COMPENSATION AND BENEFITS

Overview
Compensation refers to monetary rewards given to employees for their work
performance, while benefits are additional forms of compensation provided by
employers. Effective compensation systems are tailored to the industry, company, and
workforce type, ensuring employees feel valued while minimizing costs.
Key Topics:
Wages and Salaries
Incentive Programs
Comparable Worth
Benefits Program
Wages and Salaries
Companies must consider competitiveness when setting wages to retain skilled
workers.
Wage determination involves factors like job-related qualifications, experience, and
avoiding favoritism or discrimination.
Union contracts may specify differential pay based on objective criteria.
Incentive Programs
Incentive programs motivate employees through monetary rewards tied to performance.
Examples include:
Sales Bonuses: Rewards for meeting or exceeding sales targets.
Gain-Sharing Incentives: Shared profits from increased productivity or reduced costs by
working efficiently.
Profit-Sharing Plans: Employees receive a portion of company profits above a set
quota.
Comparable Worth
A legal principle advocating equal pay for jobs requiring similar skills, responsibilities,
and effort, regardless of gender or other factors. Jobs are evaluated based on skill
levels using a common index.
Benefits Programs
Benefits go beyond wages and salaries, including legally required provisions like
worker’s compensation, holiday pay, and insurance contributions. However, most
businesses voluntarily provide extended health, life and disability insurance.
Many companies voluntarily offer extended health, life, disability insurance, stock
purchase options, dental/vision care, or free legal services to enhance employee
satisfaction.
Laws on Wages and Working Hours in the Philippines
 1. Presidential Decree No. 928 (PD 928) – Minimum Wage Law
PD 928 ensures that all employees in the private sector (agriculture, industry,
and trade) receive at least the minimum wage set by the government. The law
aims to protect workers from underpayment and ensure a basic standard of
living.
2. Presidential Decree No. 851 (PD 851) – 13th-Month Pay Law
PD 851 requires all employers to give their employees a 13th-month salary
equivalent to one-twelfth (1/12) of their total annual salary. This must be paid
before December 24 each year to help workers with holiday expenses.
3. Presidential Decree No. 525 (PD 525) – Emergency Allowance
PD 525 mandates that employees receive an emergency cost-of-living allowance
to help them cope with economic inflation and the rising cost of essential goods.
4. Social Security Law (As Amended in the Revised Government Service Insurance
Act and Philippine Medical Care Act)
This law ensures that workers are covered by social security benefits, including:
• Social Security System (SSS) for private sector employees
• Government Service Insurance System (GSIS) for government workers
• Philippine Medical Care Act (now PhilHealth) for universal health coverage
Why are these laws important?

Fair wages and benefits

Protection from inflation and economic hardship

Access to social security and medical care

Financial security for emergencies and retirement

The Rights of Workers in the Philippines with Regard to Wages, Rest, Working Hours,
and Holidays
Minimum Wage: Amount of money paid for labor, this is set by Regional Tripartite
Wages and Productivity Boards, varying by region. For instance, the National Capital
Region's minimum wage is ₱610 per day.
13th-Month Pay: Mandated by Presidential Decree No. 851, requiring employers to
provide an annual bonus equivalent to one-twelfth of an employee's annual salary.
Overtime Pay: Employees working beyond 8 hours daily receive an additional 25% of
their regular hourly wage.
Night Shift Differential: Work between 10:00 PM and 6:00 AM warrants an extra 10% of
the regular wage per hour.
Working Hours and Rest Periods:
Standard Work Hours: 8 hours per day.
Rest Days: At least 24 consecutive hours after six consecutive workdays.
Meal Breaks: Minimum of 60 minutes for meals.
Paid Leaves:
1. Service Incentive Leave (SIL): After one year of service, employees are granted
five days of paid leave annually.
2. Maternity Leave: Female employees are entitled to 105 days of paid leave for
childbirth, with an additional 15 days for solo parents. In cases of miscarriage or
emergency termination, 60 days of paid leave are provided.
