Aallowed Deductions

ALLOWED DEDUCTIONS
Baguio City - Janine, 25 years old works in a business establishment along Session Road in Baguio
City for the past three years. She was hired November of 2015 and her first pay is given every 30th
of the month. Every cut off from the first day she reported for work to the present, indicated in her
payslip is a deduction of "cash bond/cash deposit" amounting to P 600.00, which as far as she can
remember was not explained to her, and is not stated on the provisions of her contract. Her co-
employees told her that the cash bond or cash deposit is to answer for loss or damage of materials
or equipment supplied by the employers.
Article 97 of the Labor Code defines wage as the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece,
or commission basis, or other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as determined by
the Secretary of Labor and Employment, of board, lodging, or other facilities customarily furnished
by the employer to the employee. “Fair and reasonable value” shall not include any profit to the
employer, or any person affiliated with the employer. Being the compensation of an employee for a
hard day’s work, it should not be subjected to deductions other than those authorized by law.
Our law prohibits employers, on their own behalf or in behalf of any person, to make deductions from
the wages of their employees except in the following instances: 1) where the worker is insured with
his consent by the employer, and the deduction is to recompense the employer for the amount paid
by him as premium on the insurance; 2) for union dues, in cases where the right of the worker or his
union to check-off has been recognized by the employer or authorized in writing by the individual
worker concerned; and 3) the employer is authorized by law or regulations issued by the Secretary
of Labor and Employment (Article 113, Labor Code).
The making of deductions for cash bonds or deposits is one of the allowable deductions from the
employee’s wages (Article 114, Labor Code of the Philippines). However, the employers cannot just
unilaterally declare and impose upon their employees the giving of bonds and/or deposits. Before
the employers may make deductions from wages for cash bonds, they must first establish that the
same is authorized by law, or regulations issued by the Secretary of Labor. They should also prove
that posting of cash bonds is a recognized practice in their business or if there be none, the
employers should seek for the determination by the Secretary of Labor through the issuance of
appropriate rules and regulations that the policy that they wish to implement is necessary or
desirable in the conduct of their business (Niña Jewelry Manufacturing of Metal Arts, Inc., vs.
Montecillo, G.R. No. 188169, November 28, 2011). The failure of the employers to comply with the
foregoing will render the deductions baseless and illegal.
Last July 27, 2018, DOLE Secretary Silvestre H. Bello III issued Department Order 195, Series of
2018: “Rule Amending Section 10 of Rule VIII of the Implementing Rules and Regulations of the
Labor Code on Wage Deduction” which is pursuant to Article 113 (c) of the Labor Code. The
amended rule on wage deduction, Section 10 (b) (wage deduction) of Rule VIII (Payment of Wages)
is hereby amended as follows: Section 10 (b) “When the deductions are with WRITTEN
AUTHORIZATION by the Employees for the payment to the employer or third person and the
employer agrees to do so, provided that the latter does not receive any pecuniary benefit,
directly or indirectly, from the transaction.” For Non-Diminution of Benefit it states that nothing
in the issuance will be construed to cause the diminution or substitution of any benefits and
privileges currently enjoyed by the employee at the time of issuance hereof.
On top of the general rule, the advisory provides that as to “cash deposit to answer for loss or
damage of tools, materials, or equipment supplied by the employers. It is only in private security
agency where the practice is only recognized and allowed.”
The DOLE reminds employers not to make any deductions from the wages of the employee, except
in the following cases: In requiring such a cash bond, however, a private security agency must first
strictly observe rules and standards to ensure its validity and with due regard to social protection and
welfare of an employee. To this end, the employer should first ensure that any or all of the following
attendant conditions have been observed: (a) The employee concerned is clearly shown to be
responsible for the loss or damage; (b) The employee is given reasonable opportunity to show cause
why deductions should not be made; (c) The amount of such deduction is fair and reasonable and
shall not exceed the actual loss of damage; and (d) The deduction from the wages of the employee
does not exceed 20 % of the employee’s wages in a week.
The advisory emphasized that “in the event that a private security agency requires a cash deposit
from its employees, the maximum amount shall not exceed the employee’s one month basic salary.”
It states that “the full amount of cash deposit deducted shall be returned to the employee within 10
days from his/her separation from the service.”
Finally, Labor Advisory No. 11 provides that deductions made from the employees’ wages, for
company uniforms, cash deposits for loss or damage, personal protective equipment (PPE), capital
share or capital build up in service cooperatives, training fees, and other deductions not included in
the enumeration, are unauthorized.
END/Patrick T. Rillorta

Aallowed Deductions

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