Title II – WAGES
Chapter 1 – Preliminary Chapter
Art. 97 Definitions:
• person
• employer
• employee
• agriculture
• employ
• wage
• fair and reasonable value
1. “WAGE” AND “SALARY” DEFINED
WAGE
 applies to the compensation for manual labor, skilled or
unskilled, paid at stated times, and measured by the day, week,
month, or season
 indicates inconsiderable pay for a lower and less responsible
character of employment
SALARY
 denotes a higher degree of employment, or a superior grade
of services, and implies a position or office
 suggestive of a larger and more permanent or fixed
compensation for more important office
1.1 “Wage” includes sales commissions
• wage, pay and salary have the same meaning, commission is
included in the definition of wage, therefore in the computation
of separation pay, the salary base should include earned sales
commission
Songco v NLRC → sales commissions and allowances should
be included in computation of separation pay. In the
computation of backwages and separation pay, account must
be taken not only of the basic salary of the employee but also of
the transportation and emergency living allowances.
1.2 Wage Includes Facilities or Commodities
• includes facilities (include articles or services for the benefit of
the employee or his family but shall not include tools of the
trade or articles or service primarily for the benefit of the
employer or necessary to the conduct of the employer’s
business) or commodities (employer may provide them but he
may deduct their values from the employee’s wages
2. FACILITIES DISTINGUISHED FROM SUPPLEMENTS
Facility
 include articles or services [board and lodging] for the benefit
of employee or his family
 does not include tools of the trade or articles or services
primarily for the benefit of the employer or necessary to the
conduct of employer’s business.
 wage-deductible and required that employee voluntarily
accepts the facility else cant be deducted against wages
 Secretary of Labor and Employment is authorized to fix the
fair and reasonable value of facilities furnished to employees
 items of expense necessary for the laborer’s and his family’s
existence and subsistence that they form part of wage since if
not furnished the laborer would spend and pay for them just the
same.
Supplements
 extra remuneration or special privileges or benefits given to
or received by laborers over and above their ordinary earnings
or wages
Legal requirements before deducting the value of facility:
[Mabeza]
1. proof that such facility are customarily furnished by the
trade
2. provision of deductible facilities must be voluntarily
accepted in writing by employee
3. facilities must be charged at fair and reasonable value
• HOWEVER, deduction cannot be more than 70% of the
meals and snacks, provided that such deduction must be
authorized in writing by the employee; remaining 30% has
to be subsidized by the employer
Lodging facility – value is determined to be the cost of operation
and maintenance, including adequate depreciation plus
reasonable allowance
2.2 Salary Excludes Allowances
• Allowances are excluded from basic salary or wage in
computation of the amount of retirement and other benefits
payable to employee
3. SALARY DISTINGUISHED FROM GRATUITY
GRATUITY
 something given freely, or without recompense; a gift;
something voluntarily given in return for a favor or services; a
bounty; a tip
 that which is paid to the beneficiary for past services
rendered purely out of the generosity of the giver or grantor
 not intended to pay a worker for actual services rendered
4. FAIR DAY’S WAGE FOR FAIR DAY’S LABOR
• Fair days wage for a fair days labor is a basic factor in
determining employee’s wages.
• No work performed then no wage or pay unless laborer
was willing to work but was prevented by management or
illegally locked out, suspended or dismissed.
• Failure of workers to work was not due to employer’s fault,
the burden of economic loss suffered by employee should
not be shifter to employer. Each part bears his own loss
5. Equal Pay for Equal Work
ISAE vs Quisibing fact that some teachers are foreign and
some local does not serve as a valid classification to justify
unequal salary. Equal pay for equal work. If an employer affords
same position and rank then presumption is that they perform
equal work.
6. AGRICULTURAL WORK
• Agricultural wage rates are generally lower than industrial.
Nature of the work that classifies worker as agri or industri
Agriculture—farming in all its branches, among others, include
cultivation and tillage of the soil, production, cultivation, growing
and harvesting of any agri or horti commodities, raising of
livestock, fish and any activities performed by a farmer or on a
farm but does not include manufacturing or processing.
• Agri rate applies to farm work from land preparation to
harvesting, industrial rate to manufacturing or processing of
farm products.
