stated daily wage.
Hourly rate (ordinary day) = daily rate ÷ 8 (for an 8-hour normal workday).

B. Monthly-paid: compute the daily equivalent correctly

For statutory computations (overtime, holiday pay, deductions, etc.), you need a daily equivalent.

Most conservative and commonly accepted baseline:

If the monthly salary is intended to cover all calendar days, a standard approach is:

Daily equivalent = (monthly rate × 12) ÷ 365
Hourly equivalent = daily equivalent ÷ 8

This method reflects that the monthly wage already spreads over the whole year (including rest days and regular holidays). It is commonly used in compliance-oriented payroll computations.

If the monthly salary is structured to cover fewer paid days:

Some companies structure monthly salary as a fixed monthly amount but treat it as covering only a defined set of paid days (e.g., working days), with separate handling of holiday pay/premiums. In that case, the appropriate divisor should reflect the actual paid-day design—but the employer must still ensure:

Statutory holiday pay is provided when due,
Premium pay is correctly computed for work on rest days/special days/holidays,
Deductions for absences do not create unlawful underpayment.

Best practice: Document the pay design in the employment contract and payroll policy, and compute using a divisor that matches the design while meeting statutory minimums.

7) Overtime pay rules (basic multipliers)

The general trigger

Overtime is work beyond 8 hours in a workday (unless under a valid alternative work arrangement such as a compressed workweek with DOLE-compliant conditions).

Base overtime premium (ordinary working day)

Ordinary day OT = +25% of the hourly rate So OT hourly pay = hourly rate × 1.25

Overtime on premium days

When the day itself is premium (rest day, special day, holiday), the OT premium is computed on the hourly rate of that day, not the ordinary day rate.

8) Premium pay and holiday pay multipliers (common statutory rates)

Below are the commonly applied multipliers for the first 8 hours, then for overtime hours on top of that day rate.

Important: “Special day” below refers to special non-working day (not “special working day,” which is paid like an ordinary day unless a company policy/CBA grants extra).

A. Ordinary working day

First 8 hours: 100%
OT hour: 125% (100% × 1.25)

B. Rest day (or work on scheduled rest day)

First 8 hours: 130%
OT hour: 169% (130% × 1.30)

C. Special non-working day

If not worked: typically no work, no pay (unless company practice/CBA says otherwise)
If worked (first 8 hours): 130%
OT hour: 169% (130% × 1.30)

D. Special day falling on rest day

First 8 hours: 150%
OT hour: 195% (150% × 1.30)

E. Regular holiday

If not worked (and employee is entitled): 100% of daily rate (holiday pay)
If worked (first 8 hours): 200%
OT hour: 260% (200% × 1.30)

F. Regular holiday falling on rest day

First 8 hours: 260% (200% × 1.30)
OT hour: 338% (260% × 1.30)

9) Night Shift Differential (NSD): how it stacks

Coverage and rate

For covered employees, work performed between 10:00 PM and 6:00 AM gets a night shift differential of at least 10% of the employee’s regular hourly rate (or the applicable hourly rate of the day, depending on payroll design), commonly computed as:

NSD add-on = applicable hourly pay × 10% for each hour within 10 PM–6 AM

Stacking principle

NSD is generally in addition to:

Overtime premium (if beyond 8 hours),
Rest day / special day premium,
Holiday premium.

So if someone works OT at night on a holiday, payroll typically applies:

the holiday multiplier to get the hourly pay for that hour, then
adds NSD (10% of the applicable hourly pay) for hours within the night window.

10) Holiday pay entitlement rules (practical compliance points)

A. Regular holidays: pay even if not worked (if entitled)

Covered employees are entitled to holiday pay on regular holidays even if they do not work, provided they meet conditions often applied in practice, such as:

Being present or on leave with pay on the workday immediately preceding the holiday, unless the day immediately preceding is a rest day.

B. Successive regular holidays

Where there are two regular holidays in succession, rules on entitlement can become stricter when the employee is absent without pay on the day before the first holiday. Payroll practice often treats this carefully due to DOLE guidance and jurisprudence on “day before holiday” conditions.

C. Monthly-paid employees and holiday pay

If the monthly wage is designed to cover all days including regular holidays, the employee is still legally “paid” for the holiday—meaning holiday pay is already embedded in the monthly salary. But when the employee works on a regular holiday, the employer must still pay the holiday work premium (e.g., 200% for the day, etc.), computed using the correct daily/hourly equivalent.

