Vilma Santos proposes to make overtime pay tax-free

Neophyte lawmaker Batangas Rep. Vilma Santos-Recto has filed a proposal before the House of Representatives exempting overtime pay from the computation of taxable income.

In House Bill 2599, Recto said her proposed law would benefit an estimated 39.8 million employees from the private and public sector.

Recto, former governor of Batangas, said "it is only fitting that the employee be properly compensated for additional work hours rendered."

“An employee who renders overtime work puts in additional hours of work and requires greater physical and mental effort. Instead of being able to rest early and spend more time with the family, the employee is forced to extend the working hours to achieve management’s goals," she said.

The proposal would amend Section 32 of Republic Act 8424, otherwise known as the National Internal Revenue Code of 1997.

Recto said that while her proposal would cost the government foregone revenues, more money in taxpayers' pockets will increase disposable income and boost consumer spending.

This, she further said, would trigger demand for more goods and services and stimulate activities in the industrial and service sectors and generate more taxes.

The Labor Code prescribes the maximum hours of work for employees at eight hours a day for six consecutive days.

If the employee works beyond eight hours, the employer is required to pay additional compensation equivalent to the employee's regular wage plus at least 25 percent of his regular wage. If the employee renders overtime on a holiday or rest day, the rate is increased to 30 percent.

"Unfortunately, compensation received for overtime work forms part of an employee's taxable income," Recto said.

“This not only limits the full enjoyment of monetary benefits due the employee for putting in more hours of work but also diminishes the value of the additional physical and mental effort contributed,” she added. —ALG, GMA News