THIRD DIVISION

[G.R. No. 110068. November 11, 1993.]

PHILIPPINE DUPLICATORS, INC . petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION and PHILIPPINE DUPLICATORS
EMPLOYEES UNION-TUPAS , respondents.

Benito P. Fabie for petitioner.

Benjamin C. Alar for private respondent.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; WAGE; DEFINED. — Article

97 (f) of the Labor Code de nes the term "wage" (which is equivalent to "salary," as used in
P.D. No. 851 and Memorandum Order No. 28) in the following terms: "(f) 'Wage' paid to any
employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether xed 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 . . ."
2. ID.; ID.; ID.; SALES COMMISSIONS, PART THEREOF. — In the instant case,
there is no question that the sales commissions earned by salesmen who make or close a
sale of duplicating machines distributed by petitioner corporation, constitute part of the
compensation or remuneration paid to salesmen for serving as salesmen, and hence as
part of the "wage" or "salary" of petitioner's salesmen. Indeed, it appears that petitioner
pays its salesmen a small xed or guaranteed wage; the greater part of the salemen's
wages or salaries being composed of the sales or incentive commissions earned on actual
sales closed by them. No doubt this particular salary structure was intended for the
bene t of petitioner corporation, on the apparent assumption that thereby its salesmen
would be moved to greater enterprise and diligence and close more sales in the
expectation of increasing their sales commissions. This, however, does not detract from
the character of such commissions as part of the salary or wage paid to each of its
salesmen for rendering services to petitioner corporation.
3. ID.; ID.; ID.; BASIC SALARY DIFFERENT FROM FIXED OR GUARANTEED WAGE.
— The term "basic salary" used in P.D. No. 851 and Memorandum Order No. 28 is not to be
confused with the term " xed or guaranteed wage." The term "basic salary" is used to
distinguish wage or salary from "fringe bene ts " which are not integrated into "basic
salary" for certain speci c purposes. In San Miguel Corporation v. Inciong , the catch-all
"allowances" and "monetary bene ts" which are deemed not considered or integrated as
part of "basic salary" was construed to refer to "any and all additions which may be in the
form of allowances or 'fringe' bene ts." These fringe bene ts include payments for sick
leave, vacation leave or maternity leave; premium pay for work performed on rest day and
special holidays; premium pay for regular holidays and night differential pay; and cost of
living allowances.
4. ID.; ID.; ID.; SALES COMMISSION; NOT IN THE NATURE OF AN ALLOWANCE
CD Technologies Asia, Inc. © 2018 cdasiaonline.com
 OR ADDITIONAL FRINGE BENEFITS. — Sales commissions form part of the "wage" or
"salary" of salesmen and are not in the nature of an "allowance" or "additional fringe"
bene t. Once more, we note that in the instant case, sales commissions form the bulk of
the salaries or wages of petitioner's salesmen.
5. ID.; ID.; SEPARATION PAY; EARNED SALES COMMISSION INCLUDED IN
COMPUTATION THEREOF. — This Court has had prior occasion to consider the nature of
commissions earned by salesmen. In Songco v. National Labor Relations Commission , the
Court was called upon to determine whether earned sales commissions should be
included in the monthly or xed salaries of petitioners for purposes of computing their
separation pay. The Court, in declaring that sales commissions must be included in the
salary base of salesmen for purposes of computing separation pay, stressed that: "'Salary,'
the etymology of which is the Latin word 'salarium,' is often used interchangeably with
'wage,' the etymology of which is the Middle English word 'wagen.' Both words generally
refer to one and the same meaning, that is, a reward or recompense for services
performed. Likewise, 'pay' is the synonym of 'wages' and 'salary' (Black's Law Dictionary,
5th Ed.). Inasmuch as the words 'wages,' 'pay' and 'salary' have the same meaning, and
commission is included in the de nition of 'wage,' the logical conclusion, therefore, is, in
the computation of the separation pay of petitioners, their salary base should include also
their earned sales commissions.
6. ID.; ID.; BASIC SALARY; SALES COMMISSION, NOT EXCLUDED FROM ITS
DEFINITION. — Contrary to petitioner's contention, P.D. No. 851 in de ning the term "basic
salary" did not exclude from the ambit thereof sales commissions which are paid along
with xed or guaranteed wages. As pointed out above, what Section 2(b) of the
Implementing Rules and Regulations Implementing P.D. No. 851 excluded from the scope
of "basic salary" were "pro t-sharing payments and all allowances and monetary bene ts
which are not considered or integrated as part of the regular or basic salary of the
employees . . .," which properly refer to "fringe benefits."
7. STATUTORY CONSTRUCTION; CONTEMPORANEOUS CONSTRUCTION OF A
STATUTE BY EXECUTIVE OFFICER, ENTITLED TO GREAT RESPECT; CASE AT BAR. — Both
the opinion rendered by Director Augusto G. Sanchez and the Explanatory Bulletin No. 86-
12 issued by Secretary August S. Sanchez, constitute contemporaneous administrative
construction of the meaning of the term "basic salary," and the two (2) issuances
construed the term "basic salary" as embracing both xed or guaranteed wage and sales
commissions. As long ago as 1903, this Court stressed that "the principle that the
contemporaneous construction of a statute by the executive o cers of the government,
whose duty it is to execute it, is entitled to great respect, and should ordinarily control and
construction of the statute by the courts, is so rmly embedded in our jurisprudence that
no authorities need be cited to support it." It must be noted that the construction given by
Director Sanchez and Secretary Sanchez was adopted and reiterated by Secretary Franklin
M. Drilon in promulgating, on 16 November 1987, the "Revised Guidelines on the
Implementation of the 13th Month Pay Law." Item No. 5 (a) of these Revised Guidelines,
which petitioner corporation has curiously chosen to ignore, while citing Item No. 4 (a) of
the same Guidelines, reads as follows: "5. 13th Month Pay for Certain Types of Employees .
(a) Employees Paid by Results. — Employees who are paid on piece work basis are by law
entitled to the 13th month pay. Employees who are paid a xed or guaranteed wage plus
commission are also entitled to the mandated 13th month pay, based on their total
earnings during the calendar year, i.e., on both their xed or guaranteed wage and
commission . . ." (Emphasis supplied)
CD Technologies Asia, Inc. © 2018 cdasiaonline.com
 8. LABOR AND SOCIAL LEGISLATION; LABOR CODE; 13-MONTH PAY; SALES
COMMISSION INCLUDED IN COMPUTATION THEREOF; EMPLOYER LIABLE FOR
DEFICIENCY FOR NON-INCLUSION THEREOF. — The 13th month pay of employees paid a
xed or guaranteed wage plus sales commissions must be equivalent to one-twelfth
(1/12) of the total earnings (fixed or guaranteed wage-cum-sales commissions) during the
calendar year. Considering that petitioner has excluded from the computation of the 13th
month pay the sales commissions earned by its individual salesmen, we believe and so
hold that petitioner must be held liable to pay for the deficiency.

