Compensation is considered an important factor in producing good job quality.

Providing competitive benefits and compensation to employees has been a

challenge to organization’s management. In line with this, it is important for the
management to know the basic guidelines and laws when it comes to employees’
pay and benefits.

The following sections provide an overview of the laws indicated in the Labor Code
of the Philippines regarding working conditions, pay, and benefits.

Framework Analysis

The discussion of the working conditions, compensation, and benefits goes with an
employee’s stage in its job life cycle, from the start of work, to retirement or death.
Furthermore, implications of the laws are detailed in the end of each job life cycle
stage.

EARLY YEARS OF WORK

I. Working Conditions and Rest Periods

A. Working Conditions
The working conditions discussed involves employees in all establishments,
whether profit or nonprofit, except for the following:
 Government employees
 Managerial employees
 Field personnel
 Members of the family of the employer who are dependent on him for support
 Domestic helpers
 Persons in the personal service of others
 Workers paid by results

1. Hours Worked
Normal hours of work: Employees’ normal hours of work shall not exceed eight
hours a day. Hours worked include:
a. All the time the employee is required to be on duty or to be at a prescribed
workplace
b. All the time the employee is suffered or permitted to work
c. Short duration of rest periods

2. Meal periods
Employees shall have not less than sixty minutes time off for their regular meals.

3. Night shift differential

Employees who work between ten o’clock in the evening and six o’clock in the
morning shall receive not less than 10% of his regular wage per hour.
4. Overtime work
The following benefits are entitled to the employee when he works
overtime(working beyond 8 hours):
a. Additional compensation of at least 25% of his regular wage for work performed
beyond eight hours
b. When overtime work is performed on a holiday or rest day additional 30% of the
rate of the first eight hours of work performed
c. Undertime work on a day shall not offset by overtime in another day

B. Weekly Rest Periods

1. Duration.
All employees shall have a rest period of not less than 24 hours after six days of
consecutive work. The employer subject to the collective bargaining agreement
shall determine the rest day; however, the employer shall respect the preference of
the employees when it is based on religious grounds.

2. Compensation for Rest Day, Sunday or Holiday Work

The employee is entitled to the following when he works in a rest day, Sunday, or
holiday:
a. Work on scheduled rest day: At least 30% of regular wage
b. When nature of work of employee has no regular work days and no scheduled
rest day (At least 30% of his wage for work performed on Sundays and holidays)
c. Work on holidays: At least 30% of regular wage
d. Work on holidays which fall on scheduled rest day: At least 50% of regular wage

C. Holidays, Service Incentive Leaves, and Service Charges

1. Holiday Pay
Holidays include:
 New Year’s Day
 Maundy Thursday
 Good Friday
 April 9
 May 1
 June 12
 July 4
 November 30
 December 25
 December 30
 Day for general elections
Every worker is paid his regular wage for working on holidays; except in retail and
service establishments, which employ less than ten employees. When the employer
requires employees to work on holidays: compensation is equivalent of twice his
regular rate.

2. Service Incentive Leaves

Employees who rendered at least one year of service shall be given five days of
incentive leaves with pay. However, this does not apply to the following:
 a. Those who are already enjoying the benefit
b. Those who are enjoying vacation leave with pay of at least five days
c. Those employed in establishments of less than ten employees.

3. Service Charges
For hotels, restaurants, and similar establishments: service charges shall be
distributed at a rate of 85% for all covered employees and 15% for
management. When service charges are abolished: The share of the covered
employees shall be integrated in their wages.

II. Wages

Wages are basically return to labor, as compared to profits to capital and rent
to land. The following discussion regarding wages does not apply to farm tenancy or
leasehold, domestic service and persons working in their respective homes in
needle work or in any cottage industry duly registered in accordance with law. Their
process of employment and payment mechanism are different.

A. Minimum Wage Rates

The employer should comply with the minimum wage rates prescribed by his
respective Regional Tripartite Wages and Productivity Boards authorized by the
state to fix the minimum wage. It should be noted that there are civil and criminal
violations for non-compliance with these wage orders. Moreover, minimum wage
rates from every region may change from time to time. (Refer to the appendix for
the updated summary of current regional daily minimum wage rates for agriculture
and non-agriculture sectors)

The following are the factors to consider for regional minimum wages:
 The demand for living wages;
 Wage adjustment vis-à-vis the consumer price index;
 The cost of living and changes or increases therein;
 The needs of workers and their families;
 The need to induce industries to invest in the countryside;
 Improvements in standards of living;
 The prevailing wage levels;
 Fair return of the capital invested and capacity to pay of employers;
 Effects on employment generation and family income; and
 The equitable distribution of income and wealth along the imperatives of
economic and social development.

