Joan A

Philippines Employment of Filipino Employees Philippine labor law is constantly evolving and is often difficult to keep track of the changes. K&C keeps itself constantly updated on the modifications in the law and jurisprudence. K&C will draft employee contacts and manuals for your foreign and local employees, which follow the labor law guidelines. We can advise you on salary structures and suggest tax efficient compensation packages for your foreign employees as well. K&C also lists down what every foreign employer should know before setting up a company in the Philippines regarding hiring Filipino and foreign employees. Salary Structure & Wages in the Philippines In general, salaries are increasing in the Philippines due to economic growth, especially in the BPO/IT/Call Center industries. However, IT professionals, tech support and call center support representatives' salaries are still significantly lower than in the US, Canada, Australia and Europe. The average monthly salary of tech or customer support representatives in the Philippines ranges from US$300 to US$400. the price of and IT professional in the Philippine can range anywhere from $300 - $2,000 depending on experience and skill-set.

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Other analogous causes.

In this second type of resignation, the employee need not serve a written notice. Forced resignation is not allowed and is considered “constructive” dismissal – a dismissal in disguise. Employee retirement is either voluntary or compulsory under art. 287 of the Labor Code. Dismissal of an Employee in the Philippines An equality of rights exists between employer and employee. While the employer cannot force the employee to work against his or her will, neither can the employee compel the employer to continue giving him or her work if there is a lawful reason not to do so. Thus, the employer may terminate the services of an employee for just or authorized causes after following the procedure laid down by law, but the employer has the burden of proving the lawfulness of the employee’s dismissal in the proper forum. Just causes are blameworthy acts on the part of the employee such as serious misconduct, willful disobedience, gross and habitual neglect of duties, fraud or willful breach of trust, commission of a crime and other analogous causes (art. 282, Labor Code).

Mandatory Employee Benefits Employee Benefits, Incentives, Coverage & Contributions The Philippine Social Security System consists of the following bodies.

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Social Security System (SSS) - The SSS was created to provide private employees and their families with protection against disability, sickness, old age, and death. The Government Service Insurance System (GSIS) is an equivalent system for Philippine government employees. Home Development Mutual Fund (HDMF) - The HMDF is a provident savings system providing housing loans to private and Philippine government employees, and to self-employed persons who elect to join the Fund. Philippine Health Insurance Corporation (PhilHealth) - PhilHealth is administered by the Philippine National Health Corporation, which is designed to provide employees with a practical means of paying for adequate medical care in the Philippines.

Coverage in the Philippines All persons under the age of 60 who earn income from employment of more than P1,000 per month are required to contribute to the SSS. Government employees are required to contribute to the equivalent GSIS. Employees are also required to contribute to the HDMF and PhilHealth. Membership is optional, however, for self-employed persons. Foreign personnel are also required to make contributions. Opting out is not possible, except in limited circumstances under some of the Philippines' international social security agreements. In practice, however, the potential savings involved are generally insufficient to justify the efforts required to effect the exemption. Contributions in the Philippines Employee contributions for social security are deducted from employee's salary payments. These are withheld by the employer on a monthly basis. Employers in the Philippines are also required to make contributions. SSS contributions are roughly 180% of the employee contributions, with the maximum employer contribution of P1,090 per month. HDMF and Philhealth contribution by employers in the Philippines are roughly the same with the maximum for 2008 set at P100 for HDMF and P500 for PhilHealth monthly. Termination of Employment in the Philippines Termination of Employment in the Philippines Overview The Philippine Constitution says, no involuntary servitude in any form shall exist except as punishment for a crime whereof the party shall have been duly convicted. In view of the prohibition on involuntary servitude, an employee is given the right to resign under art. 285 of the Labor Code. The provision recognizes two kinds of resignation – without cause and with cause. If the resignation is without cause, the employee is required to give a 30-day advance written notice to the employer, to enable the employer to look for a replacement to prevent work disruption. If the employee fails to give a written notice, he or she runs the risk of incurring liability for damages. The same provision also indicates the just causes for resignation (with cause)

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Serious insult to the honor and person of the employee Inhuman and unbearable treatment; Crime committed against the person of the employee or any of the immediate members of the employee’s family; and