DECISION

FELICIANO , J : p

The principal issue posed in the present controversy is: what is the appropriate
mode of computation of the 13th month pay of employees who receive a xed or
guaranteed salary plus sales commissions? LibLex

Petitioner Philippine Duplicators, Inc. is a domestic corporation engaged in the

distribution of foreign-made copying machines and related consumables. In petitioner's
employ are salesmen who are paid a xed or guaranteed salary plus commissions, which
commissions are computed on the selling price of the duplicating machines sold by the
respective salesmen.
P.D. No. 851, promulgated on 16 December 1975, prescribed payment of 13th
month pay in the following terms:
"Sec. 1. All employers are hereby required to pay all their employees
receiving a basic salary of not more than P1,000.00 a month, regardless of the
nature of the employment, a 13th month pay not later than December 24 of every
year." (Emphasis supplied)

The Rules and Regulations Implementing P.D. No. 851, issued by the Secretary of Labor
and Employment on 22 December 1975, defined the following basic terms:
"(a) '13th month pay' shall mean one-twelfth (1/12) of the basic salary
of a employee within a calendar year;

(b) 'basic salary ' shall include all remunerations or earnings paid by an
employer to an employee for services rendered, but may not include cost of living
allowances granted pursuant to President Decree No. 525 or Letter of Instructions
No. 174, pro t-sharing payments, and all allowances and monetary bene ts
which are not considered or integrated as part of the regular or basic salary of the
employee at the time of the promulgation of the Decree on December 16, 1975."
(Emphasis supplied)

On 13 August 1986, President Corazon C. Aquino, then exercising both executive

and legislative authority, issued Memorandum Order No. 28 which provided as follows:
"Sec. 1 of Presidential Decree No. 851 is hereby modi ed to the extent that
all employers are hereby required to pay all rank-and-file employees a 13th month
pay not later than December 24 of every year." (Emphasis supplied)