B. Payment of Wages
1. Form
Generally, wages should be paid in the country's current currency in the form of
cash. Payment by promissory notes, vouchers, coupons, tokens, tickets, chits or any
object is prohibited. This is illegal even if both the employee and employer agreed.
However, an employer may pay by check or money order. Compliance with the
guidelines of the Department of Labor and Employment is necessary for this form of
payment to be approved.

2. Time
Employers must pay wages at least once every two (2) weeks or twice a month at
intervals not exceeding sixteen (16) days. The only exception is when there arises
force majeure1 or circumstances beyond the employer's control wherein the
payment cannot be made. Nevertheless, the employer should pay the wages
immediately after such force majeure or circumstances have ceased.

3. Place
Payment of wages should be made at or near the place of work. However, payment
at other places is permissible whenever there are deterioration of peace and order
situations, emergencies and natural calamities in their appropriate area, in such
manner, it is impossible to make payment. Compliance with Department of Labor
and Employment's guidelines is necessary to ensure the greater protection of
wages.

4. Person
Wages shall be paid directly to the workers to whom they are due. However, there
are cases wherein indirect payment can be made.

a. In cases of force majeure or circumstances where payment is impossible, the

worker may be paid through another person under written authority given by the
worker.
b. Where the worker has died, in which case, the employer may pay the wages of
the deceased worker to the heirs of the latter without the necessity of intestate
proceedings.

5. Contractor / Subcontractor
Contractors or subcontractors follow the same payment scheme for their
employees. When there is a failure in the payment of wages in the part of the
contractor or subcontractor, the employer shall be jointly and severally liable with
his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.
Moreover, the employer or indirect employer may require the contractor or
subcontractor to furnish a bond equal to the cost of labor under contract. Hence,
the bond may answer for the wages due to the employees in cases of impossible
payment.

6. Responsibility
The employer is generally the one responsible for the payment of wages because of
the interest he acts over his employees or his contractor or subcontractor. Being
highly accountable, he is liable, in any case, to any circumstances that might occur
if he will not observe proper compliance to the Code.

1
The term force majeure relates to the law of insurance and is frequently used in construction contracts to protect
the parties in the event that a segment of the contract cannot be performed due to causes that are outside the
control of the parties, such as natural disasters, that could not be evaded through the exercise of due care.
Source: Legal Dictionary < http://legal-dictionary.thefreedictionary.com/Force+Majeure>
 In the event of bankruptcy or liquidation of an employer’s business, his workers
shall enjoy first preference as regards their wages and other monetary claims. Such
unpaid wages and monetary claims shall be paid in full before claims of the
government and other creditors may be paid.

III. Benefits

A. Compensation and Insurance Fund

1. Coverage and Liability

Employers are required to insure all their employees not over sixty years of
age. Moreover, employees and employers required to register to the system and
adhere to its regulations.

As to liabilites, the State Insurance Fund is liable for the compensation of the
employee or his dependents. However, employer’s personal liabilities to employees
are separate and distinct from the liabilities of the employer to the employee
through the State Insurance Fund.

In case of death brought about by a third party, the State will provide the
benefits. But in case an employer becomes a third party which caused the disability
or death of an employee, he will have a legal liability to the System which paid for
the employee. If the System recovers its costs and has excess from the third party
damages, these excesses shall belong to the employee or whoever is entitled to
receive them.

Lastly, employers cannot make a contract with employees to deprive them or

their dependents of the benefits granted or medical services.

2. Administration

There is an Employees’ Compensation Commission formed by several government

officials who would be able to fix a rate of contribution for all employers, to
determine a rate of contribution for an employer who has frequent cases of
employee disabilities brought about by lack of safety measures in the workplace
and to initiate standards and programs for safety in the workplace.

Any disputes arising related to employee’s compensation and benefits must be

decided upon by the Commission 20 days after evidence has been submitted. And
unless an appeal was made within 10 days of being informed, any decision made by
the Commission will be final and executory.

B. Contributions
 • For private employers, they will pay 1% of the salary of the employee to the
SSS every last day of the month, beginning once an employee’s compulsory
coverage takes effect, as coverage for any expected injuries or losses that
may occur in the course of the employee’s career.
• This amount may be adjusted depending on the level of perceived risk and
actual losses.
• The amount must be paid in their entirety by the employer, and cannot be
deducted from the employee’s compensation.
• This obligation is terminated once the employee leaves or dies.
• Coverage is guaranteed by the government of the Philippines, and any
deficiencies on the part of the GSIS will be supplemented by the national
government.

