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Basic Philippine Labor Laws and Regulations

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Employers, including small businesses, may implement policies and impose terms and conditions of employment as they deem fit given their operating and profitability requirements. These policies and employment terms and conditions however must be consistent with mandated labor policies set forth in the Labor Code of the Philippines.

Under the Labor Code, your employees are entitled to compensation or wages, overtime pay, holiday and premium pay, service charges and tips in service businesses, SSS, EC and NHI remittances, service incentive leaves, and retirement pay.

Compensation

Regular compensation

You must pay your employees no lower than the minimum wage rates prescribed by law. The minimum wage rates are based on the normal working hours of eight (8) hours a day.

The current regional daily minimum wage rates as of June 2005, are set forth in the table below and may accessed also at the Department of Labor and Employment website, www.dole.gov.ph.

CURRENT REGIONAL DAILY MINIMUM WAGE RATES
(As of June 2005)

REGION WO No./DATE OF EFFECTIVITY NON-AGRICULTURE AGRICULTURE
Plantation Non-Plantation
NCR a/ WO 11/
JUNE 16, 2005
P288.00-325.00 288.00 288.00
CAR b/ WO 10/
JUNE 15, 2005
219.00 - 225.00 206.00 - 212.00 206.00 - 212.00
I-09 WO 09/
NOV. 11, 2004
185.00 - 200.00 176.00 151.00
II c/ WO 10/
JUNE 25, 2005
200.00 - 208.00 188.00 - 196.00 188.00 - 196.00
III d/ WO 11/
JUNE 16, 2005
217.00 - 263.50 202.00 - 229.50 182.00 - 213.50
IV-A e/ WO 10/
JUNE 16, 2005
207.00 - 265.00 187.00 - 240.00 167.00 - 220.00
IV-B f/ WO 01/
JUNE 17, 2005
192.00 - 206.00 177.00 - 186.00 157.00 - 166.00
V g/ WO 10/
JUNE 24, 2005
162.00 - 209.00 177.00 - 187.00 157.00 - 167.00
VI h/ WO 13/
JUNE 18, 2005
180.00 - 205.00 165.00 - 185.00 160.00
VII i/ WO 11/
JUNE 16, 2005
190.00 - 223.00 175.00 - 208.00 175.00 - 208.00
VIII j/ WO 12/
JUNE 16, 2005
206.00 176.50 - 187.00 166.50
IX k/ WO 12/
JUNE 26, 2005
196.00 171.00 151.00
X l/ WO 11/
JUNE 17, 2005
211.00 - 218.00 201.00 - 208.00 201.00 - 208.00
XI p/ WO 11/
FEB. 5, 2005
207.00 - 209.00 197.00 - 199.00 176.00 - 178.00
XII m/ WO 12/
JUNE 19, 2005
 213.50 200.00 200.00
CARAGA n/ WO 06/
JUNE 25, 2005
 200.00 190.00 170.00
ARMM o/ WO 08/
JULY 1, 2005
 180.00 180.00 180.00

 

  1. Granted P25.00 wage increase
  2. Granted additional P20.00/day Cost of Living Allowance
  3. Granted P15.00/day Cost of Living Allowance
  4. Granted additional P20.00/day Cost of Living Allowance
  5. Granted P13.00-P22.00 wage increase to be given in two tranches, June 16, 2005 & Jan 1, 2006 as follows: P10 &12 (Extended Metropolitan Area): P10 &P7 (Growth Corridor Area): P10 & P5 (Emerging Growth Area): & P10 &P3 (Resource Based Area)
  6. Granted P5.00-P20 wage increase; Increase in non-agri will be given in two tranches, i.e. P10 upon effectivity & P5-P10 on 01 Jan. 2006.
  7. Granted P15.00 Cost of Living Allowance
  8. Granted P15 wage increase; for cottage/handicraft, retail/service employing not more than 10 & sugar industry, P10 increase upon effectivity & P5 on April 16, 2006.
  9. Granted P15 (Metro Cebu) & P12 (rest of the region) wage increase
  10. Integrated the P11 ECOLA under WO No. 10 and granted P11 Cost of Living Allowance
  11. Granted P20 Cost of Living Allowance to be given in two tranches, P16 upon effectivity & P4 on May 1, 2006
  12. Granted P16.00 Cost of Living Allowance
  13. Granted P6.00-13.00 Cost of Living Allowance
  14. Granted P11.00 wage increase
  15. Granted P10 Cost of Living Allowance
  16. Granted p15 Cost of Living Allowance

  17. Posted: 16 June 2005

Businesses Exempt from Minimum Wage Laws

If your company is a service establishment with not more than 10 employees, a distressed establishment with a deficit of 20% or more of current paid-up capital, or a new business enterprises outside the National Capital Region (NCR) or is in an export processing zones, you may pay your employees below minimum wage rates on condition that you file a request for exemption from compliance with wage orders with the National Wage and Productivity Council (NWPC).

