How to Compute Night Differential in the Philippines (with Examples)

How do you calculate the night differential in the Philippines?

One of the primary duties of HR is to take care of employees. HR must look out for their workers’ overall welfare in the company. It is also HR’s duty to look out for the company’s welfare. It is important to find a balance to better serve the business and its people.

As a company’s greatest resource, its workforce’s needs must be met. One of the best ways to keep employees satisfied is through proper payroll management. They need accurate salaries and timely payments to stay and work productively. These include night shift differential pay.

What is a night shift differential? Why is it necessary? How does it help a business?

Night Differential Pay Explained

An employee is entitled to differential pay based on the Philippine Labor Code.

She doesn’t need to request or insist on it. The company automatically has to give this as long as the hour of work performed falls within the graveyard shift schedule.

What is a night differential?

If you are a business in the Philippines, especially one just starting, you should be aware of this.

“Night shift differential pay is an additional pay for work between 6:00 p.m. and 6:00 a.m. the following day for those in the Government Service, and between 10:00 p.m. and 6:00 a.m. the following day for those in the private sector.” (LaborLaw.ph)

In other words, night differential is an additional pay given to employees that work during the night or graveyard shift. The difference only depends on whether they are government employees or private-sector employees.

The hours may be part of their regular shifts, but that does not matter. Night shift differential pay is neither a bonus nor an incentive. It is not payment for any extra hour of work performed. It is not part of the hourly rate.

Rather, differential pay is an indemnity.

Why pay night differential?

Indemnity is security or protection for the employee. It is related to the possible effects of working at night on someone’s health. In other words, differential pay is given as financial assistance should a night-shift employee need it for medical purposes.

It is not optional for businesses to grant such pay. They are required; it is the law. It is, as aforementioned, included in the Philippines’ Labor Code. Therefore, night shift differential pay is a right that must be addressed.

Related: List of government-mandated benefits employees should have

Who can receive the differential pay?

Employees whose work schedules fall within the hours specified earlier are entitled to the indemnity. However, there are certain exceptions to this rule, according to the Labor Code.

Employees not entitled:

1. Government employees whose work schedules fall between 6:00 a.m. to 6:00 p.m. (Day Shift)However, they may receive overtime pay for services rendered beyond the required 8 hours of work. (Section 2[a], R.A. 11701)
2. On-call government employees or, mostly, uniformed personnel who must serve and/or are called to serve anytime. The Civil Service Commission (CSC) and the Department of Budget and Management (DBM) identified these job personnel. (Section 2[b], Ibid.)Some Identified 24-Hour Government Jobs: Armed Forces National Police Firefighters Jail Management Personnel
3. Workers in retail and service establishments regularly employing a maximum of five (5) people only (Section 1, Rule II, Omnibus Rules Implementing the Labor Code; Chapter 6, Night Shift Differential Pay)
4. Kasambahay or domestic helpers (maids) (Ibid.)
5. Employees providing needed personal service of another person or other people (Ibid.)
6. Managerial employees

Managers excluded:

(a) When the main responsibility is to manage the company or a department or subdivision of it

(b) When they regularly supervise two (2) or more people

(c) When they have the authority to:

i. hire or fire workers

ii. recommend and/or promote people

iii. change lower-rank employees’ status

7. Managerial staff members and/or officers

Managerial staff excluded:

(a) When their duties are directly related to management policies

(b) When they regularly practice independent judgment

(c) When they…

i. assist in managing the establishment or any subdivision of it

ii. work along specialized or technical lines

iii. do special tasks

(d) When they use less than 20% of their total working hours in a week on tasks unrelated to the previous three items (a to c) (Ibid.)

8. Field personnel and unsupervised employees

Night Shift Differential: Private vs. Government

Night shift differential for those in private organizations differs from those in the government. This is important, especially for businesses to take note of, to avoid confusion.

Private Sector

According to Article 86, P.D. 442 of the Labor Code:

“Every employee shall be paid a night shift differential of not less than ten percent (10%) of his regular wage for each hour of work performed between ten o’clock in the evening and six o’clock in the morning.”

– LaborLaw.ph

In other words, an additional 10% of one’s regular wage shall be paid to a private employee for work performed during the night and up until the next morning.

There is a specific timeframe, though, which is between 10 p.m. and 6 a.m. Unlike the regular schedule, it starts late in the evening, allowing 8 hours of work. Any work done before 10 p.m. does not entitle an employee to a night shift differential. However, companies may modify the rules regarding night differential in favor of employees.

Government Sector

According to Section 1, R.A. 11701 of the Labor Code:

“SECTION 1. Government employees occupying position items from Division Chief and below, or their equivalent,…shall be paid night shift differential at a rate not exceeding twenty percent {20%) of the hourly basic rate of the employee, as determined by the head of the agency, for each hour of work performed between the hours of 6:00 in the evening and 6:00 in the morning of the following day: Provided. That the night shift differential pay provided under this Act shall be in addition to and shall not in any way diminish whatever benefits and allowances are presently enjoyed by government employees.”

– LaborLaw.ph

In other words, an additional 20% of one’s regular wage shall be paid to a government or public sector employee for work performed during the night and up until the next morning.

The timeframe is between 6 p.m. and 6 a.m. There is a 12-hour period wherein an employee may perform her duties and tasks.

Related: What is the salary differential in pay computation?

What are the DOLE and Labor Code rules on night differential rates in the Philippines?

In the Philippines, the night differential time is between 10:00 PM and 6:00 AM. DOLE provides the guidelines on night differential pay for workers who render during these times below.

1. The night differential should be at least 10% of the employee’s regular wage for each hour worked between 10:00 PM and 6:00 AM.
2.  If an employee works during both regular and night shifts, the night differential pay should be computed based on the actual hours worked during the night shift.
3.  If an employee works overtime during the night shift, the night differential pay should be based on the overtime rate.
4.  The night differential pay is not subject to income tax, but it is subject to mandatory deductions such as SSS, PhilHealth, and Pag-IBIG contributions.
5.  Employers are required to keep a record of the night shift differential pay and must make it available for inspection by DOLE representatives.

Furthermore, note that these apply to all regular or contractual employees. The same applies whether they work full-time or part-time. A business’ failure to comply with these may result in penalties or sanctions.

How to Compute Night Shift Differential Pay (Philippines)

There are many formulas to determine how much an employee’s night differential pay should be depending on their rendered work. Using the given set of formulas below, remember that “hourly basic rate” means “basic salary rate per hour.”

This is how it is computed:

Basic Salary Rate/Hour = Basic Monthly Rate/22 working days/8 hours.

How much is the night differential in the Philippines?

For example, if an employee earns a regular hourly rate of Php 100 and works for 8 hours between 10:00 PM to 6:00 AM, the night differential pay would be computed as follows:

Example: Night Differential Pay = Php 100 x 10% x 8 = Php 80

If the employee worked overtime during the night shift, the computation would be slightly different. In this case, the overtime pay should be added to the regular pay before computing for the night differential pay. Here’s an example:

Assuming the employee earns Php 100 per hour, and worked for 2 hours of overtime between 10:00 PM to 6:00 AM, the computation for the night differential pay would be:

In Conclusion

When putting up a business in the Philippines, it is important to know the requirements based on the Labor Code.

All employees working on the night shift are entitled to differential pay. The differences depend on whether the employer is a private business (you) or the government.

Abide by the law to avoid legal issues that can ruin the business.

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