Minimum Wage (PDF)

**Minimum Wage** **Republic Act No. 6727 - "Wage Rationalization Act"** mandates **the fixing of the minimum wages applicable to different industrial sectors**, namely, non-agriculture, agriculture plantation, and non-plantation, cottage/handicraft, and retail/service, depending on the number of w...

**Minimum Wage** **Republic Act No. 6727 - "Wage Rationalization Act"** mandates **the fixing of the minimum wages applicable to different industrial sectors**, namely, non-agriculture, agriculture plantation, and non-plantation, cottage/handicraft, and retail/service, depending on the number of workers or capitalization or annual gross sales in some sectors. ***"Agriculture"* farming** in all its branches and, among others, includes **the cultivation and tillage of the soil**, **production, cultivation, growing and harvesting of any agricultural or horticultural commodities**, **dairying, raising of livestock or poultry, the culture of fish and other aquatic products in farms or ponds, and any activities performed by a farmer or on a farm** as an incident to or in conjunction with such farming operations, but does not include the manufacturing and/or processing of sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm products. ***"Retail establishment"*** is one principally engaged in **the sale of goods to end-users for personal or household use**. A retail establishment that regularly engages in wholesale activities loses its retail character. ***"Service establishment"*** is one principally engaged in the **sale of service to individuals for their own or household use** and is generally recognized as such. **Regional Tripartite Wages and Productivity Boards** (RTWPBs**) authorized to** **determine the daily minimum wage rates** in the following different regions. depending on the number of workers and the capitalization of enterprises. A. **Coverage** B. **Minimum Wage Rates** C. **Rules in Determining Compensable Working Hours** **1. Basis of Minimum Wage** - The minimum wage is based on **8 working hours a day.** **2. Compensable Working Hours** - ***Hours worked include:\ ***a. Time spent on duty, at the workplace, or as required by the employer.\ b. Time spent working, even if permitted or unplanned. ***Principles in Determining Hours Worked***:\ a. All hours required by the employer, even non-productive ones, are compensable.\ b. Rest periods are not counted as hours worked if the employee can fully rest and leave the premises.\ c. Necessary work beyond regular hours is compensable if it benefits the employer or the employee cannot leave without a replacement.\ d. Interruptions in work beyond the employee\'s control are compensable if they must remain on-site or if the interval is too short for personal use. ***Waiting Time:*** - **Compensable:** When waiting is part of work or required by the employer. - **Not compensable:** When the employee is free to use the time for personal purposes. **3. Attendance at Work-Related Activities** - Not compensable if:\ a. Outside regular working hours.\ b. Attendance is voluntary.\ c. No productive work is done. **4. Meal and Rest Periods** - Meal Periods: - At least 1 hour, but shorter periods (minimum 20 minutes) are compensable in these cases:\ a. non-strenuous work.\ b. Establishment operates 16+ hours daily.\ c. Emergencies or urgent repairs.\ d. Preventing loss of perishable goods. - **Rest Breaks**: 5 to 20 minutes (e.g., coffee breaks) are **compensable.** **D. Monthly-Paid vs. Daily-Paid Employees** - **Monthly-Paid Employees:** Paid for all days in a month, including unworked rest days, special days, and holidays. Calculation uses 365 days/year. - **Daily-Paid Employees:** Paid only for days worked and unworked regular holidays. **E. Computation of the Estimated Equivalent Monthly Rate (EEMR) of Monthly-Paid and Daily-Paid Employees** **1. For monthly-paid employees:** Factor 365 days in a year is **used in determining the equivalent annual and monthly salary of monthly-paid employees.