How To Compute Night Shift Differential (NSD)

NIGHT-SHIFT DIFFERENTIAL (NSD)

 

 
 
Working in the night has become a normal workday schedule for some companies especially, those in the BPO or Business Process Outsourcing nature. In the Philippines, working in the night between 10PM to 6AM, comes with additional compensation, and it’s called Night Shift Differential or NSD.
 

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Article 86 of Philippine Labor Code states, “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.” It shall be noted that night shift differential shall be applied for every work done, whether such work is part or not part of the worker’s regular shift. The covered period of night shift differential is the work performed between 10PM until 6AM of the following day.
 
The simplest formula to compute the night shift differential is:
 
NSD = (Hourly rate * 10%) * number of hours worked from 10PM to 6AM
 
It is to be emphasized that the Labor Code only provides the minimum required payments. The employer or the union may have higher premium through an agreement. It should be however, stated in the CBA the percentage of agreed premium that has to be followed by the company.
 
 

LIMITATION OF NIGHT-SHIFT DIFFERENTIAL

 
Artile 82 of Labor Code state who are the employees not covered by this provision. In the case of night shift differential, it shall apply to all employees except the following:

• Those of the government and any of its political subdivisions, including government-owned and/or controlled corporations;
• Those of retail and service establishments regularly employing not more than five (5) workers;
• Domestic helpers and persons in the personal service of another;
• Managerial employees as defined in the Labor Code; and
• Field personnel and other employees whose time and performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work irrespective of the time consumed in the performance thereof

NIGHT SHIFT DIFFERENTIAL ON TOP OF OVERTIME RATE, REST DAY/HOLIDAY RATE AND REGULAR HOLIDAY RATE

 
On Overtime Rate During Regular Working Day
 
If an employee is required to work for overtime after the regular working hours, where its overtime schedule reached the night shift differential period, the employee shall receive the additional (not less than) ten percent (10%) of its overtime hourly rate, for work done between 10PM to 6AM.
 
Thus, when an employee is required to extend his work after his regular working time, he is entitled for his regular hourly rate and an additional twenty-five percent (25%) as his overtime rate plus ten percent (10%) for every work performed between the covered period.
 
The simplest formula to compute the night shift differential on overtime work is
 
NSD = {(Hourly rate * 25%) * 10%} * number of hours worked
 
On Rest Day
 
There are instances that an employee may be required to work on his rest days or during special holiday. The Labor Code states, “an employee who is required or permitted to work on the period covered during rest days and/or special holidays not falling on a regular holidays, shall be paid a compensation equivalent to his regular wage with plus at least thirty percent (30%) and an additional amount of not less than ten percent (10%) of such premium pay rate for each hour work performed”. Take note that our period covered in this subject is the work performed from 10PM until 6AM only.
 
Thus, the simplest formula to compute the night shift differential on work performed during rest day and/or special holiday is
 
NSD = {(Hourly rate * 30%) * 10%} * number of hours worked
 
On Regular Holiday
 
Working on a regular holiday in a BPO setting has become a normal duty since most BPO follows the calendar of their clients located in different countries. As stated in Noted in the Labor Code, “holiday pay is a day’s pay given by law to an employee even if he does not work on a regular holiday”. However, for this article, we will treat the employee as working on a regular holiday.
 
The Implementing Rules of the Labor Code state, “any employee who is permitted or suffered to work on a regular holiday, not exceeding eight (8) hours, shall be paid at least two hundred percent (200%) of his regular wage”. For any regular work performed during the night shift differential covered period, the employee shall be entitled to two hundred percent (200%) of his regular wage and an additional amount of not less than ten percent (10%) of each hour’s work performed.
 
The simplest formula to compute the night shift differential on work performed during regular holiday is
 
NSD = {(Hourly rate * 200%) * 10%} * number of hours worked.
 
It should be noted that regular holiday rate starts at 12 midnight until 11:59 in the evening of the same date. Hence, the premium pay for work performed between 10PM until 11:59PM is different from the premium pay for work performed between 12midnight until 6AM on the following day, if such following day is a regular working day. Since the law requires a higher premium pay during the regular holiday, the work performed during the first 2-hours may be paid higher than the work performed on the next 6-hours, if the regular working shift is from 10PM to 6AM.
 
In this case, the night shift differential may have two different computations, such as
 
For the first 2 hours,
 
NSD₁ = {(Hourly rate * 200%) * 10) * 2 hours
 
For the next 6 hours,
 
NSD₂ = (Hourly rate * 10) * 6 hours
 
 

NIGHT SHIFT DIFFERENTIAL TABLE MATRIX

 
For you to easily understand the concept of night shift differential, it is best to put on an illustration table. Although night shift differential may be compensated as premium pay or together with overtime pay, it shall be noted that amount may differ according to the type of days or the nature of the work performed, whether regular or overtime. The Implementing Rules have shown that night shift differential may be rendered either during the regular work hours or overtime work hours of the employee.
 
As provided by the Labor Code, the table below shows the rate of night work pay and other compensation for certain days of work. For the matter of illustration, we are using the NCR Minimum Wage (WO No. NCR-14) as reference.
 
IF THE MINIMUM WAGE CHANGED OR YOUR COMPANY BELONGS TO A DIFFERENT REGION, PLEASE ADJUST THE BASE FIGURE IN THE FORMULA TO GET THE CORRECT COMPUTATION
 
 

 
 
*** Source of this article are the Philippine Labor Code and book entitled “Guide on Employee Compensation and Benefits, Volume One” of Atty. Elvin Villanueva. This article is made for people who have limited information on night shift differential computation. You may review the article and provide insights or may give feedback for any inappropriate information through [email protected].