TUCP bats for tax exemption on night, overtime pay

MANILA – Trade Union Congress of the Philippines (TUCP), the nation’s largest democratic labor center, with member-federations forming a General Council, has thrown its support behind two House bills seeking to exclude from income taxes all overtime and graveyard shift differential pay received by salaried employees, including the country’s 1.1 million business process outsourcing (BPO) workers who perform jobs all day and all night.

“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,” said TUCP president and former Sen. Ernesto Herrera.

Herrera was referring to House Bills 2836 and 4682, which seek to exempt all overtime and graveyard shift benefits from the computation of the gross taxable income of all workers, regardless of their hourly pay rate.

Makati City Rep. Mar-Len Abigail Binay introduced both bills.

“Well-paid employees and salaried professionals stand to gain the most from Congresswoman Binay’s twin proposals, since by law, the income of our lowest-paid workers — minimum wage earners — are already absolutely tax-free,” Herrera pointed out.

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 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 10:00pm and 6:00am.

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.

TUCP’s large member-federations include the BPO Workers’ Association of the Philippines (BWAP), which is led by former Labor Secretary and now TUCP vice president Ruben Torres.

The highly labor-intensive BPO and information technology-enabled services industry includes contact centers, back offices, data transcribers, animators, software developers, engineering designers, and digital content providers.