** To compute their Estimated Equivalent Monthly Rate (EEMR), the procedure is as follows: **2. For daily-paid employees:** The following factors and formula may be used in computing the EEMR of different groups of daily-paid employees for purposes of entitlement to minimum wages and allied benefits under existing laws: a\. For those who are **required to work every day**, including Sundays or rest days, special days and regular holidays  a. b\. For those **who do not work** and are **not considered paid on Sundays or rest days** a. c\. For those **who do not work** and are **not considered paid** on **Saturdays** and **Sundays** or **rest days**  **F. Subsidized Meals and Snacks** Based on **Sec. 4, Rule VII-A**, Book III of the Rules Implementing the Labor Code. 1. Employer Subsidy: Employers must subsidize at least **30%** of the fair and reasonable value of meals and snacks provided to employees. 2. Employee Deduction: Employers can deduct **up to 70%** of the value of meals and snacks **from employees\' wages.** 3. Facility Evaluation: The value of meals and snacks must be **determined through** facility evaluation conducted by the Regional Tripartite Wages and Productivity Board (**RTWPB).** **G. Wage of Kasambahay** - The **RTWPBs** review and adjust the minimum wage of Kasambahays after **one year** of the **Batas Kasambahay\'s** effectivity and regularly thereafter. - Consultations or hearings with stakeholders are conducted before issuing a wage order **H. Wage of Kasambahay who Works as Salesclerk** - Must be paid the **minimum wage** applicable to retail and service establishments under current Wage Orders **I. Effect of Reduction of Workdays on Wages** - Employers can deduct wages for reduced workdays due to serious losses (e.g., low demand or lack of raw materials). - Principle: "No work, no pay," unless an agreement or company policy states otherwise. **J. Penalty and Double Indemnity for Violation of the Prescribed Increases or Adjustments in the Wage Rates (RA 8188)** **1. Penalties for Non-Compliance:** - Fine: ₱25,000 to ₱100,000, or - Imprisonment: 2 to 4 years, or both (at court discretion). - No probation benefits for offenders. **2. Double Indemnity:** - Employers must pay double the unpaid benefits to employees. - Payment does not absolve criminal liability. **3. Corporate Violations:** - Imprisonment applies to responsible officers (e.g., president, VP, CEO, Managing Director, Partner). **K. Barangay Micro Business Enterprises (BMBEs)** 1. **Exemption from Minimum Wage Law**: - Applies to businesses with assets ≤ **₱3 million** (excluding land). - Employees still get **regular benefits** like social security and health care. 2. **Certification**: - Issued by **DTI Negosyo Centers** under **RA 9178** otherwise known as the "Barangay Micro Business Enterprises (BMBE's) **Act of 2002**". 3. **Wage Agreement**: - **BMBE worker**s and **owners** decide on wages based on **RTWPB advisories**. **L. Wage of Workers Paid by Results** **1.Minimum Wage Compliance**: - Workers paid by results (e.g., piecework, takay, pakyaw, or task basis) must earn at least the **prescribed minimum wage** for up to 8 hours of work, or proportionally for less than 8 hours. **2.Determining Fair Wages**: - Wages are determined through **time and motion studies** or consultations with employers\' and workers\' representatives. **3.Piece-Rate or Production Standard Orders**: - Issued by the **DOLE Regional Director** based on RTWPB recommendations. - Adjusted whenever a new Wage Order is issued to align with the applicable minimum wage. **M. Wage of Apprentices, Learners, and Persons with Disability** 1. **Apprentices and Learners**: - Must earn **at least 75%** of the applicable minimum wage. - Covered by agreements approved by **TESDA**. 2. **Employees with Disability**: - Entitled to the **same wages, benefits, and conditions** as able-bodied employees. **N. Annual Establishment Report on Wages (AERW)** 1. **Requirement**: - Private establishments must submit a verified **itemized listing** of all: - Workers below managerial level (including apprentices, learners, and persons with disabilities). - Their **corresponding salaries and wages**. 2. **Legal Basis**: - Mandated by **Article 124 of the Labor Code**, as amended by RA No. 6727 (Wage Rationalization Act). - Establishments must register and submit the report \*\*online\*\* through the AERW portal 3. **Deadlines:** - For **2022**, the report must be submitted by **May 31, 2023.