Purpose
This article provides the standard procedure for computing Overtime (OT) pay based on an employee’s monthly salary. It applies to pay tables with a 125% Overtime Rate (equivalent to a 1.25 multiplier).
Scope
This guideline covers all employees whose overtime pay is derived from a fixed monthly rate. It ensures consistent and accurate computation of overtime compensation across the organization.
Computation Formula
Step 1: Determine the Daily Rate
Step 2: Determine the Hourly Rate
Step 3: Compute the Overtime Rate
(where 1.25 represents the 125% rate for regular overtime work)
Step 4: Compute the Total Overtime Pay
Sample Computation
Example:
Monthly Pay: ₱20,000
Days Considered Paid: 313 days
Overtime Hours Worked: 2 hours
Computation:
Daily Rate = (₱20,000 × 12) ÷ 313 = ₱766.45
Hourly Rate = ₱766.45 ÷ 8 = ₱95.81
OT Rate = ₱95.81 × 1.25 = ₱119.76
Total OT Pay = ₱119.76 × 2 = ₱239.52
Important Notes
The Days Considered Paid may differ depending on company policy (e.g., 261, 313, or 365 days).
The 125% rate applies to regular overtime rendered beyond eight (8) working hours on a regular workday.
Overtime on rest days, special holidays, or regular holidays follows different computation rates as mandated by labor laws.
All overtime work must be properly approved and recorded before inclusion in payroll processing.