In connection with and in implementation of Memorandum Order No. 28, Minister

CD Technologies Asia, Inc. © 2018 cdasiaonline.com
 Augusto S. Sanchez of the then Ministry of Labor and Employment issued MOLE
Explanatory Bulletin No. 86-12 on 24 November 1986. Item No. 5 (a) of this issuance
read:
"Employees who are paid a xed or guaranteed wage plus commission are
also entitled to the mandated 13th month pay, based on their total earning[s]
during the calendar year, i.e., on both their xed and guaranteed wage and
commission." 1 (Emphasis supplied)
Private respondent union, for and on behalf of its member-salesmen, asked
petitioner corporation for payment of 13th month pay computed on the basis of the
salesmen's fixed or guaranteed wages plus commissions.
Petitioner corporation refused the union's request, but stated it would respect an
opinion from the MOLE. On 17 November 1987, acting upon a request for opinion
submitted by respondent union, Director Augusto G. Sanchez of the Bureau of Working
Conditions, MOLE, rendered an opinion to respondent union declaring applicable the
provisions of Explanatory Bulletin No. 86-12, Item No. 5 (a):
". . . [S]ince the salesmen of Philippine Duplicators are receiving a xed
basic wage plus commission on sales and not purely on commission basis, they
are entitled to receive 13th month pay provided that they worked at least one (1)
month during the calendar year. May we add at this point that in computing such
13th month pay, the total commissions of said salesmen for the calendar year
shall be divided by twelve (12)." (Emphasis supplied)
Notwithstanding Director Sanchez' opinion or ruling, petitioner refused to pay the
claims of its salesmen for 13th month pay computed on the basis of both xed wage plus
sales commissions.
Respondent union thereupon instituted a complaint against petitioner corporation
for payment of the demand of its salesmen-members for 13th month pay. The union
averred that the salesmen received 13th month pay computed only on the basis of their
xed or guaranteed wage. Its basic contention was that pursuant to Memorandum Order
No. 28, above quoted, in relation to the Explanatory Bulletin No. 86-12, also quoted above,
the 13th month pay of salesmen receiving a xed salary and commissions should be
computed on the basis of their total earnings for the calendar year, i.e., on both the xed
salary and sales commissions. llcd

After submission of the parties' respective position papers, the Labor Arbiter
rendered a decision dated 24 October 1989 directing petitioner corporation to pay 13th
month pay to its salesmen computed in accordance with the requirements of Explanatory
Bulletin No. 86-12.
Petitioner appealed to the National Labor Relations Commission ("NLRC"),
formulating the basic issue in terms of "whether or not an employer is liable to give his
employee a separate 13th pay on commissions independently of, aside from and in
addition to, 13th month pay on basic wage." Petitioner maintained that the commissions
earned by its salesmen fell outside the scope of the term "basic salary" for purposes of
computing the 13th month pay of employees. Expansion of the scope of the term "basic
salary", for purposes of computing 13th month pay, is beyond the authority and
prerogatives of the DOLE Secretary, petitioner argued, since such expansion required
legislative authority. prcd

CD Technologies Asia, Inc. © 2018 cdasiaonline.com

 On 17 November 1992, the NLRC a rmed the award of the Labor Arbiter, declaring
that it (the NLRC) was not vested with authority to pass upon the validity of Explanatory
Bulletin No. 86-12, which issuance by Secretary Augusto S. Sanchez remain operative as a
source of rights until declared invalid by the proper authorities, i.e., the Supreme Court.
Petitioner moved for reconsideration of the decision, without success.
Hence, this recourse.
Petitioner reiterates its contention that Explanatory Bulletin No. 86-12 issued by
Secretary Augusto S. Sanchez, as well as the opinion dated 17 November 1987 of Director
Augusto G. Sanchez rendered upon request of respondent union, are void and without
force and effect. Petitioner contends that Explanatory Bulletin No. 86-12 runs counter to
Section 2 (b) of the Implementing Rules and Regulations Relating to P.D. No. 851, quoted
earlier. Petitioner insists also that Explanatory Bulletin No. 86-12 was in any case rendered
ineffective by Item No. 4 (a) of the "Revised Guidelines on the Implementation of the 13th
Month Pay" issued by Secretary Franklin M. Drilon on 16 November 1987, which Item
provides in part as follows: LLjur

