Labor Law & Social

Legislation

November 8, 2022

Reporter: Apple B. Lavarez

 LABOR LAW AND SOCIAL LEGISLATION

▰ THIRTEENTH-MONTH PAY
▰ Presidential Decree No. 851 (1975)
▰ Memorandum Order No. 28 (1986)
▰ Revised Guidelines on the implementation of the 13th Month
Pay Law
▰ SERVICE CHARGE
▰ Labor Code: Article 96
▰ Omnibus Rules: Book III, Rule VI

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 THIRTEENTH-MONTH PAY

Presidential Decree No. 851 (1975)

REQUIRING ALL EMPLOYERS TO PAY THEIR EMPLOYEES A 13th-MONTH PAY

WHEREAS, it is necessary to further protect the level of real wages from the ravage of worldwide inflation;

WHEREAS, there has been no increase in the legal minimum wage rates since 1970;

WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may
properly celebrate Christmas and New Year.

NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the powers vested in me by the Constitution, do hereby decree as follows:

Section 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000 a month,
regardless of the nature of their employment, a 13th-month pay not later than December 24 of every year.

Section 2. Employers already paying their employees a 13th-month pay or its equivalent are not covered by this Decree.

Section 3. This Decree shall take effect immediately.

Done in the City of Manila, this 16th day of December 1975.

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 THIRTEENTH-MONTH PAY

Memorandum Order No. 28, s. 1986

MODIFYING PRESIDENTIAL DECREE NO. 851 REQUIRING ALL EMPLOYERS TO PAY THEIR EMPLOYEES A 13TH
MONTH PAY

Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all employees are hereby required
to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year.

Done in the City of Manila, this 13th day of August in the year of Our Lord, nineteen hundred and eighty-six.

(SGD.) CORAZON C. AQUINO

President of the Philippines

TOMAS CLAUDIO COLLEGES – COLLEGE OF LAW

 Revised Guidelines on the implementation of the 13th Month Pay Law

DOLE Secretary Silverio H. Bello III issued

Labor Advisory No. 18 (Series 2018)
reminding employers of provisions of the
13th Month Pay Law and its implementing
guidelines –
• Definition of “basic salary” along
with its inclusions and exclusions
• Coverage
• Amount and Time of Payment
• Formula and computation of the 13th
Month Pay
• Compliance Reporting from
Employers

TOMAS CLAUDIO COLLEGES – COLLEGE OF LAW

Revised Guidelines on the implementation of the 13th Month Pay Law

TOMAS CLAUDIO COLLEGES – COLLEGE OF LAW

 SERVICE CHARGE

Labor Code: Article 96

ART. 96. Service Charges. – All service charges collected by hotels, restaurants and similar establishments shall be
distributed completely and equally among the covered workers except managerial employees.

In the event that the minimum wage is increased by law or wage order, service charges paid to the covered
employees shall not be considered in determining the employer’s compliance with the increased minimum wage.

To facilitate resolution of any dispute between the management and the employees on the distribution of service
charges, a grievance mechanism shall be established. If no grievance is established or if inadequate, the grievance
shall be referred to the regional office of the Department of Labor and Employment which has jurisdiction over the
workplace for conciliation.

For purposes of this Article, managerial employees refer to any person vested with powers or prerogatives to lay
down and execute management polices or hire, transfer suspend, lay-off, recall, discharge, assign or discipline
employees or to effectively recommend such managerial actions.

TOMAS CLAUDIO COLLEGES – COLLEGE OF LAW

 SERVICE CHARGE

Labor Code: Article 96 and Omnibus Rules: Book III, Rule VI

• Coverage and distribution

• Applies only to establishments collecting service charges such as: hotels, restaurants, lodging houses, night clubs to
name a few and those entities operating primarily as private subsidiaries of the government

• Covers all employees except managerial employees where: a "managerial employee" shall mean one who is vested
with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign, or discipline employees or to effectively recommend such managerial actions. All
employees not falling within this definition shall be considered rank-and-file employees.

• It shall be distributed and paid to the employees not less than once every two (2) weeks and should not exceed 16
days interval

• The 85% shall be distributed equally among the covered employees. The 15% shall be for the disposition by
management to answer for losses and breakages and distribution to managerial employees at the discretion of the
management in the latter case. (Omnibus Rules: Book III, Rule VI, Section 3)

TOMAS CLAUDIO COLLEGES – COLLEGE OF LAW

 SERVICE CHARGE

Labor Code: Article 96 and Omnibus Rules: Book III, Rule VI

• Rule if collection of service charge is abolished

• Shall be considered part of their wages

• Amount will be based on the average monthly share of each employee for the last year prior to abolition
or withdrawal of such charges

• Applicability to agreements

• SECTION 6. Relation to agreements. — Nothing in this Rule shall prevent the employer and his employees
from entering into any agreement with terms more favorable to the employees than those provided
herein, or be used to diminish any benefit granted to the employees under existing laws, agreement and
voluntary employer practice.

• SECTION 7. This rule shall be without prejudice to existing, future collective bargaining agreements.
Nothing in this rule shall be construed to justify the reduction or diminution of any benefit being enjoyed
by any employee at the time of effectivity of this rule.

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