11) Special days vs regular holidays: don’t mix them up

Regular holiday: if not worked and entitled, paid (holiday pay). If worked, premium (200%, etc.).
Special non-working day: if not worked, generally unpaid unless favorable policy/practice; if worked, premium (typically 130%).
Special working day: treated like an ordinary working day unless policy/CBA provides additional pay.

Because Philippine calendars often include proclamations, payroll should identify whether a date is a regular holiday, special non-working day, or special working day, and whether it also coincides with a rest day.

12) Wage deduction and “no work, no pay” differences

A. Daily-paid: ordinary absence usually unpaid

If the employee does not work on an ordinary working day, the default is no pay, unless the absence is covered by a paid leave benefit or special rule.

B. Monthly-paid: deductions must use the correct daily equivalent

Monthly-paid employees usually get the full monthly wage minus lawful deductions, which may include absences or undertime computed based on the employee’s daily/hourly equivalent.

Compliance risks to avoid:

Using an arbitrary divisor (like “monthly ÷ 30” or “monthly ÷ 26”) without checking whether it matches how the monthly wage is intended to cover days—this can cause underpayment or over-deduction.
Deducting in a way that effectively makes the employee pay for a holiday/rest day that is supposed to be covered by the salary design.

13) Undertime and offsetting: a common unlawful practice

A frequent compliance mistake is offsetting undertime with overtime (e.g., employee was late 1 hour, worked OT 1 hour, employer nets them out). Philippine labor standards generally treat undertime as not offset by overtime—overtime is compensable work beyond normal hours and is paid with premiums when due.

14) Alternative work arrangements (compressed workweek) and overtime

Under a compressed workweek (e.g., 10 hours/day for 4 days), the arrangement may be valid if it complies with DOLE guidance (voluntariness, health/safety, no diminution of benefits, and proper documentation).

In a compliant compressed workweek:

Hours beyond 8 within the agreed compressed schedule are commonly not treated as overtime (since the normal weekly hours are merely redistributed), but
Work beyond the agreed schedule becomes overtime, and
Premium day rules (rest day/holiday) still apply.

15) Worked examples (illustrative)

Example 1: Monthly-paid rank-and-file, ordinary day overtime

Monthly wage: ₱30,000
Compute daily equivalent (calendar-day coverage approach):
- Daily = (30,000 × 12) ÷ 365 = 360,000 ÷ 365 ≈ ₱986.30
- Hourly = 986.30 ÷ 8 ≈ ₱123.29
OT on ordinary day (1 hour):
- OT hourly pay = 123.29 × 1.25 ≈ ₱154.11

Example 2: Daily-paid, worked on a regular holiday for 8 hours

Daily rate: ₱800
Regular holiday work (first 8 hours): 200%
- Pay = 800 × 2.00 = ₱1,600

Example 3: Worked on rest day with 2 hours overtime

Daily rate: ₱900
Hourly rate = 900 ÷ 8 = ₱112.50
Rest day first 8 hours: 130%
- Day pay = 900 × 1.30 = ₱1,170
OT rate on rest day: 169% of ordinary hourly rate
- OT hourly pay = 112.50 × 1.69 = ₱190.125
- 2 OT hours = ₱190.125 × 2 = ₱380.25
Total for the day = 1,170 + 380.25 = ₱1,550.25 (before any other additions like NSD)

16) Payroll controls and documentation that matter in disputes

Overtime and premium pay disputes often come down to documentation. Strong compliance practice includes:

Clear classification of employees as covered/non-covered by hours-of-work rules (based on duties and facts),
Time records (log-in/out, biometrics, DTRs) and approvals for overtime,
Calendar tagging (regular holiday vs special day vs special working day),
Written policy on how monthly salary is intended to cover days (especially rest days/holidays),
Consistent computation method and transparent payslips.

17) Practical summary: what to remember

Monthly-paid vs daily-paid changes the starting point (how you derive daily/hourly and how absences are deducted), but does not remove overtime rights for covered rank-and-file employees.
Overtime is generally beyond 8 hours and is paid with premiums: +25% on ordinary days, higher on premium days.
Regular holidays are paid even if not worked (if entitled), while special non-working days are generally unpaid if not worked.
Premium multipliers stack by day type (rest day/special day/holiday) and then OT premiums apply on top; NSD adds for 10 PM–6 AM hours.
The legally safest computations start with a defensible daily equivalent for monthly-paid employees based on what their salary is designed to cover, and then apply the statutory multipliers consistently.