** - For subsequent years, the report must be submitted by **January 31** of the following year (e.g., for **2023**, the deadline is **January 31, 2024**). **5. Assistance for Offline Establishments:** - Establishments without online access can visit the nearest **RTWPB** for assistance in encoding their entries. **O. Coverage from Income Tax** **Exemptions from Withholding Tax on Compensation (Effective January 1, 2018)** 1. **Minimum Wage Earners (MWEs)**: - **Exempt from withholding tax** if they earn the **Statutory Minimum Wage (SMW)** set by the **Regional Tripartite Wage and Productivity Board (RTWPB)** or **National Wages and Productivity Commission (NWPC)** in their area of work. - **Included in the exemption**: - Holiday pay - Overtime pay - Night shift differential pay - Hazard pay - **Definition of Hazard Pay**: Paid to MWEs working in **dangerous or strife-torn areas**, **disease-infested places**, or **isolated stations and camps** where their life is at risk. - **Exemption Limitations**: Hazard pay not meeting the criteria above will be subject to withholding tax. - **Other Exemptions**: Only the income listed (SMW, holiday pay, overtime, etc.) is exempt. Additional compensation like **commissions**, **honoraria**, and **taxable allowances** are **subject to withholding tax**. 2. **Annual Compensation Below ₱250,000**: - **Compensation** earned **during the year** that does not exceed **₱250,000** is **exempt from withholding tax**. **Contact Information:** - For **Minimum Wage Rates** inquiries, contact the **National Wages and Productivity Commission**. - For **Domestic Workers\' Rights and Benefits** inquiries, contact the **Bureau of Workers with Special Concerns**. **Holiday Pay** **A. Definition** **Holiday Pay** refers to the payment of the regular daily wage for any **unworked regular holiday**. **B. Coverage** The **Holiday Pay** benefit applies to all employees, except those in the following categories: 1. **Government Employees:** Including those employed by the National Government, its political subdivisions, government-owned/controlled corporations, or entities created under special laws. 2. **Retail and Service Establishments:** Those regularly employing less than 10 workers. 3. **Kasambahay (Domestic Workers) and persons** in the personal service of another. 4. **Managerial Employees,** if all the following conditions are met: - Their primary duty is to manage the establishment or department. - They direct the work of two or more employees. - They have the authority to **hire or fire employees** or their suggestions are given significant weight in decisions related to hiring, firing, promotions, or changes in employee status. 5. **Officers or Members of Managerial Staff,** if they perform the following: - Primarily perform work directly related to **management policies.** - Regularly exercise **discretion** and independent judgment. - **Either:** - Assist in the management of the establishment, or - Execute specialized or technical work requiring special skills, experience, or knowledge, or - Execute special assignments and tasks under general supervision. - **Do not spend more than 20% of their time** on activities not closely related to management or specialized tasks. 6. **Field Personnel** and employees whose time and performance are **unsupervised**, including those working on: - Task or contract basis, - Commission basis, - Fixed compensation irrespective of time worked. **C. Regular Holidays** According to **Proclamation No. 42 s. 2022**, as amended by **Proclamation No. 90 s. 2022**, the following are the **twelve (12) regular holidays** for the year **2023**: 1. **New Year\'s Day** - 01 January (Sunday) 2. **Maundy Thursday** - 06 April (Thursday) 3. **Good Friday** - 07 April (Friday) 4. **Araw ng Kagitingan** - 10 April (Monday nearest April 9) 5. **Eidul Fitr** - Movable Date 6. **Labor Day** - 01 May (Monday) 7. **Independence Day** - 12 June (Monday) 8. **Eidul Adha** - Movable Date 9. **National Heroes Day** - 28 August (Monday) 10. **Bonifacio Day** - 27 November (Monday nearest November 30) 11. **Christmas Day** - 25 December (Monday) 12. **Rizal Day** - 30 December (Saturday) **D. Holiday Pay Rates** - **Holiday Pay**: Employees get at least **100%** of their daily wage for a **regular holiday**, even if they don't work, as long as they are present or on leave with pay the