If you do not pay minimum wages, you will be subject under Republic Act No. 8188 to a fine not less than Twenty-five thousand pesos (P25.000) nor more than One hundred Thousand pesos (P100.000) or imprisonment of not less than two (2) years nor more than four (4) years or both such fine and imprisonment at the discretion of the court. You may also be ordered to pay an amount equivalent to double the unpaid benefits owing to the employees. Payment of this indemnity may not absolve you of criminal liability.

Computation of Wages

The salaries and wages of your employees depend on whether you pay them on a monthly or daily basis.

Monthly-paid employees are those whom you pay every day of the month, including unworked rest days, special days and regular holidays.

Daily-paid employees are those whom you pay for days actually worked and on unworked regular holidays.

The EMR (equivalent monthly rate) of your employees is computed as follows:

Monthly Paid Employees

The formula for the EMR of monthly paid employees is:

EMR = (Applicable Daily Rate x 365)/12

The factor of 365 days consists of: 302 ordinary working days, 51 rest days, 10 regular holidays, and 2 special days.

Daily-paid employees:

The EMR of daily-paid employees depends on whether they are required to work on rest days and holidays.

The EMR of employees who are required to work every day including Sundays or rest days, special days and regular holidays is:

EMR = (Applicable Daily Rate x 391.50)/12

The factor of 391.5 days consists of: 302 ordinary working days, 20.60 (9 regular holidays x 200% plus one regular holiday/Sunday*260%), 66.3 (51 rest days x 130%), 2.6 (2 special days x 130%).

The EMR of employees who do not work and are not considered paid on Sundays or rest days is:

EMR = (Applicable Daily Rate x 314)/12

The factor of 314 days consists of: 302 ordinary working days, 10 regular holidays, 2 special days (if actually worked, equivalent to 2.6 days).

The EMR of employees who do not work and are not considered paid on Saturdays and Sundays or rest days

EMR = (Applicable Daily Rate x 262)/12

The factor of 262 days consists of: 250 ordinary working days, 10 regular holidays, 2 special days (if actually worked, equivalent to 2.6 days). Factor of 260 maybe used if the 2 special days are not worked and are not considered paid.

Workers Paid by Results

Your workers who are paid by results, including homeworkers and those who are paid on piecework, takay, pakyaw, or task basis, shall receive not less than the applicable statutory minimum wage rates prescribed under the Regional Wage Orders for normal working hours, or a portion thereof.

Adjustments in the AMW (applicable minimum wage rate) are computed as follows:

is:

  1. Amount of increase in AMW ÷ Previous AMW x 100 = % increase
  2. Existing rate/piece x % increase = Increase in rate/piece;
  3. Existing rate/piece + increase in rate/piece = Adjusted rate/piece;

Apprentices, Learners and Handicapped Workers

If you have apprentices, learners or handicapped workers, you need to pay them no less than seventy five percent (75%) of the applicable statutory wage rates. Apprentices and learners are those who are covered by apprenticeship/learnership agreements duly approved by the DOLE.

Additional Compensation

Holiday Pay

You need to pay your employees holiday pay when you require them to work on legal, declared holidays or special days.

Regular holidays include:

Date

Holiday

January 1 New Year’s Day
Movable Date Maundy Thursday
Movable Date Good Friday
April 9 Araw ng Kagitingan
May 1 Labor Day
June 12 Independence Day
Last Sunday of August National Heroes Day
November 30 Bonifacio Day
December 25 Christmas Day
December 30 Rizal Day



Your employees who work on a regular holiday (for work within 8 hours) are entitled to twice (200%) their basic wage.

Where the holiday falls on their scheduled rest day, they are entitled to an additional 30% of the employee’s regular holiday rate of 200% or a total of at least 260%.

