How To Compute Night Shift Differential (NSD)

by Dina Epili | Compensation and Benefits, HR ToolBox

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.
Read: How to compute your 13th month pay
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.