ACCOUNTING FOR LABOR COST

Regular Holidays
New Year January 1
Maundy Thursday Movable date
Good Friday Movable date
Araw ng Kagitingan April 9
Labor Day May 1
Independence Day June 12
National Heroes Day Last Sunday (Monday) of August
Bonifacio Day November 30
Christmas Day December 25
Rizal Day December 30

Special Holiday
All Saints Day November 1
Last day of the Year December 31

Premium Pay – refers to the additional compensation for work within 8 hours on non working days (such as rest day and
special Holiday) as required by the law
Premium Pay Rates
For works performed on Rate of pay, based on daily rate
Rest Day 130%
Special Day 130%
Rest day which also special day 150%
Regular Holiday 200%
Regular Holiday which also rest day 260%

Example: A worker has a daily rate of ₱300 and works for 8 hours in one day shall be compensated as follows:
For works performed on Rate of pay, based on daily Amount Earned
rate
Rest Day 300 × 130% ₱390
Special Day 300 × 130% ₱390
Rest day which also special day 300 × 150% ₱450
Regular Holiday 300 × 200% ₱600
Regular Holiday which also rest day 300 × 260% ₱780

A normal hours of work of an employee shall not exceed to 8 hours a day as per law
All work performed beyond 8 hours in one day is considered as Overtime Work.
Overtime Work is entitled to overtime pay of at least 125%

Example: a worker with a daily rate of ₱320 and works for 10 hours on a working day.

For regular 8 hours of works he is compensated of ₱320

For overtime works of 2 hours he is compensated of ₱100 [(₱300/8hours) × 125% × 2]
For his 10 hours of work during working day he earned total of ₱420

Regular 8 hours 320

2 hours overtime 100
Total earned for 10 hours 420
Based on the computation, we can conclude that overtime pay is equals to daily rate divided by 8 hours multiplied by
125% multiplied by number of overtime hours:
Overtime pay = (Daily rate/8hrs) × 125% × overtime hours

Overtime work rendered on a scheduled rest day, special day or a regular Holiday is entitled to a overtime premium of
30% based on the hourly rate. (Article 87 labor code of the Philippines)
Overtime Rates
For overtime works performed on Rate of pay, based on daily rate
Regular working day 125%
Rest Day (130%×130%) 169%
Special Day (130%×130%) 169%
Rest day which also special day (150%130%) 195%
Regular Holiday (200%×130%) 260%
Regular Holiday which also rest day (260%×130%) 330%

Overtime Pay = (overtime rates) × (daily rate/8hrs) × (overtime hours)

Regular Premium = (daily rate) × (premium pay rate)

Example: A worker has a daily rate of ₱300 and works for 8 hours in one day shall be compensated as follows:
For works performed on Overtime pay Regular premium Amount Earned
Rest Day 135.20 390 ₱535.20
Special Day 135.20 390 ₱535.20
Rest day which also special day 156 450 ₱606
Regular Holiday 208 600 ₱808
Regular Holiday which also rest day 270.40 780 ₱1050.40

On rest day
Regular premium (₱300 × 130%) ₱390
OT pay (130% × 130%) × ₱40 × 2hrs ₱ 135.20
Amount earned for 10 hours of work ₱ 535.20

On special day
Regular premium (₱300 × 130%) ₱390
OT pay (130% × 130%) × ₱40 × 2hrs ₱ 135.20
Amount earned for 10 hours of work ₱ 535.20

On rest day which is also a special day

Regular premium (₱300 × 150%) ₱460
OT pay (150% × 130%) × ₱40 × 2hrs ₱ 156
Amount earned for 10 hours of work ₱ 606

On regular holiday
Regular premium (₱300 × 200%) ₱600
OT pay (200% × 130%) × ₱40 × 2hrs ₱ 208
Amount earned for 10 hours of work ₱ 808

On regular holiday which is also a rest day

Regular premium (₱300 × 260%) ₱780
OT pay (260% × 130%) × ₱40 × 2hrs ₱ 270.40
Amount earned for 10 hours of work ₱ 1,050.40
Overtime Premium – refers to additional monetary compensation given to employees for works beyond the eight hour
period set as limit by law.
OT premium = hourly rate × overtime rate × number of OT work
Overtime premium is treated as DIRECT LABOR COST when overtime work is due to the rush nature of job
Overtime premium is treated as FACTORY OVERHEAD when overtime work is due to greater volume of work, slow
production, or inadequate plant capacity