All covered employees are entitled to holiday pay when they are on leave of absence with pay. Those who are on leave of absence without pay on the day immediately preceding a regular holiday may not be paid the required holiday pay if they do not work during the regular holiday.

National Special Days

There are two national special days: All Saints Day on November 1 and Last Day of the Year, December 31. During these days, the principle of “no work, no pay” applies. Workers who were not required or permitted to work on those days are not entitled to any compensation. This is without prejudice to any voluntary practice or provision in the Collective Bargaining Agreement (CBA) providing for payment of wages and other benefits for days declared as special days.

Employees who work on special days are entitled to additional compensation of not less than 30% on top of the basic pay or a total of 130%. If the special day is also the person’s rest day, he is entitled to at least 50% over and above the basic pay or a total of 150%.

Muslim Holidays

There are five (5) recognized Muslim holidays, namely:

  1. Amun Jadid (New Year), which falls on the first day of the lunar month of Muharram
  2. Maulid-un-Nabi (Birthday of the Prophet Muhammad), which falls on the twelfth day of the third lunar month of Rabiul- Awwal
  3. Lailatul Isra Wal Mi Raj (Nocturnal Journey and Ascension of the Prophet Muhammad), which falls on the twenty-seventh day of the seventh lunar month of Rajab
  4. Id-ul-Fitr (Hari Raya Pausa), which falls on the first day of the tenth lunar month of Shawwal commemorating the end of the fasting season
  5. Id-ul-Adha ( Hari Raha Haji), which falls on the tenth day of the twelfth lunar month of Dhu’l-Hijja.

If your business is located in the provinces of Basilan, Lanao del Norte, Lanao del Sur, Maguindanao, North Cotabato, Sultan Kudarat, Sulu, Tawi-Tawi, Zambaonga del Norte and Zamboanga del Sur and in the cities of Cotabato, Iligan, Marawi, Pagadian and Zamboanga, you need to pay your employees holiday pay.

Premium Pay

You need to pay your employees premium pay or additional compensation if you require them to perform work on nonworking days, such as rest days and special days.

The current premium pay rates are as follows:

Work
Premium Rate
(of daily rate)
Total Rate
Work on rest days or special days
30%
130%
Work on rest day which is also a special day
50%
130%
Work on regular holiday which also a rest day
30% of 200%
260%

You may opt not to pay your managerial employees, workers paid by results or field personnel the above premium pay.

Overtime Pay

If you require your employees to perform work beyond eight (8) hours a day, you need to pay them additional compensation as follows:

Work Overtime Rate
Work > 8 hours on ordinary working days
25%
Work > 8 hours on rest day or  special or regular holiday
30%


Night Shift differential

If your employees work at night between 10:00 pm and 6:00 am, you are required to pay them Night Shift Differential (NSD), as follows:

Work

Rate (of hourly rate)

Pay

Night shift (10pm to 6 am) considered regular work

 

 

Ordinary day

10%

110%

Rest day, special day or regular holiday

10% of rest day, special day or holiday rate

110% of rest day, special day or holiday rate

Night shift considered overtime work

 

 

Ordinary day

10% of 125%

110% of 125% of basic rate

Rest day, special day or regular holiday

10% of rest day, special day or holiday rate

110% of rest day, special day or holiday rate



If you employ not more than five workers and you are a retail or a service establishment, you need not pay night shift differential. You also do not need to pay your managerial employees and field personnel the NSD.

Service Incentive Leave (SIL)

If your employees have been with you already for at least one (1) year, whether service is continuous or broken, you need to pay them Service Incentive Leave (SIL) equivalent to five days. The SIL may be used for sick and vacation leave purposes. If the SIL is not used up within the year, you may commute or pay its money equivalent at the end of the year. In computing the SIL, the basis shall be the salary rate at the date of commutation. The availment and commutation of this benefit may be on a pro rata basis.

You need not grant SIL if your employees are already enjoying this benefit such as when they are already given a vacation leave of at least five days.

You also need not accord SIL to your managerial employees and field personnel. If you are employing less than ten employees, you need not also pay them SIL.

Service Charges

If you are a service establishment, such as hotels, restaurants and night clubs, you may charge an additional 10% to your customer’s bill for distribution to employees.