3. Paternity Leave: Married male employees are granted seven days of paid leave
for the first four deliveries of their lawful spouse.
4. Parental Leave for Solo Parents: Solo parents, as defined by law, receive seven
working days of paid leave annually.
5. Leave for Victims of Violence Against Women and Their Children (VAWC Leave):
Up to ten days of paid leave for women employees who are victims of violence,
extendable as necessary.
6. Special Leave for Women (Gynecological Leave): Two months of paid leave for
female employees undergoing surgery due to gynecological disorders.
Unpaid Leaves:
1. Extended Maternity Leave: Beyond the paid 105 days, female employees can opt
for an additional 30 days without pay.
Holiday Pay:
Employees are entitled to holiday pay on regular and special holidays. The computation
varies as follows:
Regular holidays – 100% of daily wage if not worked; 200% if worked.
Special (non-working) holidays – 30% additional pay if worked; no pay if not worked,
unless stated in the contract.
Philippine Labor Law
Rest, Working Hours, and Holidays
Workers have the right to just and favorable conditions of work, including rest, leisure,
reasonable working hours, and paid holidays.
Normal working hours should not exceed eight (8) hours a day.
Overtime pay for required overtime work (except for emergencies).
Meal periods.
Night shift differential pay.
Weekly rest day.
Additional compensation for work on a rest day (in emergencies) or holiday.
Holiday pays for regular holidays and special days.
Service incentive leave.
Minimum Wage Law
 Republic Act 602, also known as the Minimum Wage Law, applies to employees
in private enterprises, whether in agriculture, industry, or commerce.
 It covers employees of religious, charitable, and educational institutions, as well
as those in government-owned or controlled corporations.
Exclusions: The law does not apply to farm tenancy, domestic service, or
homeworkers engaged in needlework, with some exceptions for those working in
establishments covered by the law.
Objectives of the Minimum Wage Law:
To maintain workers in a state of good health, efficiency, and general well-being.
To serve as leverage for collective wage bargaining.
To afford a fair return of investment to the investor, owner, or operator.
Payment of Wages:
Payment should be made at or near the workplace.
Employers cannot eliminate or diminish wages by stipulating payment through specific
establishments where games of chance, or the sale of liquor or other items take place.
Normal Hours of Work:
All time the employee is required to be on duty or at a prescribed workplace.
All time the employee is permitted to work.
Waiting time, if required or engaged by the employer, is considered part of working
hours.
Attendance at lectures, meetings, training programs, and similar activities is not
considered work time if:
Attendance is outside the employee's regular working hours.
Attendance is voluntary.
The employee does not perform any productive work.
Meal and Rest Periods:
Employees are entitled to at least one-hour time-off for regular meals, or rest
periods/coffee breaks of five to twenty minutes.
Shortening of Meal Period: The meal period may be shortened under specific
conditions, such as:
When the work is non-manual and doesn't involve strenuous physical exertion.
When there is urgent work to avoid serious loss or damage.
When the work is necessary to prevent loss of perishable goods.
A shorter meal period (not less than 20 minutes) may be allowed, provided that this
shorter period is credited as compensable hours worked.
NIGHT SHIFT DIFFERENTIAL PAY
Employees who work between 6:00 PM to 6:00 AM are entitled to night shift differential
pay. This means they receive an additional 10% of their hourly wage for every hour
worked at night. If they work on a rest day or special holiday, they get an extra 30%
premium. On regular holidays, they receive their full wage plus an extra 10% per hour
worked. However, some workers, such as government employees and managers, are
not entitled to this benefit.
The following workers are excluded:
Government employees and those in government-owned corporations
Retail and service workers in businesses with not more than 5 workers
Domestic helpers and personal service workers
Managerial employees
Field personnel who work unsupervised
Commission-based employees who receive fixed pay regardless of hours worked
OVERTIME PAY
Overtime pay is given when employees work beyond 8 hours per day. For regular
workdays, the extra hours are paid with at least 25% more than their regular hourly rate.