Authorized causes are of two types – business reasons and disease. The business reasons are installation of labour-saving devices, redundancy, retrenchment and closure or cessation of operation (art. 283, Labor Code). Before the employer can terminate on the ground of disease, he must obtain from a competent public health authority a certification that the employee’s disease is of such a nature and at such a stage that it can no longer be cured within a period of six months even with medical attention (art. 284, Labor Code; Implementing Rules of Book VI, Labor Code). Those hired on a temporary basis, that is, for a “term” or “fixed period” are not regular employees, but are “contractual employees.” Consequently, there is no illegal dismissal when their services are terminated by reason of the expiration of their contracts. Lack of notice of termination is of no consequence, because a contract for employment for a definite period terminates by its own term at the end of such period. An Illegal Strike can be cause for Termination of Employment Employment is not deemed terminated when there is a bona fide suspension of the operations of a business or undertaking for a period not exceeding six months, or when the employee fulfills a military or civic duty (art. 286, Labor Code). Under the Corporation Code (sec. 80), the surviving or consolidated entity in a merger or consolidation automatically assumes all rights and obligations, assets and liabilities of the combining entities. This includes obligations or liabilities under valid agreements, like labour contracts. The surviving or consolidated entity must, therefore, recognize the security of tenure and length of service of the workers of the merging or consolidating corporations. By the fact of merger or consolidation, a succession of employment rights and obligations occurs. Notice and prior procedural safeguards As stated above, dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based on authorized causes involve grounds – business or health – allowing the employer to terminate. A termination for an authorized cause requires payment of separation pay. When the termination of employment is declared illegal, reinstatement and full backwages are mandated under art. 279 of the Labor Code. If reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted. Procedurally, (1) if the dismissal is based on a just cause under art. 282 of the Labor Code, the employer must give the employee two written notices and a hearing or opportunity to be heard before terminating the employment, that is, a notice specifying the grounds for which dismissal is sought and, after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under arts. 283 and 284 of the Labor Code, the employer must give the employee and the Department of Labour and Employment written notices 30 days prior to the effectivity of the separation. Severance pay As already noted, separation pay is required to be paid to the employee when there is termination of employment by the employer for an authorized cause, the amount of which depends on the cause. If the termination is due to the installation of labour-saving devices or redundancy, the separation pay is one month’s pay for every year of service or one month pay, whichever is higher (art. 283, Labor Code). If the termination is due to retrenchment to prevent losses, or closure or cessation of operation of the establishment not due to serious business losses, or due to disease, the separation pay is one-half month’s pay for every year of service or one month pay, whichever is higher (arts. 283 and 284, Labor Code). However, there is no requirement for separation pay if the closure is due to serious business losses. Avenues for redress

From the foregoing, four possible situations may be derived: (1) the dismissal is for a just cause under art. 282 of the Labor Code, or for an authorized cause – business reason under art. 283 or health reason under art. 284 – and due process was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3) and there no process; (4) for a not observed. In the first situation, the dismissal is undoubtedly valid and the employer will not incur any liability, save for separation pay when the dismissal is for an authorized cause. In the second and third situations, where the dismissals are illegal, art. 279 of the Labor Code mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement. In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be held liable for nominal damages for non-compliance with the procedural requirements of due process. If the dismissal is for an authorized cause, the employee is also entitled to separation pay.

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Due Process in the Context of Termination of Employment Due process means the right of an employee to be notified of the reason for his or her dismissal and, in case of just causes, to be provided the opportunity to defend himself or herself. Components of Due Process in Termination Cases In a termination for a just cause, due process involves the two-notice rule: 1. 2. 3.