C. Medical and Dental Benefits

• Every employer must have first-aid services in the premises
- A Physician must be on stand-by for emergencies
• The company must have a comprehensive health program for the benefit of
the employees.
• It is the responsibility of the employer to assist the employee in adequate
and immediate medical and dental emergencies
• Employees will be provided medical benefits by the System (SSS for private
and GSIS for public), depending on the nature of their injury or sickness and
subject to the relevant expense limits set by the Compensation Commission.
• The System has the authority to select the physician and the medical facility
that an injured or sick employee may avail of. If the employee makes any
unauthorized changes in either the choice of physician or medical facility, the
System shall not be liable for any further injuries or losses on the part of the
employee.
• The physician assigned to treat the employee must submit regular medical
reports to the System.
• If an employee refuses medical treatment unreasonably, the System is no
longer obliged to pay for any further medical treatments for as long as the
employee continues to refuse treatment.
• All fees and expenses must not be higher than the prevailing rates in other
wards and hospitals for patients receiving similar treatment.
• The System shall establish an ongoing program for the rehabilitation of
injured and handicapped employees to help them regain physical
independence.
• The System shall establish centers with programs to help handicapped
employees regain a suitable level of employment and develop potential.

IMPLICATIONS
• Analysis and Design of Work: In designing a job, the HR Department should
take into consideration which laws govern the compensation scheme of the
employee. Some laws may not apply to jobs such as government and
managerial employees
 • Planning: Laws on holiday pays and rest days would lead the HR Department
to come up with a staffing plan which will allocate efficiently the human
resources
• Compensation: HRD’s recording of an employee’s hours worked should be
accurate enough to ensure that employee’s receive their compensation fairly
• Employee relations: If a union of workers exists, the HR Department should
communicate to them what the rights of employees are, and settle down
matters which the law requires to be tackled with the union
• Recruitment and Selection – In the selection process, the HR personnel
should properly state the amount the potential employee will receive when he is
accepted. The form of payment should also be discussed in this case to boost the
interest of the applicants to join the company.
• Planning and Administering Pay and Benefits – Careful planning of the dates
when the release of payments should be made together with the place where it
should take place. In result, there would be an organized and systematic way of
administering the pay. Moreover, the responsibilities to provide benefits are
guaranteed by the law of the land; thus, the employer is ultimately responsible for
their employee’s welfare.

MIDDLE JOB LIFE

I. Working Conditions for Special Groups of Employees

A. Employment of Women
The following conditions pertains to women employees:
i. Women should not be made to work late nights (between 10pm to 6am)
ii. Women should be given facilities in the workplace (seats, separate toilets,
dressing room, nursery)
iii. Women should be given benefits
a. Maternity Leave Benefits
- at least 2 weeks prior to expected date of delivery and another
4 weeks after normal delivery with full pay
- shall be extended without pay on account of illness
- first 4 deliveries only
b. Family Planning Services/ Incentives for Family Planning
- free family planning services for establishments required by
law to maintain a clinic or infirmary
- incentive bonus schemes to encourage family planning
iv. Women should not be discriminated against
v. Women should not be given stipulations against marriage

B. Employment of Minors
i. Minors below 15 years old should not be employed unless under the
responsibilty of his/her parents
ii. Minors between 15 to 18 years old can be employed only for a limited
number of hours
iii. Minors shall not be discriminated against.
C. Employment of Househelpers

i. Domestic or Household Service is for the ministering of the personal comfort

and convenience of the employer’s household
ii. Contracts must be at the maximum of (2) years. It can be renewed afterwards.
iii. Minimum Wage of P550-P800 per month, depending on the location
iv. Employer should provide lodging, food and medical attendance outside of the
Cash Wages
v. The house helper must be treated in a just and humane manner

D. Prohibitions Regarding Wages

The following are the prohibitions regarding wages:

a. Employers should not force, compel, or oblige the employees the way they
dispose their wages.
b. Employers have no right to deduct wages of employees unless:
- because of insurance purposes
- because of union dues
- authorized by law (DOLE sec)
c. No employer shall require his worker to make deposits from which deductions
shall be made for the reimbursement of loss of or damage to tools (unless
recognized)
d. Deductions regarding loss should only be made after the employees’ side is
heard and responsibilities are shown.
e. Employers must not withhold wage by means of stealth, force, threat. etc unless
if with worker’s consent.
f. Employers must not make deductions to wages for his benefit as consideration for
employment retention in employment.
g. Employers must not discriminate and must still pay any employee who has filed
any complaints.

