I. Introduction

Many sari-sari stores, mini-groceries, pharmacies, small hardware shops, and similar businesses in the Philippines operate with fewer than ten (10) employees. A common misconception is that these “small stores” are exempt from paying overtime (OT) simply because they are small.

Under Philippine labor law, that is usually false: as a rule, there is no “small business” exemption from overtime pay. The key question is not how many workers the store has, but what kind of employee you are (managerial or rank-and-file, field or office/store-based, etc.). (RESPICIO & CO.)

This article explains how overtime pay works specifically for employees in small stores with fewer than 10 workers, including legal bases, exemptions, computation, and enforcement.

II. Legal Framework

1. Labor Code: Hours of Work and Overtime

The main rules are found in Book III, Title I (Working Conditions and Rest Periods) of the Labor Code (P.D. 442, as amended): (gancaycolaw.ph)

Article 83 (Normal Hours of Work) – Normal hours shall not exceed 8 hours a day, exclusive of meal period.
Article 87 (Overtime Work) – Work beyond 8 hours must be paid an additional compensation of at least 25% of the employee’s regular wage for that period. (Labor Law PH)
Article 88 (Undertime not offset by overtime) – An undertime (leaving early) on one day cannot be used to “cancel” overtime on another.
Article 89 (Emergency Overtime) – Lists situations when an employer may legally require overtime (e.g., emergencies, urgent repairs, abnormal pressure of work, perishable goods, continuous operations). (Philippine Law Firm)

These provisions apply to all covered employees regardless of whether the establishment is big or small.

2. Coverage and Exclusions (Article 82)

Article 82 of the Labor Code sets out who is covered by the rules on hours of work and overtime. It states that the provisions apply to employees in all establishments, whether for profit or not, but exclude: (gancaycolaw.ph)

Government employees;
Managerial employees (those primarily managing the business and exercising hiring/firing and disciplinary authority);
Field personnel (those who work away from the principal place of business and whose hours cannot be determined with reasonable certainty); (Labor Law PH)
Members of the employer’s family who are dependent on the employer for support;
Domestic helpers (kasambahay);
Persons in the personal service of another;
Certain workers paid by results (piece-rate, pakyawan, etc.) where output rates are regulated/approved.

If a worker in a small store does not fall under any of these exclusions, they are covered by the hours-of-work and overtime rules.

Note: The law does not say that “retail establishments with less than 10 workers” are excluded from overtime rules. That phrase appears in other contexts (e.g., minimum wage, holiday pay), not in Article 82.

3. Where “≤10 workers” Actually Matters

The “not more than ten workers” concept is legally relevant mainly in:

Minimum wage laws and wage orders under R.A. 6727 (Wage Rationalization Act), where some wage orders create separate categories or possible exemptions for retail/service establishments employing ≤10 workers. (Lawphil)
Holiday pay, service incentive leave, and retirement pay – DOLE materials and commentary note that employees in establishments with fewer than 10 employees enjoy most benefits, but small retail/service and agricultural establishments may be exempt from some, particularly holiday pay, SIL and certain forms of retirement pay. (Alburo Law Offices)

However, DOLE guidance and the Labor Code do not provide a blanket overtime exemption for small establishments. Even where such businesses are exempt from minimum wage or certain benefits, they are still generally bound by the 8-hour rule and overtime pay requirement. (RESPICIO & CO.)

III. Are Employees in Small Stores with Fewer Than 10 Workers Entitled to Overtime Pay?

1. General Rule

For rank-and-file employees in small stores (cashiers, clerks, merchandisers, stockmen, sales staff, etc.) who:

are not managerial employees,
are not field personnel, and
have reasonably measurable working hours in the store,

the rule is straightforward:

Once they work more than 8 hours in a day, they must be paid overtime premium on top of their regular wage for those excess hours. (Labor Law PH)

This applies even if:

the store has only 2 or 3 employees;
the store is a micro-enterprise or BMBE; (RESPICIO & CO.)
the employees are paid below the regional minimum wage pursuant to an approved exemption or special category.

The OT premium percentage is applied to whatever basic wage the worker is legally receiving.

2. No General “Small Business” Exemption

Recent commentary on overtime obligations for small businesses emphasizes that:

Overtime pay is a statutory monetary benefit.
There is no general exemption just because the enterprise is micro, small, or employs fewer than 10 workers. (RESPICIO & CO.)

Exemptions are by type of employee, not by size of the store.

