- Batangas Representative Vilma Santos wants to make overtime pay tax free
- This is her proposal on the House Bill 2599 she filed before the House of Representatives
- Recto said this would compensate for the lost time from a worker when asked to work extra hours
In view of the workers’ welfare, Batangas Representative Vilma Santos-Recto has filed a measure that seeks to exempt the overtime pay from taxation.
“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,” Recto said of House Bill 2599.
If passed, the law will amend Republic Act 8424 or the National Internal Revenue Code of 1997. Based on the Labor Code, a day’s work is equivalent to 8 hours.
When an employee renders services beyond this, the company should compensate him based on his hourly rate with an additional 25% of his wage. The surplus amount increases to 30% when a laborer is asked to report to work on a holiday or a day off.
Lifting the tax dues of overtime pay in effect compensates for the hours lost from an employee when asked to work extra.
“[Tax] 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,” Recto said.
Even if this would decrease government revenue, Recto emphasized that this would boost spending since money will go to the pockets of the consumers.
“This, in turn, would trigger demand for more goods and services, and thereby stimulate activities in the industrial and service sectors and generate more taxes,” she said.