Del Rosario vs CIR the following are deemed industrial
workers: mill, laborers, chemists, fuelmen, oiler, tractor, and
truck drivers
PART V - 1
Art. 98 – Application of Title 2 (Wages)
Not applicable to:
1. farm tenancy or leasehold
2. domestic services
3. persons working in their respective homes in needle work or
any cottage industry
4. workers employed in any establishment duly registered with
the National Cottage Industries and Development Authority
5. workers in any duly registered cooperative when so
recommended by the Bureau of Cooperative Development
6. Barangay micro business enterprise any business entity
engaged in the production, processing, or manufacturing of
products or commodities, including agro-processing, trading
and services, whose total assets including those arising from
loans but exclusive of the land on which the particular business
entity’s office, plant and equipment are situated, shall not be
more than P3M.
Chapter 2: Minimum Wage Rates
Art. 99 Regional Minimum Wages
1. MINIMUM WAGE DEFINITION; RATIONALE
• Agri and non agri prescribed by the Regional Tripartite
Wages and Productivity Boards
Minimum wage—lowest wage rate fixed by law that an
employer can pay his employee.
• Paying less than minimum wage is illegal. Complaint may
be brought to DOLE regional office.
2. ABILITY TO PAY IMMATERIAL
De Rancho vs Municipality of Iligan employer cannot be
exempted because of poor financial condition of the company;
payment of minimum wage is not dependent on employer’s
ability to pay
3. EMPLOYEES NOT ESTOPPED TO SUE FOR
DIFFERENCE IN AMOUNT OF WAGES
• acceptance by an employee of the wages paid him without
objection does not give rise to estoppel precluding him from
suing for the difference between the amount received and
the amount he should have received pursuant to a valid
minimum wage law
4. EXEMPTIONS
4.1 Exemption Under the Implementing Rules:
a. household or domestic helpers including family drivers and
persons in the personal service of another
b. homeworkers engaged in needlework
c.workers employed un any establishment registered with the
National Cottage Industry
d. workers employed in any establishment duly refistered with
Bureau of Cooperative Development
4.1a Cooperatives may still be Exempted from Minimum
Wage Law
4.2 Exemptions from BMBEs
• BMBE act of 2002 exempts BMBE from coverage of
minimum wage law
4.3 Retail and Service Establishment
• Retail/service establishments regularly employing not more
than 10 workers may be exempted from Wage
Rationalization Act or minimum wage law
4.4 Other Exemptions
• Wage orders allow petitions for exemption from prescribed
wage rates
Art. 100. PROHIBITION AGAINST ELIMINATION OR
DIMINUTION OF BENEFITS
Non –diminution rule: benefits being given to employees cannot
be taken back or reduced unilaterally by the employer because
the benefit has become part of the employment contract, written
or unwritten.
• Rule against diminution of supplements or benefits is
applicable if it is shown that the grant of benefit is based on
an express policy or ripened into a practice over a long
period of time and practice is consistent and deliberate
• No unlawful diminution if benefit is a contingent or
conditional benefit whose demandability depends on
certain pre-conditions
1. NONDIMINUTION OF BENEFITS
Requisites for application of nondiminution rule:
1. grant of the benefit is founded on a policy or has ripened into
a practice over a long period
2. the practice is consistent and deliberate
3. the practice is not due to error in the construction or
application of a doubtful or difficult question of law
4. the diminution or discontinuance is done unilaterally by the
employer
Extent of the Rule
1. 1 food and meal allowances
1. 2 noncontributory retirement plan
1. 3 monthly emergency allowance
1. 4 Full Thirteenth Month Pay
3. EXCEPTIONS TO THE NON-DIMINUTION RULE
Jurisprudence recognizes exceptions to the rule illustrated in
the following cases:
1. correction of error
2. Negotiated benefits
3. wage order compliance
4. benefits on reimbursement basis
5. reclassification of position
6. contingent benefits or conditional bonus
7. productivity incentives
3.1 Not Established Practice; Mistake in Application of Law
3.2 Negotiated Benefits
• Benefits negotiated in CBA are not within prohibition of art
100 because it is a prodict of a bilateral contract which can
be diminished billaterally. Prohibited are those that the
employer can do unilaterally
3.3 Wage Order Compliance
PART V - 2
• If no salary distortion to cure—previous across the board
mehtod can not be demanded as if it were a legal
obligation
3.4 Benefit on Reimbursement Basis
• Elimination of existing benefit in exchange for an equal or
better one does not violate art 100
3.5 Reclassification of Position; Promotion
• Should be done in good faith
3.6 Contingent or Conditional Benefits; Bonus
Bonus—is an amount granted and paid to an employee for his
industry and loyalty which contributed to the success of the
employer’s business and made possible the realization of
profits; bonus is not a demandable and enforceable obligation
BUT it is when made part of the wage or salary or
compensation
3.6a Equity or Long Practice as Basis of Bonus
• equity or long practice as basis of bonus – even if bonus is
not demandable; long and regular concession; fixed hope