3. Common Exempt Cases in Small Stores

In small stores, the following individuals often do not receive overtime because they are excluded by Article 82:

The owner or spouse personally manning the store;
A close family member (e.g., child or sibling) who lives with and is financially dependent on the owner;
A true manager (e.g., branch manager supervising all staff with hiring/firing power);
A field merchandiser or route salesman who spends most time outside and whose actual hours cannot be tracked with reasonable certainty.

But rank-and-file store staff whose attendance is logged (time-in/time-out, manual logbook, POS logins, CCTV, etc.) are usually covered and must receive overtime.

IV. Overtime Pay Computation for Small Store Employees

1. Determining the Regular Hourly Rate

a. Daily-paid employees Hourly rate =

Daily rate ÷ 8

Example: Daily rate = ₱610 → hourly = 610 ÷ 8 = ₱76.25

b. Monthly-paid employees

DOLE practice typically uses [Monthly rate ÷ 26 days ÷ 8] (for monthly paid in a 6-day workweek) unless a company uses a different DOLE-accepted divisor (e.g., 30 days system with corresponding adjustment). (Labor Law PH Library)

Example: Monthly rate = ₱18,000

Equivalent daily rate ≈ 18,000 ÷ 26 = ₱692.31
Hourly rate ≈ 692.31 ÷ 8 = ₱86.54

2. Overtime on a Regular Workday

Legal basis: Article 87 – at least 25% premium for work beyond 8 hours on a regular workday. (Labor Law PH)

Formula:

OT pay per hour = Hourly rate × 125% (1.25)

Total pay for a day with overtime =

(First 8 hours × hourly rate) + (OT hours × hourly rate × 1.25)

3. Overtime on Rest Days, Special Days, and Regular Holidays

DOLE and Labor Code rules create higher premiums if the overtime is done on days that already have a premium:

Rest Day or Special Non-Working Day – Work on these days is usually paid at 130% of the basic wage for the first 8 hours, with an additional 30% of that rate for overtime hours. (Labor Law PH)
Regular Holiday – Work on a regular holiday is generally at 200% of the basic wage for 8 hours; overtime on such a day requires an additional 30% of the hourly rate on that day for OT hours.

Small retail/service establishments with ≤10 workers may be exempt from certain holiday pay obligations when the holiday is unworked, but if the employee actually works, they are still entitled to applicable premium for work performed, based on current DOLE rules and wage orders. (Alburo Law Offices)

4. Sample Scenario for a Small Store

Store helper’s daily rate: ₱610
Regular hours: 8 hours/day
Actual work: 10 hours on a regular day (2 hours OT)

Hourly rate = 610 ÷ 8 = ₱76.25 OT rate per hour = 76.25 × 1.25 = ₱95.31

Pay for first 8 hours = 610
OT pay = 2 × 95.31 = 190.62

Total pay for the day = ₱800.62

Even if the store has only three employees, the employer must still pay this amount unless the worker is exempt under Article 82.

V. Special Issues Common in Small Stores

1. Long Shifts and “Duty Hours”

Many small stores operate from early morning until late at night, with one or two workers rotating:

If the employee is on duty and not free to leave (even during slow periods), that time generally counts as hours worked.
A one-hour meal break is not counted as work if the employee is fully relieved from duty and free to leave. If they must stay at the counter and attend to customers during “break,” that period is usually counted as working time. (ChanRobles Law Firm)

2. Part-Time and “Reliever” Staff

Part-time employees are still covered by overtime rules:

If their scheduled day is 5 hours but they work 10, the hours beyond 8 in that day are overtime (not just beyond 5).
For store relievers who cover two shifts in a day (e.g., morning and evening), total actual hours in the 24-hour period are counted for OT purposes.

3. Night Work and Night Shift Differential

If an employee in a small store works between 10:00 p.m. and 6:00 a.m., they are generally entitled to night shift differential of at least 10% of their regular wage for each hour of night work, in addition to any overtime premium if they exceed 8 hours. (studylib.net)

Example: 9:00 p.m. – 1:00 a.m. shift (4 hours), all within night hours:

Pay = hourly rate × 4 × 110%
If this also pushes the day beyond 8 hours, the same hours may be both OT and night differential, computed layer-by-layer (base wage + OT premium + NSD).

4. “Off-the-Clock” Work

Frequent in small stores:

Opening tasks (cleaning, refilling stocks) before official opening time, or
Closing tasks (inventory, counting cash, locking up) after official closing time

If the employer knows or should know that the employee is working, these periods are considered hours worked and must be included when deciding whether overtime pay is due.

