COMPENSATION
STRUCTURE
Compensation Structure in the Philippines
1. Labor and Social Legislation
-The labor code of the Philippines, otherwise known as Presidential Decree No. 442, governs all
employee-employer relations, their rights and obligations.
2. Payroll Salary Compensation, Benefits, Wage and Wage –Related Benefits Overview
•At least the minimum wage per region and/or sector
•Holiday wage and overtime pay for work during holidays or rest days
•Overtime pay when working in excess of 8 hours
•Service Incentive Leave: 5 days of vacation per year of service
•Parental leaves (Maternity, Paternity and Solo parent leaves)
•Other leaves
•13th month
•Separation pay
Compensation Structure in the Philippines
3. Wage and Wage Related Benefits
1. Minimum wage. The Wage Rationalization Act, Republic Act No. 6727, sets the
minimum wage rates applicable per region, province, and industry sector.
*The industry sectors are: non-agricultural, agriculture (plantation and non-
plantation), cottage and handicraft, retail and service sectors.
2. Overtime. Overtime pay rates vary depending on when the overtime work
takes place: regular workday, holiday, rest day, or night (between the hours of
10pm to 6am).
Overtime Rates:
•Regular workday: plus 25% of the hourly pay rate.
•Rest day, regular/special holiday: plus 30% of the hourly rate on said day.
Compensation Structure in the Philippines
3. Premium Pay. This is given on non-working days (rest days/special holidays).
There are Three Special Holidays:
-Ninoy Aquino Day
-All Saints Day
-Last Day of the Year
Premium Pay Rates:
*On a rest day or special holiday, an employee is entitled to an additional 30% of his daily basic rate,
or a total of 130%.
*On a rest day, which is also a special holiday, an employee is entitled to an additional 50% of his daily
basic rate, or a total of 150%.
*On a regular holiday, which is also an employee’s rest day, an employee is entitled to an additional
30% of the regular holiday rate of 200%, or a total of 260%. Note that this is only applicable to
employees covered by the holiday-pay rule.
* The “no work, no pay” principle applies during special non-working days and such other special days
as may be proclaimed by the President of the Philippines.
Compensation Structure in the Philippines
4. Holiday Pay. The Labor Code requires the payment of an employee’s daily basic wage for all non-working regular
holidays. There are 12 regular and there special non-working holidays in the Philippines.
The 12 Regular Holidays are (Republic Act No. 9849):
1.New Year’s day
2.Maundy Thursday
3.Good Friday
4.Araw ng Kagitingan
5.Labor Day
6.Independence Day
7.National Heroes Day
8.Eidl Fitr
9.Eidl Adha
10.Bonifacio Day
11.Christmas Day
12.Rizal Day
Compensation Structure in the Philippines
Rate example:
•If work is accomplished on a regular holiday (up to 8 hours), an employee is entitled to at least twice (200%) of his basic
wage.
•If the holiday corresponds to a scheduled rest day, the employee is entitled to an additional 30% based on his regular holiday
rate of 200%, which comes to a total of at least 260%.
Absences:
*All covered employees shall be entitled to holiday pay when they are on leave of absence with pay on the workday
immediately preceding the regular holiday.
*Employees 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 on such regular holiday.
*Employers shall grant the same percentage of the holiday pay as the benefit granted by competent authority in the form of
employee’s compensation or social security payment whichever is higher, if the employee are not reporting for work while on
such leave benefits.
*Where the day immediately preceding the holiday is a non-work day in the establishment or the scheduled rest day of the
employee, he/she shall not be deemed to be on leave of absence on that day, in which case, he/she shall be entitled to the
holiday pay if he/she worked on the day immediately preceding the network day or rest day.
Successive Regular Holiday:
* Where there are two (2) successive regular holiday, like Maundy Thursday and Good Friday, an employee may not be paid for
both holidays if he/she absents himself/herself from work on the day immediately preceding the first holiday, unless he/she
works on the first holiday, in which case he/she is entitled to his/her holiday pay on the second holiday.
Compensation Structure in the Philippines
5. Night Shift Differential. This is appliable for the work done
between the hours of 10pm to 6am, employees are entitled to Night
Shift Differential (NSD), which represents an additional 10% to the
regular wage for each hour of work performed.
6.) Service Charge. Employees of employers collecting service
charge are entitled to equal share in the 85% of the total of such
charges, except managerial employees. The remaining 15% of the
charges may be retained by the management to answer for losses
and breakages and for distribution to managerial employees, at the
discretion of the management in the latter case.
Compensation Structure in the Philippines
7. Service Incentive Leave. Every employee who has rendered at least one (1)
year of service is entitled to a Service Incentive Leave (SIL) of five (5) days with
pay. SIL maybe used for sick and vacation leave purposes.