3.6b Services rendered as basis of bonus
• services rendered as basis of bonus – right is not defeated
by a “release and quitclaim” upon termination (Marcos v
NLRC – redundancy benefits)
3.6c No Profit, No Bonus
Traders Royal Bank vs NLRC reduction of bonus not
diminution of benefits; no profit, no bonus. Granting of bonus is
basically a management prerogative
3.7 Productivity Incentives
• employee’s share is in the nature of salary bonus
proportionate to increases in current productivity over the
average for the preceding 3 consecutive years; “bonus” is
not gratuity but the computed result of joint planning and
effort; claimable only on the basis of predefined output level
4. PD 851 – 13TH MONTH PAY
THIRTEENTH MONTH PAY
• Required by PD 851, which is an additional income based
on wage but not part of wage
• 1/12 of the total basic salary earned by an employee within
a calendar year
• all employees regardless of designation or employment
status irrespective of method by which wages are paid,
provided they worked for at least 1 month
• employee who resigned or terminated at any time before
payment of 13th month is entitled to monetary benefit pro
rata
• even piece rate workers are entitled to 13th month pay
• managerial employees are exceed but company policy or
established practice may cover them
• earnings and remuneration which are not part of basic
salary is not included in computation of 13th month pay by
PD 851
• government employees are not covered
Universal Corn Product CBA provides for a bonus in
graduated amounts depending on length of service, intention is
clear that the bonus is meant to be in addition to legal
requirement of 13th month pay. If in lieu of 13 th month then CBA
should say so.
Tax Exemption
• RA 7833 exempts from income and withholding tax the 13 th
month pay [in the private sector] and other benefits
received by gov and private employees
• Benefits exceeding P30,000 shall be taxable
4.1 Nature of the 13th Month Pay
• issued during the Martial Law, requires all employers to pay
their rank-and-file employees receiving a basic salary of not
more than P1000 a month, regardless of the nature of
employment, a 13th month pay not later than December 24
of every year
• President Aquino removed the P1000 ceiling, entitled to
13th month pay all rank-and-file employees, regardless of
salary rate, but still excluding managerial or supervisory
employees
4.2 Equivalent or Bonuses May Be Credited as the 13th
Month Pay
• “equivalent” (i.e. Christmas bonus, mid-year bonus, profit-
sharing payments, and other cash bonuses amounting to
not less than 1/12 of the basic salary but shall not include
cash and stock dividends, cost-of-living allowances and all
other allowances enjoyed by the employees, as well as
non-monetary benefits) or bonuses may be credited as
13th month pay
• Nat’l Federation of Sugar Workers v Ovejera – year-end
productivity bonus of 1/12 of basic salary plus difference
4.3 When CBA Bonus Deemed Apart from, not “Equivalent”
of 13th Month Pay
• If the CBA did provide for bonus in graduated amounts
depending on the length of service of the employee, bonus
provided in the CBA was meant to be in addition to the
legal requirement (Universal Corn Products v NLRC –
graduated Christmas bonus)
4.4 Thirteenth Month Pay Deemed Written in Contract
• Absence of an express provision in the CBA obligating the
employer to pay the employees a 13th month pay is
immaterial; PD 851 is mandatory, 13th month pay is
deemed written in contract
4.5 Food, Etc. Not Substitute for 13th Month Pay
• Supplements or other employee’s benefits or favorable
practice not substitute for 13th month pay
4.6 14th Month Pay Not Legally Demandable
4.7 Computaion of 13th month pay
• Computation of 13th month pay – 1/12 of basic salary
within a calendar year
• Basic salary – include all remunerations or earnings paid
by an employer to an employee for services rendered but
may not include cost-of-living allowances, profit-sharing
payments and all allowances and monetary benefits which
are not considered or integrated as part of the basic salary
of the employee;
PART V - 3
• overtime pay and other remunerations are excluded as part
of basic salary and in the computation of the 13thmonth
pay (San Miguel Corp v Inciong)
4.7b Are Commisions Included in the Computation
• commissions are included or excluded, depending on what
kind of commissions are involved; if wage-or-sales-
percentage type [intimately related to the extent or energy
of an employee’s endeavors], includible in the 13thmonth
pay computation (Phil. Duplicators v NLRC); if profit-
sharing or productivity bonus type [something extra for
which no specific additional services are rendered by any
particular employee], excluded (Boie-Takeda Chemicals v
Dela Serna)
4.7c Guaranteed Wage and/or Commission
• employees w/ guaranteed wages/commissions entitled to
13th month pay based on their total earnings during the
calendar year on both their fixed and guaranteed wage and
commissions (Phil. Agricultural and Industrial Workers’
Union v NLRC – drivers and conductors)
• commissions recompense, compensation, reward of an
employee, agent, salesman, executor, broker or bailee,
when the same is calculated as a percentage on the
amount of his transactions or on the profit of the principal
4.7d Is Teachers’ Overload Pay Included?