Compulsory arbitration of illegal dismissal cases is conducted by the Labour Arbiters of the National Labour Relations Commission and their decisions are appealable to the Commission (arts. 217 and 218, Labor Code). In view of the stated preference for voluntary modes of settling labour disputes under art. 13 (3) of the Constitution and art. 211of the Labor Code, voluntary arbitration of illegal dismissals is recognized on the basis of mutual agreement between the parties (art. 262, Labor Code). Compulsory arbitration is both the process of settlement of labour disputes by a government agency which has the authority to investigate and issue an award binding on all the parties, as well as a mode of arbitration where the parties are compelled to accept the resolution of their dispute through arbitration by a third party. While a voluntary arbitrator is not part of the labour department, he or she renders arbitration services provided for under labour laws. Generally, the voluntary arbitrator is expected to decide only questions that are expressly delineated by the submission agreement. However, since arbitration is the final resort for the adjudication of disputes, the arbitrator can assume that he or she has the power to make a final settlement. Thus, assuming that the submission agreement empowers the arbitrator to decide whether an employee was discharged for just cause, the arbitrator can reasonably assume that his or her powers extend beyond giving a mere yes-or-no answer and include the authority to reinstate with or without back pay. Difference between a Just and Authorized Cause of Termination Just cause refers to a wrong doing committed by the employer or employee on the basis of which the aggrieved party may terminate the employer-employee relationship. Authorized cause refers to a cause brought about by changing economic or business conditions of the employer. Causes for Termination by the Employer 1. 2. 3. 4. 5. 6.

Serious misconduct; Willful disobedience of employer’s lawful orders connected with work; Gross and habitual neglect of duty; Fraud or breach of trust; Commission of a crime or offense against the employer, employer’s family or representative; and Other analogous causes.

Disease not curable within six months as certified by competent public authority, and continued employment of the employee is prejudicial to his or her health or to the health of his or her co-employees.

A notice of intent to dismiss specifying the ground for termination, and giving to said employee reasonable opportunity within which to explain his or her side; A hearing or conference where the employee is given opportunity to respond to the charge, present evidence or rebut the evidence presented against him or her; A notice of dismissal indicating that upon due consideration of all the circumstances, grounds have been established to justify the termination.

In a termination for an authorized cause, due process means a written notice of dismissal to the employee specifying the grounds given, at least 30 days before the date of termination. A copy of the notice shall be furnished the Regional Office of the Department of Labor and Employment of the Philippines (DOLE). An Employee may Question the Legality of his or her Dismissal The legality of the dismissal may be questioned before the Labor Arbiter of the National Labor Relations Commission (NLRC) of the Philippines, through a complaint for illegal dismissal. In establishments with a collective bargaining agreement (CBA), the dismissal may be questioned through the grievance machinery established under the CBA. If the issue is not resolved at this level, it will be submitted to voluntary arbitration. Proving the Dismissal is Legal In a case of illegal dismissal, the employer as the burden of proving that the dismissal is legal. Grounds for an Employee to Question his or her Dismissal An employee may question his or her dismissal based on substantive or procedural grounds. The Substantive aspect pertains to the absence of a just or authorized cause supporting the dismissal. The Procedural aspect refers to the notice of termination or the opportunity to present an explanation. What are the rights afforded to an unjustly dismissed employee? An employee who is dismissed without just cause is entitled to any or all of the following: 1. 2. 3.

Reinstatement without loss of seniority rights, or separation pay if reinstatement is not possible; Full backwages, inclusive of allowances and other benefits or their monetary equivalent from the time compensation was withheld from him or her up to the time of reinstatement; Damages and attorney’s fees if the dismissal was done in bad faith.

Reinstatement Just Causes for Termination by the Employee 1. 2. 3. 4.

Serious insult by the employer or his or her representative on the honor and person of the employee; Inhuman and unbearable treatment accorded the employee by the employer or his or her representative; Commission of a crime by the employer or his or her representative against the person of the employee or any of the immediate members of his or her family; and Other analogous causes.

Authorized Causes for Termination 1. 2. 3. 4.

Installation of labor-saving devices; Redundancy; Retrenchment to prevent losses; Closure or cessation of business; and

Reinstatement means restoration of the employee to the position from which he or she has been unjustly removed. Reinstatement without loss of seniority rights means that the employee, upon reinstatement, should be treated in matters involving seniority and continuity of employment as though he or she had not been dismissed from work. When a Labor Arbiter rules for an illegal dismissal, reinstatement is immediately executory even pending appeal. Forms in which reinstatement be effected Reinstatement may be actual or payroll in nature, at the option of the employer. Full Backwages