"4. Amount and payment of 13th Month Pay

(a) MINIMUM AMOUNT — The minimum 13th month pay required by
law shall not be less than 1/12 of the total basic salary earned by an employee
within a calendar year. For the year 1987, the computation of the 13th month pay
shall include the cost of living allowance (COLA) integrated into the basic salary
of a covered employee pursuant to Executive Order 178.

xxx xxx xxx

The "basic salary " of an employee for the purpose of computing the 13th
month pay shall include all remunerations or earning paid by this employer for
services rendered but does not include allowances and monetary bene ts which
are not considered or integrated as part of the regular or basic salary, such as the
cash equivalent of unused vacation and sick leave credits, overtime, premium,
night differential and holiday pay, and cost of living allowances. However, these
salary-related bene ts should be included as part of the basic salary in the
computation of the 13th month pay if by individual or collective agreement,
company practice or policy, the same are treated as part of the basic salary of the
employees." (Emphasis supplied)

Petitioner thus reads the above provisions as expressly excluding sales or incentive
commissions from the coverage of "basic salary" for purposes of computing 13th
month pay. Petitioner also denies that it had any company policy treating said
commissions as part of its salemen's xed or basic salary. Petitioner asserts that
neither P.D. No. 851 nor the amendatory Memorandum Order No. 28 expressly or
impliedly considered "commissions" as part of "basic salary" for purposes of
computing the 13th month pay due to its salesmen. Accordingly, petitioner insists that
Explanatory Bulletin No. 86-12 constituted an invalid expansion of the scope of P.D. No.
851, as well as Memorandum Order No. 28.
The petition must fail.
In the rst place, Article 97 (f) of the Labor Code de nes the term "wage" (which is
equivalent to "salary," as used in P.D. No. 851 and Memorandum Order No. 28) in the
following terms:
CD Technologies Asia, Inc. © 2018 cdasiaonline.com
 "(f) 'Wage' paid to any employee shall mean the remuneration or
earnings, however, designated , capable of being expressed in terms of money,
whether xed 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, of board, lodging, or other
facilities customarily furnished by the employer to the employee. 'Fair and
reasonable value' shall not include any pro t to the employer or to any person
affiliated with the employer." (Emphasis supplied)

In the instant case, there is no question that the sales commissions earned by
salesmen who make or close a sale of duplicating machines distributed by petitioner
corporation, constitute part of the compensation or remuneration paid to salesmen for
serving as salesmen, and hence as part of the "wage" or "salary" of petitioner's
salesmen. Indeed, it appears that petitioner pays it salesmen a small xed or
guaranteed wage; the greater part of the salesmen's wages or salaries being
composed of the sales or incentive commissions earned on actual sales closed by
them. No doubt this particular salary structure was intended for the bene t of
petitioner corporation, on the apparent assumption that thereby its salesmen would be
moved to greater enterprise and diligence and close more sales in the expectation of
increasing their sales commissions. This, however, does not detract from the character
of such commissions as part of the salary or wage paid to each of its salesmen for
rendering services to petitioner corporation.
The term "basic salary" used in P.D. No. 851 and Memorandum Order No. 28 is not
to be confused with the term " xed or guaranteed wage." The term "basic salary" is used to
distinguish wage or salary from " fringe bene ts " which are not integrated into "basic
salary" for certain speci c purposes. In San Miguel Corporation v. Inciong , 2 the catch-all
phrase "allowances" and "monetary bene ts" which are deemed not considered or
integrated as part of "basic salary" was construed to refer to "any and all additions which
may be in the form of allowances or 'fringe' bene ts." These fringe bene ts include
payments for sick leave, vacation leave or maternity leave; premium pay for work
performed on rest day and special holidays; premium pay for regular holidays and night
differential pay; and cost of living allowances. 3 Sales commissions form part of the
"wage" or "salary" of salesmen and are not in the nature of an "allowance" or "additional
fringe" bene t. Once more, we note that in the instant case, sales commissions form the
bulk of the salaries or wages of petitioner's salesmen.
This Court has had prior occasion to consider the nature of commissions earned by
salesmen. In Songco v. National Labor Relations Commission , 4 the Court was called upon
to determine whether earned sales commissions should be included in the monthly or
xed salaries of petitioners for purposes of computing their separation pay. The Court, in
declaring that sales commissions must be included in the salary base of salesmen for
purposes of computing separation pay, stressed that:
" 'Salary ,' the etymology of which is the Latin word 'salarium,' is often used
interchangeably with 'wage,' the etymology of which is the Middle English word
'wagen.' Both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed. Likewise, 'pay' is the synonym of
'wages' and 'salary' (Black's Law Dictionary, 5th Ed.). Inasmuch as the words
'wages,' 'pay' and 'salary' have the same meaning, and commission is included in
the de nition of 'wage,' the logical conclusion, therefore, is, in the computation of
CD Technologies Asia, Inc. © 2018 cdasiaonline.com
 the separation pay of petitioners, their salary base should include also their
earned sales commissions.
xxx xxx xxx