5. Undertimes and “Make-Up Work”

Under Article 88, if an employee leaves early (undertime):

The employer cannot use that undertime to avoid paying overtime on another day or later on the same day. (RESPICIO & CO.)

Example:

Monday: Employee works only 6 hours (2 hours undertime).
Tuesday: Employee works 10 hours.

Employer still owes 2 hours of OT pay for Tuesday; the 2-hour undertime on Monday cannot cancel it.

6. Compressed Workweek and Flexible Schemes

DOLE allows compressed workweek (e.g., 4 days × 10 hours) or certain flexible arrangements via guidelines:

Must generally be documented and voluntary.
Daily work may exceed 8 hours without overtime, but maximum weekly hours and health standards must be observed, and DOLE rules followed. (Labor Law PH Library)

Small stores rarely formalize compressed workweek agreements, so default rule (OT after 8 hours/day) usually applies.

VI. Interaction with Other “Small Establishment” Rules

1. Minimum Wage and Wage Orders

Under R.A. 6727, Regional Tripartite Wages and Productivity Boards (RTWPBs) issue wage orders that sometimes:

Allow lower minimum wage categories for retail/service establishments employing not more than 10 workers, or
Allow such establishments to apply for exemption from wage increases for a limited period. (Respicio & Co.)

But even in those cases:

Whatever actual basic rate is approved becomes the basis for OT computation.
Overtime premium (25%, 30%, etc.) is computed on that rate, not on the standard non-exempt minimum.

2. Barangay Micro Business Enterprises (BMBEs)

Under R.A. 9178, some micro-enterprises registered as BMBE may be exempt from minimum wage laws, but DOLE guidance stresses that working hours and overtime rules generally still apply unless specific DOLE exemptions are granted. (RESPICIO & CO.)

Again, OT is based on the actual agreed wage.

3. Holiday Pay, SIL, Retirement Pay

Small retail/service establishments regularly employing not more than 10 employees may be exempt from: (Alburo Law Offices)

Holiday pay (when unworked),
Service Incentive Leave (SIL), and
Certain retirement pay obligations (in specific sectors).

This has no direct effect on overtime rules, but it changes the base upon which some holiday-related OT computations might be made.

VII. Documentation and Compliance for Small Store Owners

For store owners, compliance largely turns on good documentation:

Time records – Daily time records (DTRs), bundy clock, logbooks, or electronic systems showing exact time-in/time-out and breaks.
Payslips – Should itemize:
- Basic wage;
- Overtime hours and OT pay (separately shown);
- Night shift differential;
- Holiday/rest-day premiums, if any. (studylib.net)
Company policies – Written schedule of shifts, policy on overtime (approval process, voluntary nature except in emergencies, etc.).
Contracts or appointment letters – Clarifying whether employees are managerial, rank-and-file, field personnel, or otherwise (though labels are not controlling; actual duties and conditions prevail).

Without records, the law tends to resolve doubts in favor of labor, and courts/DOLE often accept reasonable estimates from the employee of OT actually worked, especially if the employer fails to present time records.

VIII. Enforcement and Remedies for Employees

Employees in small stores who believe they are not being paid proper overtime may:

Raise the issue internally – Discuss with the owner/manager and show the discrepancy.
File a request for assistance with DOLE (SENA) – The Single-Entry Approach (SEnA) provides mediation/conciliation before any formal case. (Google Cloud Storage)
File a formal complaint with the DOLE Regional Office for labor standards violations (overtime underpayment, non-payment of premiums, etc.).
Pursue a money claims case before the NLRC for unpaid OT, if appropriate.

Claims for overtime are typically subject to prescriptive periods under the Labor Code (generally 3 years for money claims), so employees should not delay asserting their rights.

IX. Practical Takeaways

For store owners with fewer than 10 workers:

Do not assume you are exempt from overtime rules just because you are small or “micro.”
Check whether each worker is truly managerial, field personnel, or family-dependent before treating them as OT-exempt.
Keep clear time records and pay the correct OT premium whenever hours exceed 8 per day.
If relying on wage-order exemptions or BMBE status, remember these go mainly to minimum wage, not to hours-of-work/overtime rules.

For employees in small stores:

If you are rank-and-file, store-based, and not a family-dependent or manager, you are likely entitled to overtime pay once you work beyond 8 hours a day.
Night work and work on rest days or holidays may entitle you to additional premiums on top of overtime.
You can request proper payslips and, if needed, seek help from DOLE to clarify or enforce your rights.

This is a general legal overview; actual entitlements can depend on your region’s current wage order, DOLE issuances, and the specific facts of your employment.