Full backwages refer to all compensations, including allowances and other benefits with monetary equivalent, that should have been earned by the employee but was not collected by him or her because of unjust dismissal. It includes all the amounts he or she could have earned starting from the date of dismissal up to the time of reinstatement. In cases of illegal dismissal, a dismissed employee who has found another job may still be entitled to collect full backwages from his or her former employer. Full backwages is a form of penalty imposed by law on an employer who illegally dismisses his or her employee. The fact that the dismissed employee may already be employed and earning elsewhere does not extinguish the penalty. The former position of the employee no longer exists at the time of reinstatement In that case, the employee shall be given a substantially equivalent position in the same establishment without loss of seniority rights and to backwages from the time compensation was withheld up to the time of reinstatement. Employee Benefits when the Establishment no longer exists When an establishment no longer exisits at the time an order for reinstatement is made the employee can claim benefits. The employee is entitled to a separation pay equivalent to at least one-month pay or at least one month pay for every year of service whichever is higher, a fraction of at least six months shall be considered as one whole year. The period of service is deemed to have lasted up to the time of closure of the establishment. He or she may also claim backwages to cover the period between dismissal from work and the closure of the establishment. Separation Pay In authorized cause terminations, separation pay is the amount given to an employee terminated due to retrenchment, closure or cessation of business or incurable disease. The employee is entitled to receive the equivalent of one month pay or one-half month pay, whichever is higher, for every year service. In just cause terminations, separation pay is also the amount given to employees who have been dismissed without just cause and could no longer be reinstated. Reinstatement is not possible so that separation pay shall be given to an illegally dismissed employee 1. 2. 3. 4.

When company operations have ceased; When the employee’s position or an equivalent thereof is no longer available; When the illegal dismissal case has engendered strained relations between the parties, in cases of just causes and usually when the position involved requires the trust and confidence of the employer; When a substantial amount of years have lapsed from the filing of the case to its finality.

Exception for an employee dismissed for just cause be entitled to separation pay As a rule, no. But in instances where the just cause for dismissal is other than serious misconduct or moral turpitude, the employee may be awarded Financial Assistance in the amount of one month’s pay as a form of compassionate justice. Proof of Financial Losses is Necessary to Justify Retrenchment Yes. Proof of actual or imminent financial losses that are substantive in character must be proven to justify retrenchment. Proof of Financial losses is NOT necessary to justify redundancy In redundancy, the existing manpower of the establishment is in excess of what is necessary to run its operation in an economical and efficient manner. Other Conditions before an Employee may be Dismissed on the Ground of Redundancy It must be shown that:

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Good faith in abolishing redundant position; There is fair and reasonable criteria in selecting the employees to be dismissed, such as but not limited to less preferred status (e.g. temporary employee), efficiency and seniority. A one-month prior notice is given to the employee as prescribed by law.

Failure to Comply with the Due Process Requirements Failure to comply with the due process requirements will NOT invalidate a dismissal with an otherwise established just or authorized cause. The employee, however, will be entitled to backwages from the time of termination till finality of the decision confirming the presence of a just or authorized cause. Difference between Transfer and Promotion Promotion is the advancement of an employee from one position to another with an increase in duties and responsibilities, and is usually accompanied by an increase in salary. Promotion is a privilege and as such may be declined by the employee. Transfer is a lateral movement that does not amount to a promotion. It constitutes a valid exercise of management prerogative, unless it is done to defeat an employee’s right to selforganization, to get rid of undesirable workers, or to penalize an employee of his or her union activities. If done in good faith, management’s decision to transfer an employee may not be questioned. An employee’s refusal to transfer may constitute willful disobedience, a just cause for his or her dismissal. An Employer Transferring an Employee to another place of work without prior notice Generally, an employer can not transfer an employee to another place of work without prior notice. But if the urgency of the service requires a transfer, and such transfer is exercised in good faith for the advancement of the employer’s interest and will not adversely affect the rights of the employee, the transfer may be undertaken even without the employee’s consent. Non-union member availing of the grievance machinery in case of termination If a non-union member belonging to an appropriate bargaining unit of the recognized bargaining agent and pays agency fees to the union and accepts the benefits under the collective agreement, said non-union members may avail of the grievance machinery. On the other hand, if the non-union member is not part of the appropriate bargaining unit of the recognized bargaining agent and is expressly excluded in the collective agreements, said employee cannot avail of the grievance machinery. Reasonable period for an Employee subjected to Dismissal to answer charges against him or her by the Employer A reasonable period should be provided wherein the employee can answer all the charges against him or her, gather evidence and confront the witnesses against him or her. It should include the opportunity to secure the assistance of a representative who could be a union officer. Reasonableness of the period should be based, among others, on the gravity of the charges against the employee. An employee charged with an offense may be placed under preventive suspension while he or she is preparing to answer charges filed against him or her by the employer Only on grounds that his or her continued presence inside the company premises poses a serious imminent threat to the life or property of the employer or his or her co-workers, and only for a period of 30 days may be placed under preventive suspension. After 30 days, the employee should be reinstated to his or her former position or in a substantially equivalent position. The employer, however, may extend the period of suspension provided that the employee is paid his or her wages and other benefits during the extension. If the employer decides to dismiss the employee after completion of the investigation, the employee is not bound to reimburse the amount paid to him or her during the extended period. The employer is required to immediately notify the employee in writing of a decision to dismiss him or her stating clearly the reasons for the dismissal. Preventive suspension is not a disciplinary measure, and should be distinguished from suspension imposed as a penalty. Validity of the Employer’s Decision on Termination A dismissed employee may still question the validity or legality of his or her dismissal by filing a complaint for illegal or unjust dismissal before the Arbitration Branch of NLRC. In such a case, the burden of proving that the dismissal is for a valid or authorized cause rests on the employer. During the pendency of the termination case, an employee may be be retained in his or her work