day before the holiday. - **Work on a Holiday**: If employees work on a holiday, they get **200%** of their daily wage. - **Rest Day**: If the holiday falls on an employee's rest day, and they work, they get **30% extra** on top of the holiday pay, totaling **260%** of the daily wage. - **Example**: - **Non-agriculture sector wage**: ₽610 - For working on a holiday: **₽610 x 200% = ₽1,220**. - **Special Cases**: - **Retail/Service with fewer than 10 workers**: Not covered by holiday pay rules. - **Sunday Holidays**: If a holiday falls on a Sunday, the next Monday is not automatically a holiday unless declared by a proclamation. - **Araw ng Kagitingan and other holidays**: If this falls on Maundy Thursday or Good Friday, employees get **200%** pay for not working. If they work, they get **an additional 100%**. **E. Absences** 1. **Holiday Pay Entitlement**: - Employees who are on **paid leave** the day before a holiday are entitled to holiday pay, even if they don't work on the holiday. - Employees on **unpaid leave** the day before a holiday **will not** receive holiday pay if they don't work on the holiday. 2. **Leave Benefits**: - If employees are on leave with compensation (such as social security or employee compensation benefits), they must still receive the **same percentage of holiday pay** as the leave benefits they receive, whichever is higher. 3. **Non-Work Day Before Holiday**: - If the day before a holiday is an **employee's rest day** or a **non-work day**, they won't be considered on leave. However, if they work the day before their rest day or non-work day, they are still entitled to holiday pay. **F. Successive Regular Holidays** - If two regular holidays fall on consecutive days (e.g., Maundy Thursday and Good Friday), an employee **must work** on the first holiday to be entitled to holiday pay for the second holiday. - If the employee is absent on the day before the first holiday, they won't be paid for both holidays unless they work on the first holiday. **G. Temporary or Periodic Shutdown/Cessation of Work** - During temporary shutdowns (e.g., inventory, machinery repairs), **regular holidays within this period** should still be compensated according to the rules outlined in the Labor Code. **H. Holiday Pay of Certain Employees** 1. **Piece-Rate Employees**: - Their holiday pay should be at least their average daily earnings for the last 7 actual workdays before the holiday. - The holiday pay should **not be less than the minimum wage**. 2. **Seasonal Workers**: - They are **not entitled to holiday pay** during their off-season when they are not working. 3. **Workers Without Regular Workdays** (e.g., stevedores): - They are still entitled to **holiday pay**, even though they do not have regular workdays. **PREMIUM PAY (Articles 91-93)** **A. Definition** - **Overtime Pay**: Additional compensation for work performed beyond **eight (8) hours** in a day. **B. Coverage** - Overtime pay applies to employees covered under **Premium Pay** rules. **C. Overtime Pay Rates** The minimum overtime pay rates depend on when the overtime work is performed: 1. **Ordinary Working Days** (excess of 8 hours): - **+25% of the hourly rate** - **Calculation**: - **Non-Agriculture**: ₽610/8 hours x 125% = ₽76.25/hour - **Retail/Service**: ₽573/8 hours x 125% = ₽71.63/hour 2. **Scheduled Rest Day or Special Day** (excess of 8 hours): - **+30% of the hourly rate** - **Calculation**: - Non-Agriculture: ₽610/8 hours x **130%** = ₽76.25/hour - Retail/Service: ₽573/8 hours x **130%** = ₽71.63/hour 3. **Special Day Falling on a Scheduled Rest Day** (excess of 8 hours): - **+30% of the hourly rate** on **both the special day and rest day.** - **Calculation**: - Non-Agriculture: ₽610/8 hours x 150% x 130% = ₽76.25/hour - Retail/Service: ₽573/8 hours x 150% x 130% = ₽71.63/hour 4. **Regular Holiday** (excess of 8 hours): - **+30% of the hourly rate** - **Calculation**: - Non-Agriculture: ₽610/8 hours x 200% x 130% = ₽76.25/hour - Retail/Service: Not covered by holiday pay rule 5. **Regular Holiday Falling on a Scheduled Rest Day** (excess of 8 hours): - **+30% of the hourly rate** on both the regular holiday and rest day. - **Calculation**: - Non-Agriculture: ₽610/8 hours x 260% x 130% = ₽76.25/hour - Retail/Service: Not covered by holiday pay rule