Giving Workers Their Due
When starting a business, the entrepreneur naturally has to include in his computation the cost of his would-be employees. Aside from the wages to be paid, he would also have to include in his figures the government-mandated benefits to be given to employees and wherein the employee has to contribute a significant percentage.
To insure the protection of workers as mandated by the Constitution, certain labor standards have been promulgated into law through the Labor Code. Labor standards are the minimum terms and conditions in which an employee may be hired within the Philippines. To effectively implement the dictates of the Code, the Secretary of Labor or his agents has the power (1) to enter into the work premises and inspect the books of a company; (2) to order an employer, after due notice and hearing, to comply with labor standards; (3) to issue a writ of execution in case the employer does not honor the order of compliance; and (4) to stop work or suspend operations if the violation poses an imminent danger to the health and safety of workers.
That said, what is the minimum wage? The Minimum Wage is set by the Regional Tripartite Wages and Productivity Board (RTWPB). Each region has its own set of mandated minimum wages depending on the industry/sector, i.e. non-agriculture, retail/service, etc. or on the location of the work place, i.e. extended metropolitan areas, growth corridor areas, etc. In the National Capital Region (NCR), the minimum wage is TWO HUNDRED FIFTY PESOS (P 250.00) per day. In addition, the NCR is also mandated to grant Emergency Cost of Living Allowance (ECOLA) of THIRTY PESOS (P 30.00) per day starting February 2002. Effectively, therefore, the minimum wage is TWO HUNDRED EIGHTY PESOS (P 280.00) per day.
Aside from the wage, an employer is required to pay a premium for work done on the following occasions: (1) overtime; (2) rest day or holiday; and (3) night work.
As a general rule, an employee is allowed to work only for a maximum of eight (8) hours a day, six (6) days a week. An 8-hour day is exclusive of a 1-hour meal time break which in non-compensable. If the meal time break is less than 1-hour, it is deemed compensable and shall be included in the 8-hour computation. In excess of the 8-hour day or 6-day week, it called overtime. Overtime work may be rendered upon mutual agreement by the employer and employee or upon the circumstances specified in the Labor Code, i.e. in times of war, in cases of actual/impending emergencies in order to prevent serious losses, etc.
An employee’s rest day does not necessarily mean that it should be on a weekend. The law merely says that is has to be twenty-four (24) consecutive hours after six (6) consecutive days of work. Similar to overtime and aside from by mutual agreement, there are certain circumstances when an employee may be compelled to render work during his rest day. Examples are: during emergencies, or where the nature of the work requires continuous operations, etc.
There are two (2) kinds of holidays in the Philippines: regular/legal holiday and special holiday. There are eleven (11) regular/legal holidays and two (2) national special days, namely:
New Year’s Day - January 1
Maundy Thursday - (movable date)
Good Friday - (movable date)
Araw ng Kagitingan - April 9
Labor Day - May 1
Independence Day - June 12
National Heroes Day - Last Sunday of August
Bonifacio Day - November 30
Christmas Day - December 25
Rizal Day - December 30
Last day of Ramadan - (movable date)
Nationwide Special Days
All Saints Day - November 1
Last day of the Year - December 31
The difference in these kinds of days is the premium to be paid on such day. Every employee, except in retail and service establishment employing less than ten (10) workers, is entitled to be paid his daily wage during regular/legal holidays even if the employee does not work on the said day. Special days, on the other hand, is considered as no-work, no-pay. However, if such day is worked, such work is entitled to an additional premium.
When an employee is required to work at night, between 10:00 p.m. and 6:00 a.m., the employer is required to pay a premium called night differential pay. This is equivalent to an additional 10% of the employee’s hourly rate per hour.
The Labor Code prescribes that there shall be certain days when an employee may not report to work but shall still be paid his daily wage. These are called leave privileges and are enumerated as follows: (1) Service Incentive Leave, (2) Maternity Leave, (3) Paternity Leave, and (4) Solo Parent’s Leave.
An employee who has rendered at least one (1) year of service is entitled to five (5) days service incentive leave with pay yearly. This provision of the law is not applicable to employers who are already granting more than five (5) days paid leave to its employees.
A pregnant female employee who has paid at least three (3) monthly contributions in the twelve month period right before her childbirth or miscarriage is entitled to sixty (60) calendar days maternity leave for normal delivery and seventy-eight (78) calendar days for caesarean delivery. The maternity benefit shall be for the account of the Social Security System, however, the employer is mandated to advance the maternity leave benefit to the employee within thirty (30) days from the time the employee filed her maternity leave application. This is limited to the first four (4) deliveries/miscarriages.
Unlike the maternity leave benefit, the paternity leave benefit of seven (7) days, is for the account of the employer. To be entitled to this, the employee has to fulfil the following conditions: (1) he has to be legally married; (2) he must have given notice to his employer the moment he learned of his wife’s pregnancy; and (3) this is available for the first four (4) legitimate children only.
In the year 2000, our legislature passed into law the Solo Parent’s Act (Republic Act No. 8972). The main impact of this law, on the employer’s part, is the directive that “solo parents,” as defined by the law, shall be given seven (7) days solo parent leave in addition to any other existing leave benefits given by the company. Moreover, employers are also directed, as much as possible, to provide solo parents with flexible time schedules. There are also certain “social” benefits which the law mandates should be provided by an employer to his employees, namely contribution to: (1) the Social Security System, (2) Employees’ Compensation Program, (3) Philhealth and, (4) Pag-Ibig Fund.
The Social Security System (SSS) provides the following benefits to employees, in addition to its Loan Programs: Sickness, Maternity, Disability, Death/Funeral, and Retirement benefits. So long as an employer has employees who are below sixty (60) years old, the employer is mandated to remit to the SSS, as employer’s contribution, approximately 60% of the total monthly SSS contribution for each employee.
Together with the SSS, the employer is automatically made a member of the Employees’ Compensation Program (EC). The benefits from the EC may be claimed for any work-related illness or injury resulting to death or disability. This may be availed simultaneously with the SSS benefits. The EC contribution is made by the employer alone and is equivalent to about 1% of the employee’s monthly salary credit or Ten Pesos (P 10.00) per month.
Once an employer/employee is a member of the SSS, he is also a member of the Philhealth program. The contribution to the Philhealth is shared by the employer and employee equally with a maximum of One Hundred Twenty Five Pesos (P 125.00) each per month.
Finally, all SSS members who are earning at least Four Thousand Pesos (P 4,000.00) is also required to become a member of the Pag-Ibig Fund, which is basically a savings and loan association. Just like the Philhealth program, the employers and employees share the monthly contribution equally with a maximum of One Hundred Pesos (P 100.00) each per month.
To summarize, when an entrepreneur decides to put up a business, he hast to take into consideration he various Labor standards (minimum wage, overtime/holiday pay, paid leaves) and government mandated benefits (SSS, EC, Philhealth, Pag-Ibig_ which come with the cost of labor.
Caveat: This is merely a general overview of our existing Labor-related rules. There are exceptions and limitations which may apply to each specific employer-environment.