If you collect service charges, your employees are entitled to an equal share in the 85% of the total of such charges, except managerial employees. You may retain the remaining 15% to answer for losses and breakages and for distribution to managerial employees, at your discretion.

You must distribute the shares of the employee in the service charges no less than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.

If you stop collecting service charges, you are required to provide and integrate into the basic wage of your employees, the average share previously enjoyed by them for the past twelve (12) months immediately preceding such stoppage.

Tips

If you do not collect service charges but practice the pooling of tips given voluntarily by your customers to your employees, you should ensure that the pooled tips are monitored, accounted and distributed in the same manner as the service charges.

13th Month Pay

You also need to pay your rank and file employees 13th month pay no later than December 24 of every year. One half (1/2) of the required 13th month pay may be made before the opening of the regular school year and the other half on or before the 24th of December of every year. The minimum 13th month pay is not less than 1/12 of the total basic salary earned by an employee within a calendar year.

The "basic salary" includes all remunerations or earnings paid for services rendered. It does not include allowances and monetary benefits which are not considered part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances.

Retirement Pay

If you have employees who have reached the age of 60 years or more but not beyond 65 years old, you need to pay them retirement. However, if you are a retail, service and agricultural establishment with no more than ten (10) employees, you are exempted from paying retirement pay. The minimum retirement pay is one-half (1/2) month salary for every year of service. A fraction of at least six (6) months is considered as one whole year.   "One-half month salary" includes:

  1. 15 days salary based on the latest salary rate;
  2. cash equivalent of 5 days of service incentive leave;
  3. one-twelfth (1/12) of the 13th month pay

These benefits are over and above those granted by the Social Security System.

SSS Registration

You are also required to enroll your employees under the Social Security System (SSS) program, which provides insurance and protection for private-sector employees, including resident foreign employees. SSS benefits include disability pension, retirement,funeral benefit, sickness allowance, maternity and paternity leave and loans.

If you are the owner of a single proprietorship business, you should accomplish and submit SSS Forms R-1 (Employer's Data Record) and R-1A (Initial or Subsequent List of Employees). If your business is a partnership or a corporation, you also need to submit your articles of partnership or incorporation.

You should also require your employees to secure an SS number and that that they are reported for coverage under the SSS;

You must report all employees for SS coverage within thirty (30) days from the date of employment by submitting an accomplished SSS Form R-1A (Employment Report) at the nearest SSS office. You are also required to deduct from your employees salaries’ the monthly SS contributions based on the schedule of contributions and remit these contributions to any SSS-accredited bank/SSS Head Office/ SSS selected branches on or before the 10th day following the month when said contributions are due and applicable.

SSS Benefits

The Social Security System (SSS) provides insurance and protection for private-sector employees, including resident foreign employees. SSS benefits include disability pension, retirement, funeral benefit, sickness allowance, maternity and paternity leave and loans.

Maternity Benefits

You must advance maternity benefits to your female employees whether married or unmarried equivalent 60 days for normal delivery, abortion or miscarriage or 78 days for caesarian section delivery. The rate is equivalent to one hundred percent (100%) of the average daily salary credit. Your female employees should be SSS members at the time of delivery, miscarriage or abortion, must have given the required notification to the SSS thru you; and you must have paid at least three months of maternity contributions within the twelve-month period immediately before the date of contingency.

Maternity benefits, like other benefits granted by the SSS, are granted to employees in lieu of wages and is not included in computing the employee’s 13th month pay.

Paternity Leave under Republic Act No. 8187

You are also required to grant paternity leave or time off from work to all your married male employees, regardless of employment status, (e.g. probationary, regular, contractual, project basis) to allow them to lend support to their wives during the period of recovery and/or in the nursing of their newborn child.

The paternity leave consists of seven (7) days with full pay for the first four deliveries of the employee’s lawful wife. Availment of the paternity leave may be after the delivery, without prejudice to an employer’s policy of allowing the employee to avail of the benefit before or during the delivery, provided that the total number of days shall not be more than seven (7) days for each covered delivery.

For more information on SSS registration and benefits, you may visit www.sss.gov.ph.

Tax Compliance

You must also ensure that you are withholding the proper taxes due on the compensation, benefits and other taxable emoluments paid to all your employees.

For more information on tax requirements and compliance standards, please visit www.bir.gov.ph.

 

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