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Labor group backs House bills making overtime pay, night differential tax-free

A labor group on Sunday urged the House of Representatives to pass a proposed law exempting overtime pay and graveyard shift differential from the computation of income taxes.

In a statement, the Trade Union Congress of the Philippines expressed support for the twin bills filed by Makati City Rep. Abigail Binay, seeking to amend the computation of gross income under Republic Act 8424, otherwise known as the Tax Reform Act.

TUCP president and former Senator Ernesto Herrera said that among those who stand to gain from the measures is the country's 1.1 million workers in the business process outsourcing (BPO) industry.
“The measures will prosper middle-class families, rev up household consumption, create new demand for the products and services of domestic industries, and stimulate economic growth amid persistent government underspending,” Herrera said.

In her bills’ explanatory notes, Binay said the tax reprieves “are meant to give greater substance to the mandates of the Constitution for the State to provide a living wage, a rising standard of living, and improved quality of life for all.”

At present, Herrera said the overtime and night shift premiums of workers receiving more than the statutory minimum wage are slapped with up to 32 percent in withholding taxes, depending on the employee’s tax bracket.
Overtime pay refers to the extra 25 to 30 percent compensation received by an employee for labor rendered in excess of the required maximum eight hours a day.
The night shift premium is the additional 10 percent remuneration for work delivered between 10 p.m. and 6 a.m.
Under the Labor Code, if the overtime work falls inside the graveyard shift, the extra reward for overtime labor is first added to the employee’s regular hourly rate before computing the night differential pay, the TUCP said.  — Kathrina Charmaine Alvarez/LBG, GMA News