D. Creation of National Wages and Productivity Commission

It is established mainly to:

a. Serve as advisory body for wages, income, etc

b. Formulate policies and guidelines (national levels) regarding wages
c. Prescribe rules and guidelines for appropriate minimum wages (regional,
provincial, and industry)
d. Review wage levels
e. Review plans and programs to determine if consistent with National Development
Plans
Exercise technical and administrative supervision over the Regional Tripartite
Wages and Productivity Boards

E. Wage Order
No wage order shall:
a. be construed to prevent workers in particular firms or enterprises or industries
from bargaining for higher wages with their respective employers
b. provide for wage rates lower than the statutory minimum wage rates
prescribed by Congress

III. Benefits
Temporary Disability Benefits
The following are the benefits the employee receives when he experiences a
temporary disability:
 An employee with a temporary total disability will receive 90% of his or
her average daily salary credit for each day of such a disability or
fraction thereof, subject to the following conditions: the daily income
benefit shall not be less than Ten Pesos nor more than Ninety Pesos,
nor paid for a continuous period longer than one hundred twenty days.
 An employee with a permanent total disability will receive the full
amount of his or her monthly income benefit, plus 10% of this amount
for each dependent child, but not exceeding 5 dependent children,
every month until his or her death.
 This benefit is guaranteed for 5 years, and will be suspended if the
employee recovers, finds full employment, and/or fails to present
himself or herself for examination at least once a year, as required by
the GSIS.
 An employee with a permanent partial disability will receive the
monthly income benefit for duration to be specified by the GSIS,
depending on the type of injury received.

IMPLICATIONS
 The HR department would have to make it their business to be
knowledgeable of such laws that greatly involve the wages and the wage-
giving of their employers.
 Companies would feel that it is more costly to hire women than men.
However, they are also reminded not to discriminate against women because of
this.
 HR would know how to treat and cater to women employees’ basic needs.
Companies would think twice before hiring minors despite hiring them being less
costly for the company.
 A company, if it adheres to these stipulations, would be viewed by women
employees not just as a source of their income but as an institution concerned with
their welfare.
 HR Department will have to secure some degree of transparency in terms of
wage and benefit determination
 From the time of initial hiring, the factors considered and the compositions of
wages should be comprehensively explained to the employee
 In cases of necessary deductions regarding loss (and if with employee’s
consent) the HR department would have to establish a fair set of guidelines
to be followed and implemented
  HRD will have to secure an objective compensation allocation system and
maintain a complete record of it to avoid any further complications in any
case of complaint and inspection
 The HR department would also have to take it upon themselves to dutifully
inform their employees of such guidelines established for the sake of fairness
to all the parties involved
 The HR department would have to appoint people (representatives) to be
wholly knowledgeable of the set of guidelines provided by the commission
and boards, said people should be up-to-date of whatever announcements
and changes that are to be made by the commission therefore keeping the
management duly informed.
 HRD will have to ensure proper and updated planning for employee
compensation and develop good internal contingency arrangements in any
case of stoppage or suspension of company operation because of serious
complaints. This requires for an extensive communication with other
departments.
 Employers are encouraged to actively maintain a safe work environment,
both to boost job satisfaction and cut down on unnecessary expenses and
career-ending injuries.
 Employers’ responsibilities to their employees injured onsite extend beyond
their stay in the company; employees are compensated for any productivity
lost due to injury, practically keeping them on the payroll.

RETIREMENT or DEATH

This section focuses more on the benefits since laws regarding working conditions
and wages for the retiring employees are basically the same with the
aforementioned.

A. Permanent Total Disability Benefits

The System shall pay the following upon the death of a covered employee who is
under permanent total disability:
1. Primary Beneficiaries

a. 80% of the monthly income benefit and his dependents to the dependents’
pension
b. Provided that the marriage must have been validly subsisting at the time of
the disability
2. No Primary Beneficiaries – Secondary Beneficiaries
· The monthly pension excluding the dependents’ pension of the remaining
balance of the 5-year guaranteed period
C. Minimum Benefit
Minimum death benefit shall not be less than P15,000. In addition to the benefits
stated above, a funeral benefit of Php 3,000 shall be paid upon the death of a
covered employee or permanently disabled pensioner.
B. Death Benefits
The following will be the benefits if an employee dies:

1. Primary Beneficiaries
a. An amount equivalent to the employee’s monthly income benefit, plus
10% thereof for each dependent child (not exceeding five) beginning with the
youngest.
b. The monthly income benefit shall be guaranteed for five years.