8. Parental Leave. The labor code of the Philippines covers three different types
of parental leave: maternity leave, paternity leave, and solo-parent leave.
*Maternity Leave. Whether married, or not, each pregnant employee is
entitled 105 days for both normal and cesarean.
*Paternity Leave. All married male employees are entitle to 7 days
leave for the delivery or miscarriage of his legitimate spouse with whom he must
live, for up to four pregnancies.
*Solo-Parent leave. In addition to parental leaves at the time of a
child’s birth, the Filipino labor code drew a special leave for solo-parent
employees as described in the Solo Parent Welfare, Republic Act No. The
employee must have been working for at least a year to be entitled to a solo-
parent leave, which allows him to 7 working days of leave in a year.
Compensation Structure in the Philippines
9. Other Leaves
Gynecological leave. A woman employee having rendered continuous aggregate
employment service at least six (6) months for the last twelve (12) months shall
be entitled to a special leave benefit of two (2) months with full pay based on her
gross monthly compensation following surgery caused by gynecological disorders.
Leave For Women and their Children who are Victims of Violence. Victims shall
be entitled to take a paid leave of absence up to ten (10) days in addition to
other paid leaves under the Labor Code and Civil Service Rules and Regulations,
extendible when the necessity arises as specified in the protection order.
Compensation Structure in the Philippines
10. 13th Month Pay. Each year, a 13th month pay is given to all rank-and-file employees.
By law, this benefit must be paid before December 24 th and is mandatory.
11. Separation Pay. Following the labor code of the Philippines, article 283 and 284 state
that an employee can claim separation pay if his contract is ended under authorized
causes. A separation pay of ½ month pay for every year of service can be claimed under
the following authorized causes:
a.Retrenchment of person for loss prevention.
b.Cessation of operation not due to serious losses or financial difficulties.
c.If the employee has contracted a disease not curable within 6 months and that his
presence at work can be harmful to himself or his co-workers.
d.A separation pay of 1-month pay for every year of service can be claimed under the
following authorized causes:
a. Labor-saving devices installed by the employer.
b. Redundancy of employee’s services for the company.
c. Impossibility to reinstate the employee to his former position or to an equivalent
position for reasons outside of the employer’s power.
Compensation Structure in the Philippines
12. Retirement Pay. All employees from the private sector may retire from age 60 up to age 65,
at which retirement becomes compulsory, and must have served the establishment for at least
5 years.
Minimum Retirement pay = latest daily pay rate x 22.5days per
month x number of years of service
13. Gross Benefits & De Minimis Benefits
*To reward employee performance and to set incentives it is common for employers to give
compensation in cash or in kind to employees.
*In the Philippines, there are certain benefits and allowances that are given to employees which
are not subject to income tax. This is known as a de minimis benefit, and it includes items such
as food and transportation allowances, small gifts, and other minor expenses. Employees who
receive a de minimis benefit of up to P90,000 in a year will not have to pay any income tax on
it. Let’s take a closer look at this exemption and see how it can help you save money on your
taxes.
*
Compensation Structure in the Philippines
As of January 1, 2018, under the TRAIN Tax Law, here are the new de minimis benefits :
1. Convertible unused vacation leave credits of private employees not exceeding ten days during a year.
2. The convertible value of vacation and sick leave credits paid to government officials and employees
3. Medical cash allowance to dependents of employees not exceeding 1,500 per semester (before it was 750.00) or 250.00 per month (before 125.00)
4. Rice subsidy of 2 000.00 (replaced the amount of 1500.00) or one sack of 50 kg. Rice per month amount to not over 2, 000.00
5. Uniform and clothing allowance not exceeding 6 000 per year (replaced the amount of 5000)
6. Actual medical assistance, e.g., a therapeutic benefit to cover medical and healthcare needs, annual medical/executive check-ups, maternity
assistance, and routine consultations, not exceeding 10 000 yearly.
7.Laundry allowance not exceeding 300 per month
Other De minimis Benefits Philippines
1. Employees’ achievement awards, e.g., for a length of service or safety achievement, employees’ achievement awards must be as tangible personal
property other than cash or gift certificates. It has an annual monetary value not exceeding 10,000 received by the employee under an established written
plan. This benefit does not discriminate in favor of highly paid employees.
2. Any gifts received during Christmas and major anniversary celebrations not exceeding 5 000 per employee once a year.
3. Daily meal allowance for overtime work and nigh/graveyard shift not exceeding 25% of the basic minimum wage on per region basis
4. Last, benefits received by an employee by a collective bargaining annual monetary value received from both this and productivity incentive schemes
combined do not exceed 10 000 per employee per taxable year.