If overtime falls on a rest day or special holiday, employees receive at least 30% extra.
For work exceeding 8 hours on a regular holiday, employees get an additional 20% of
their daily wage, plus overtime pay.
PHILIPPINE LABOR LAW ON OVERTIME PAY AND EMPLOYEE BENEFITS
The Article 87 of Labor Code of the Philippines ensures that employees are
compensated fairly for overtime work. Employers must follow these laws to protect
workers’ rights. Employee benefits include night shift pay, overtime compensation, and
holiday premiums, ensuring fair wages for extra work.
Key Terminologies:
Overtime Pay - is the additional compensation payable to employee for services or work
rendered beyond the normal eight hours of work.
Overtime Work - Any work performed beyond the normal 8 hours of work in one
workday is considered as overtime work.
Workday - A full 24-hour period based on an employee’s regular shift.
Overtime Pay Rates – The percentage increase in wages depending on whether the
work is done on a regular day, special day, rest day, or holiday:
*For ordinary working days - additional at least 25% thereof
*For holiday, special day, and rest day - plus at least 30% thereof
Computation of Overtime Pay:
On ordinary days:
Regular hourly rate = minimum wage rate / 8 hours
= ₱250 / 8 = ₱31.25 per hour
To determine overtime per hour:
Overtime rate = regular rate + 25% of regular hourly
OT rate = ₱31.25 + (25% of ₱31.25)
= ₱31.25 + ₱7.81 (₱31.25 × 1.25)
= ₱39.06 per hour
On rest days and special days:
Hourly rate = 130% of regular hourly rate (₱31.25 × 1.30)
= ₱40.625 per hour
Note: The hourly rate on rest day and special day is 130% of the regular rate.
To determine overtime per hour:
Overtime rate = hourly rate on rest day + 30% hourly rate on rest days
= ₱40.625 + (30% of ₱40.625)
= ₱40.625 + ₱12.1875 (₱40.625 × 1.30)
= ₱52.81 per hour
On rest days which fall on special days:
Hourly rate = 150% of regular hourly rate (₱31.25 × 1.50)
= ₱46.875 per hour
To determine overtime per hour:
Overtime rate = hourly rate + 30% of hourly rate
= ₱46.875 + (30% of ₱46.875)
= ₱46.875 + ₱14.0625 (₱46.875 × 1.30)
= ₱60.94 per hour
On regular holidays:
Hourly rate = 200% of regular hourly rate (₱31.25 × 2)
= ₱62.50 per hour
To determine overtime per hour:
Overtime rate = hourly rate + 30% of hourly rate
= ₱62.50 + (30% of ₱62.50)
= ₱62.50 + ₱18.75 (₱62.50 × 1.30)
= ₱81.25 per hour
On rest days which fall on regular holidays:
Hourly rate = 260% of regular hourly rate (₱31.25 × 2.60)
= ₱81.25 per hour
To determine overtime per hour:
Overtime rate = hourly rate + 30% of hourly rate
= ₱81.25 + (30% of ₱81.25)
= ₱81.25 + ₱24.375 (₱81.25 × 1.30)
= ₱105.625 per hour
Work Need Not Be Continuous:
Work performed by the employee need not be continuous as long as it falls in the same
workday.
Undertime Cannot Be Offset by Overtime:
Employers in the Philippines cannot offset undertime by requiring overtime on another
day. Article 87 of the Labor Code prohibits this practice to ensure employees receive
proper overtime compensation.
Article 87. Undertime not offset by overtime. Undertime work on any particular day shall
not be offset by overtime work on any other day.
General Rule:
Employees may not be compelled to work in excess of eight hours or to render overtime
work on any given day against his or her will.
Exceptions:
Article 89 of the Labor Code states that employees may be compelled to perform
overtime work in any of the following cases:
When the country is at war or under any national or local emergency:
When overtime work is necessary to prevent loss of life or property, or in case of danger
to public safety:
When there is urgent work to be performed on machines, etc.,
When the work is necessary to prevent loss or damage to perishable goods;
When the completion or continuation of work is necessary to prevent obstruction or
prejudice to the business; and
When overtime work is necessary to avail of favorable weather or environmental
conditions.