• teacher’s overload pay performed during or within the 8
hours in a day [the load in excess of the normal load of
private school teachers as prescribed by DECS or the
policies, rules, and standard of particular private schools;
work in excess of the regular teaching load; may be
performed within or outside 8 hours in a day] part of basic
pay for computing 13th month pay
4.8 Proportionate 13th Month Pay
• an employee who has resigned or whose services were
terminated at any time before the time for payment of the
13th month pay is entitled to this monetary benefit in
proportion to the length of time he worked during the year,
reckoned from the time he started working during the
calendar year up to the time of his resignation or
termination from service (Int’l School of Speech v NLRC)
4.9 Distressed Employer
• distressed employer may be exempt from paying the 13th
month pay only upon prior authorization from Labor Sec
(Dentech Manufacturing Corp v NLRC)
4.10 Non-Strikeable
• difference of opinion on how to compute the 13th month
pay does not justify a strike
• nonpayment of 13th month pay is not an issue of unfair
labor practice but one of money claim
4.11 Exclusion: Government Employees
• PD 851 only applies to private employers and their
employees; no intention to cover persons working in the
govt service (Alliance of Govt Workers v Minister of Labor
and Employment)
4.12 Seafarers
• Seafarers are contractual not regular this not entitled to 13th
month pay
Art 101. PAYMENT BY RESULTS
Piece rate workers are subdivided into 2 categories:
1. those paid piece rates which are prescribed in Piece
Rate Orders issued by DOLE
 wages or earning under this category are determined by
multiplying number of pieces produced by the pay rate per
piece. Whatever they earn after working for a certain number of
hours in a particular day shall be their actual earning even if the
work time exceeds eight hours.
2. those paid output rates which are prescribed by the
employer and are not yet approved by the DOLE
 under this category the number of pieces produced is
multiplied by the rate per piece as determined by the employer.
If the amount is equal to or greater than the applicable legal
daily rate in proportion tot eh number of hours worked, worker
receives such equal or greater amount. But if amount is lower
than the legal daily rate, employer must make up the difference.
• Piece rate workers are entitled to holiday pay, premium
pay, 13th month pay, SIL as well as overtime pay
1.1 Illustrative Case
• payment by result not determinative of er-ee rel., only a
method of compensation
2. BASIS OF OUTPUT PAY RATE
• basis of output rate – the performance of an ordinary
worker of minimum skill or ability [aka the average worker
of the lowest producing group representing 50% of the total
number of employees engaged in similar employment in a
particular establishment, excluding learners, apprentices,
and handicapped workers employed therein
3. ENTITLEMENT OF PIECE RATE WORKERS TO NIGHT
DIFFERENTIAL AND SIL
• unsupervised piece-rate workers are not entitled to night
differential pay and service incentive leaves
• re: yearly commutation or cash conversion of the service
incentive leave based on their average daily earnings of
piece-rate workers during the particular year of service
which can be derived by dividing the amount earned during
the year by the actual number of working days or the
statutory minimum rate, whichever is higher
• in the absence of any agreement which provides otherwise,
the amount earned during the year may exclude COLA,
overtime pay, and premium pay, holiday pay, night
differential pay and company fringe benefits
4. ENTITLEMENT TO HOLIDAY PAY
• piece rate worker entitled to holiday pay
5. ENTITLEMENT TO 13TH MONTH PAY
• to be entitled piece rate worker should have rendered
at least 1 mont work or service during calendar year
PART V - 4