2. No Primary Beneficiaries – Secondary Beneficiaries

· Monthly income benefit but not to exceed 60 months.
3. Minimum Benefit
The minimum death benefit shall not be less than Php15,000.
---
E.g. Jenny, a 40-year old factory worker, dies. She is a single mom and the
breadwinner of the family. She has two children, both minors. Her dependents are
entitled to the amount equivalent to Jenny’s monthly income benefit plus 20% of
the monthly income benefit (10% for each dependent child) for the next five years.
However, the money will be given to a person who is qualified to take care of the
dependents and their property, upon the discretion of the court (as discussed later
on).

If, for example, Jenny has six dependents, only five will be entitled to the
benefit, starting from the youngest up to the second eldest child.
---
C. Provisions Common to Income Benefits

1. Delinquent Contributions/Payments by the Employer

a. Any benefit and expenses to which the employer is liable will entail legal claims
on all his property, real or personal, which is according to the law, is preferred to
any credit, except taxes. To absolve him from the liability, the employer must pay
the lump sum equivalent of such liability.
b. If the disability or death occurs before the name of the employee is received by
the System, the employer shall be liable to the System for the lump sum equivalent
to the benefits that the employee or his dependents are entitled.

If any employee under permanent partial disability suffers another injury which
results in a compensable disability greater than the previous injury, the State
Insurance Fund shall be liable for the income benefit of the new disability. However,
if the second disability is related to the previous disability, the System shall
be liable only for the difference in income benefits.
Employers must always ensure the safety of their employees’ working environment.
If by any chance, an employee’s injury or death was due to the employer’s failure to
comply with any law or to take safety precautions to prevent injury, the said
employer must pay the SIF a penalty of 25% of the lump sum equivalent of the
income benefit payable by the System to the employee. This is to encourage
employers to strengthen measures in providing for a safe and healthy work
environment to their employees.
2. Issues in Payments to Dependents
 If the System in good faith pays income benefit to the wrong dependent,
the System is free from liability unless and until such other dependent notifies the
System of his claim before the payments have been made. Also, if the money is
payable to minors or incompetents, the payment shall be given to the person or
persons best qualified to take care and dispose of the minor’s or incompetent’s
property for his benefit.
3. Claims for Compensation
No claim for compensation (at least under this Title) is transferable, except to
pay any debt of the employee to the System. Also, the claim for compensation must
be filed with the System within 3 years from the time the cause of action accrued;
otherwise, no claim for compensation shall be given due course.
In filing for claims of benefits, no person may charge any fee for such service, and
any stipulation against this is null and void. Violation of this provision is punishable
by a fine of Php 500 – 5,000, or imprisonment of 6 months to 1 year, or both.
Finally, the SIF and all its assets are exempt from any form of tax, fee, charge, levy,
or customs or import duty.

D. Records, Reports, and Penal Provisions

1. Notice and Record of Sickness, Injury and Death
s If an employee gets sick, injured, or dies, he/she, his dependents, or anybody
on his/her behalf must notify the employer within 5 days of the contingency’s
occurrence.
s Employers should keep a logbook to record chronologically the sickness,
injury, or death of their employees. The record contains vital information such as
name, date, place and nature of contingencies. Entries in the logbook should be
made within 5 days from notice or knowledge of the occurrence of the contingency.

2. Penal provisions: SSS and GSIS

Relating to Republic Act1161 and Commonwealth Act 186, whoever, whether
an employee or employer, commits fraud, collusion, falsification, misrepresentation
of facts, or any other kind of anomaly, for the purpose of securing entitlement to
any benefit or payment from SSS or GSIS, shall be punished. He/She shall pay a fine
of at least Php500 but not more than Php5000 and be imprisoned of 6 months to 1
year.

Implications
 Managing Performance: Employers must make sure that the working
environment for their employees is safe for they will be held liable if they
neglect the health and safety of their employees. Unsafe environments affect
workers’ performance and productivity if they are not assured of occupational
safety.
 Managing Contingencies: The HR Department will exert effort in maintaining
and securing the records of contingencies of the company’s employees, as
they follow standard procedures.
 Administering Pay Benefits: The employer must always be mindful of their
computations for benefits and the like.