Emergency Overtime Work
Managerial Employees Not Entitled to Overtime Pay:
Article 82 of the Labor Code states that the provisions of the Labor Code on working
conditions and rest periods shall not apply to managerial employees. This includes
overtime pay for overtime work. Thus managerial employees are not entitled to overtime
pay for services rendered in excess of eight hours a day.
Who Receives Overtime Pay?
Eligible Employees:
 Government employees
 Managerial employees under specific definitions
 Domestic servants and workers on result-based pay
 Non-agricultural managerial employees
Weekly Rest Period:
Who determines the schedule of rest day?
General Rule: Employer shall determine and schedule the rest day of his employee.
Exceptions:
Collective bargaining agreement
Rules and regulations as the Sec. of Labor provides
Employer must respect the preference of his employee if it is based on religious
grounds.
Note: Employer must notify the employees of their scheduled rest day:
By written notice
Posting
Or personal notification
(Article 91 - Right to Weekly Rest Day)
a) Work on rest day = additional 30% of regular wage.
b) If the nature of the work of the employee is such that he has no regular workdays and
no regular rest days can be scheduled = additional 30% of the regular wage on
Sundays/Holidays
c) Work on Special Holiday = additional 30% of regular wage.
d) Work on Special Holiday + Rest day = Additional 50% of regular wage.
e) CBA may provide for higher rates.
What is premium pay?
It is the additional compensation for work rendered by the employee on days when
normally he should not be working such as special holidays and rest days.
Refers to the additional compensation required by law to be paid for work performed
within regular eight (8) hours on non-working days such as rest days and special
holidays.
Note: The employer and the employee can agree on higher rates.
(Article 93 - Compensation for rest day, Sunday or holiday work)
Chapter Summary:
Compensation Package - major factor in employee retention
Compensation - organized system providing monetary worth to employees in exchange
for work performance
Benefits - paid by employers over and above regular salary and wages
Problems about compensation should be a top concern for a company. The company
must be accountable in explaining how salaries are determined.
Incentive Program - official monetary plan to motivate and credit employees'
performance.
Comparable worth - legal principle regardless of sex that employees should be
compensated equally involving the same degree of skills and responsibilities.
COMPENSATION AND BENEFITS
Presented by Goal Diggers
Overview:
Compensation refers to monetary rewards given to employees for their work
performance, while benefits are additional forms of compensation provided by
employers. Effective compensation systems are tailored to the industry, company, and
workforce type, ensuring employees feel valued while minimizing costs.
Key Topics:
Wages and Salaries
Incentive Programs
Comparable Worth
Benefits Program
Wages and Salaries:
Companies must consider competitiveness when setting wages to retain skilled
workers.
Wage determination involves factors like job-related qualifications, experience, and
avoiding favoritism or discrimination.
Union contracts may specify differential pay based on objective criteria.
Incentive Programs:
Incentive programs motivate employees through monetary rewards tied to performance.
Examples include:
Sales Bonuses: Rewards for meeting or exceeding sales targets.
Gain-Sharing Incentives: Shared profits from increased productivity or reduced costs by
working efficiently.
Profit-Sharing Plans: Employees receive a portion of company profits above a set
quota.
Comparable Worth:
A legal principle advocating equal pay for jobs requiring similar skills, responsibilities,
and effort, regardless of gender or other factors. Jobs are evaluated based on skill
levels using a common index.
Benefits Programs:
Benefits go beyond wages and salaries, including legally required provisions like
worker’s compensation, holiday pay, and insurance contributions. However, most
businesses voluntarily provide extended health, life and disability insurance.
Many companies voluntarily offer extended health, life, disability insurance, stock
purchase options, dental/vision care, or free legal services to enhance employee
satisfaction.