We agree with the Solicitor General that granting, in gratia argumenti, that
the commissions were in the form of incentives or encouragement, so that the
petitioners would be inspired to put a little more industry on the jobs particularly
assigned to them, still these commissions are direct remunerations for services
rendered which contributed to the increase of income of Zuellig. Commission is
the recompense, compensation or reward of an agent, salesman, executor,
trustees, receiver, factor, broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on the pro t to the principal
(Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A2d
749, 750). The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commissions are part
of petitioners' wage or salary . . ." 5 (Emphasis supplied)
In the second place, contrary to petitioner's contention, P.D. No. 851 in de ning the
term "basic salary" did not exclude from the ambit thereof sales commissions which are
paid along with xed or guaranteed wages. As pointed out above, what Section 2(b) of the
Implementing Rules and Regulations Implementing P.D. No. 851 excluded from the scope
of "basic salary" were "pro t-sharing payments and all allowances and monetary bene ts
which are not considered or integrated as part of the regular or basic salary of the
employees . . .," which properly refer to "fringe benefits."
In the third place, both the opinion rendered by Director Augusto G. Sanchez and the
Explanatory Bulletin No. 86-12 issued by Secretary August S. Sanchez, constitute
contemporaneous administrative construction of the meaning of the term "basic salary,"
and the two (2) issuances construed the term "basic salary" as embracing both xed or
guaranteed wage and sales commissions. As long ago as 1903, this Court stressed that
"the principle that the contemporaneous construction of a statute by the
executive o cers of the government, whose duty it is to execute it, is entitled to
great respect, and should ordinarily control and construction of the statute by the
courts, is so rmly embedded in our jurisprudence that no authorities need be
cited to support it." 6

Finally, it must be noted that the construction given by Director Sanchez and
Secretary Sanchez was adopted and reiterated by Secretary Franklin M. Drilon in
promulgating, on 16 November 1987, the "Revised Guidelines on the Implementation of the
13th Month Pay Law." Item No. 5 (a) of these Revised Guidelines, which petitioner
corporation has curiously chosen to ignore, while citing Item No. 4 (a) of the same
Guidelines, reads as follows:
"5. 13th Month Pay for Certain Types of Employees
(a) Employees Paid by Results. — Employees who are paid on piece
work basis are by law entitled to the 13th month pay.
Employees who are paid a xed or guaranteed wage plus commission are
also entitled to the mandated 13th month pay, based on their total earnings
during the calendar year, i.e., on both their xed or guaranteed wage and
commission.

CD Technologies Asia, Inc. © 2018 cdasiaonline.com

 xxx xxx xxx"
(Emphases supplied)

To recapitulate, the 13th month pay of employees paid a xed or guaranteed wage
plus sales commissions must be equivalent to one-twelfth (1/12) of the total earnings
( xed or guaranteed wage- cum-sales commissions) during the calendar year. Considering
that petitioner has excluded from the computation of the 13th month pay the sales
commissions earned by its individual salesmen, we believe and so hold that petitioner
must be held liable to pay for the deficiency.
WHEREFORE, petitioner having failed to show any grave abuse of discretion on the
part of the National Labor Relations Commission in rendering its Decision dated 17
November 1992, the Petition for Certiorari is hereby DISMISSED for lack of merit. Costs
against petitioner.
SO ORDERED.
Bidin, Romero, Melo and Vitug, JJ ., concur.

Footnotes
1. See Decision of the NLRC dated 17 November 1992; Rollo, p. 24.
2. 103 SCRA 139 (1981).
3. See Item No. 4 (a), Revised Guidelines on the Implementation of the 13th Month Pay
Law.
4. 183 SCRA 610 (1990).
5. 183 SCRA at 617-618.

6. In Re Allen, 2 Phil. 630, 640 (1903).

CD Technologies Asia, Inc. © 2018 cdasiaonline.com