Basic Philippine Labor Laws and Regulations

Provided by SME.com.ph

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)

WO
AGRICULTURE
No./DATE
NONREGIO
Plantati
NonOF
AGRICULTU
N
on
Plantati
EFFECTIVI
RE
on
TY
NCR a/

WO 11/
JUNE 16,
2005

P288.00325.00

288.00

288.00

CAR b/

WO 10/
JUNE 15,
2005

219.00 225.00

I-09

WO 09/
NOV. 11,
2004

185.00 200.00

II c/

WO 10/
JUNE 25,
2005

200.00 208.00

188.00 - 188.00 196.00 196.00

III d/

WO 11/
JUNE 16,

217.00 263.50

202.00 - 182.00 229.50 213.50

206.00 - 206.00 212.00 212.00

176.00

151.00

2005
IV-A e/

WO 10/
JUNE 16,
2005

207.00 265.00

187.00 - 167.00 240.00 220.00

IV-B f/

WO 01/
JUNE 17,
2005

192.00 206.00

177.00 - 157.00 186.00 166.00

V g/

WO 10/
JUNE 24,
2005

162.00 209.00

177.00 - 157.00 187.00 167.00

VI h/

WO 13/
JUNE 18,
2005

180.00 205.00

165.00 185.00

VII i/

WO 11/
JUNE 16,
2005

190.00 223.00

175.00 - 175.00 208.00 208.00

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 - 201.00 208.00 208.00

XI p/

WO 11/
FEB. 5,
2005

207.00 209.00

197.00 - 176.00 199.00 178.00

XII m/

WO 12/
JUNE 19,
2005

213.50

200.00

200.00

CARA
GA 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

160.00

a.

Granted P25.00 wage increase

b.

Granted additional P20.00/day Cost of Living Allowance

c.

Granted P15.00/day Cost of Living Allowance

d.

Granted additional P20.00/day Cost of Living Allowance

e.

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)

f.

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.

g.

Granted P15.00 Cost of Living Allowance

h.

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.

i.

Granted P15 (Metro Cebu) & P12 (rest of the region) wage increase

j.

Integrated the P11 ECOLA under WO No. 10 and granted P11 Cost of Living
Allowance

k.

Granted P20 Cost of Living Allowance to be given in two tranches, P16 upon
effectivity & P4 on May 1, 2006

l.

Granted P16.00 Cost of Living Allowance

m.

Granted P6.00-13.00 Cost of Living Allowance

n.

Granted P11.00 wage increase

o.

Granted P10 Cost of Living Allowance

p.

Granted p15 Cost of Living Allowance

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 daysis:
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
Movable Date
Movable Date
April 9
May 1
June 12
Last Sunday of August
November 30
December 25
December 30

New Years Day

Maundy Thursday
Good Friday
Araw ng Kagitingan
Labor Day
Independence Day
National Heroes Day
Bonifacio Day
Christmas Day
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 employees 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
persons 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:

a.

Amun Jadid (New Year), which falls on the first day of the lunar month of
Muharram

b.

Maulid-un-Nabi (Birthday of the Prophet Muhammad), which falls on the twelfth

day of the third lunar month of Rabiul- Awwal

c.

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

d.

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

e.

Id-ul-Adha ( Hari Raha Haji), which falls on the tenth day of the twelfth lunar
month of Dhul-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

30% of
260%
also a rest day
200%
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

Ordinary day

10%

110%

Rest day, special day or

regular holiday

10% of rest day, special 110% of rest day, special

day or holiday rate
day or holiday rate

Night shift (10pm to 6 am)

considered regular work

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 110% of rest day, special

day or holiday rate
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 customers 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 employees 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 employees lawful wife. Availment of the paternity leave may be after the delivery,
without prejudice to an employers 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.

Cost of Living Allowance (COLA) is given to workers to compensate for loss in

purchasing power due to inflation. Rate of COLA is commonly pegged to a general
index such as consumer price index (CPI).

May 09, 2011 The National Capital Region-Regional Tripartite Wages and Productivity
Board issued Wage Order No. 16, granting a P22.00 Cost-of-Living Allowance (COLA)
to minimum wage earners. The wage order was published on May 11, and takes effect
on May 26. Cities covered are the following: Caloocan, Las Pinas, Makati, Malabon,
Mandaluyong, Manila, Marikina, Muntinlupa, Navotas, Paranaque, Pasay, Pasig,
Quezon, San Juan, Taguig and Valenzuela and the Municipalities of Pateros.
The COLA is part of the minimum wage, but shall be excluded from the computation of
wage related benefits, such as overtime pay, night differential, and 13 th month pay. It
shall however, form part of the computation of mandatory contributions to the Social
Security System (SSS), PhilHealth, and Pag-ibig.
This grant of COLA aims to help workers cope with the continuing increase in the prices
of essential commodities, while minimizing cost to employers who are facing high fuelrelated production costs and majority of whom are micro and small enterprises.
The last wage increase took effect on July 01, 2010, in accordance with Work Order No.
NCR-15 wherein all private sector minimum wage workers and employees in the
National Capital Region received an increase in the amount of P22.00 per day.
Work Order No. NCR-16
Under Work Order No. NCR-16, all private sector minimum wage workers and
employees will receive a Cost -of-Living Allowance (COLA) in the amount of P22.00
pesos. However, this does not include household or domestic helpers; persons in the
personal service of another, including family drivers, and duly registered Barangay
Micro Business Enterprise (BMBEs).
Table: The new daily wage rates of covered workers in the private sector in the National
Capital Region as adjusted by the additional P22 COLA
Sector/ Industry

Basic Wage

New Wage Rates

Non-Agriculture

P404.00

P426.00

Agriculture (Plantation and Non Plantation)

P367.00

P389.00

Private Hospitals with bed Capacity of 100 or less

P367.00

P389.00

Retail/Service Establishments employing 15 workers or less

P367.00

P389.00

Manufacturing Establishments regularly employing less than 10

workers

P367.00

P389.00

SOURCES:
BOARD
WAGE ORDER
NCR NO. NCR-15 REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY
BOARD
WAGE ORDER
NCR NO. NCR-16 REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY
DOLE MEMORANDUM SUBMITTED TO PRESIDENT AQUINO, MAY 10, 2011
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