Senate President Pro Tempore Ralph Recto has renewed his call to make the overtime pay of government and private sector workers tax-free.
Recto’s proposal, first filed during the 15th Congress, seeks to amend the tax code by including “overtime pay” in the tax-exempt items.
Admittedly, Recto said his proposal will cost government foregone revenues but said that more money in taxpayers’ pockets will raise workers’ disposable income and boost consumer spending.
“This, in turn, would trigger demand for more goods and services thereby stimulate activities in the industrial and service sectors and eventually generate more taxes,” the senator explained.
Recto’s Senate Bill No. 601 is expected to benefit an estimated 26.7- million wage and salary workers from both private and public sectors.
The bill seeks to exclude overtime pay from the computation of taxable income, amending Section 32 (B) (7) of the National Internal Revenue Code of 1997.
It defined overtime pay as “compensation due to hours worked in excess of the required normal working hours.”
“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 the organization’s goals. Thus, it is only fitting that the employee is properly compensated for additional work hours rendered,” said Recto.
Under the Labor Code, the prescribed number of hours of work for employees for six consecutive days is eight hours a day.
If the employee renders more than eight hours of work, the employer is required to pay additional compensation equivalent to the employee’s regular wage plus at least 25 percent of his regular wage and if the overtime work falls on a holiday or rest day, the rate is increased to 30 percent.
State workers are also entitled to overtime pay subject to Civil Service laws, rules and regulations.
Under existing laws, overtime pay of employee is taxable.
Recto said the current set-up 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 exerted.