An employee may be retained in his or her work even during the pendency of a termination case under the following circumstances: 1. 2.

Upon serving the preventive suspension period of 30 days; and Upon management prerogative allowing the employee to be retained at work and his or her continued employment poses no serious nor imminent threat to the life or property of the employer or his or her co-employees.

The Effects of Termination may be Suspended Pending Resolution of the Case The Secretary of Labor of the Philippines may provisionally order a reinstatement in the event of prima facie finding that the dismissal may cause a serious labor dispute as in a strike or lock-out, or is in implementation of mass lay-off.

Probationary Employment Probationary employment is not necessarily a category of employment in the Philippines. It pertains to a period of time in which the employee is being observed and evaluated to determine whether or not he is qualified for permanent employment. Under art. 281 of the LC, probationary employment shall not exceed six months. An employee who is allowed to work after a probationary period shall be considered a regular employee. A probationary employee is, for a given period of time, under observation and evaluation to determine whether or not he or she is qualified for permanent employment. During the probationary period, the employer is given the opportunity to observe the skills, competence and attitude of the employee while the latter seeks to prove to the employer that he or she has the qualifications to meet the reasonable standards for permanent employment. National, Official and Non-working Holidays in the Philippines

Services of an Employee Terminated due to Disease

National, Official and Non-working Holidays in the Philippines Overview

The employer may terminate employment on ground of disease only upon the issuance of a certification by a competent public health authority that the disease is of such nature or at such stage that it cannot be cured within a period of six months even with proper medical treatment.

In general, providing a fixed list of holiday dates is difficult because most of the 2009 regular holidays and nationwide special holidays in the Philippines are movable, as provided under Republic Act 9492 (an Act rationalizing the celebration of national holidays). For these movable holidays, the President is tasked by law to issue a Proclamation, at least 6 months prior to a movable holiday, fixing the specific date of that non-working day.

Suspending Operations of a Business If the period of suspension of operations do not exceed six months, the workers shall be reinstated to their respective positions without loss of seniority rights if they indicated their desire to resume work not later than one month from the resumption of operations of business. If the shutdown is for a period of not more than six months such as may occur in equipment check or repair, stock inventory or lack of raw materials, the employee is only temporarily laid off and, therefore, employer-employee relationship is not severed. If it will last for a period of more than six months and is of an indefinite character, it may be considered as equivalent to closure of the establishment leading to termination of employment. In such a case, the requirements of the law and rules on employee dismissals must be observed. Types of Employment in the Philippines Employment in the Philippines Overview Depending on the company and or industry there are various types or categories of employment in the Philippines. This essentially comes down to how the employer wants the employee's employment to be structured, which should be bound by a contract signed by both the employer and employee. Project Employment Where the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee in the Philippines. Seasonal Employment Where the work or services to be performed is seasonal in nature and the employment is for the duration of the season in the Philippines. Casual Employment Where the employment is not covered by the foregoing, provided that an employee who has rendered at least one year of service, whether continuous or broken, shall be considered regular with respect to the activity in which he or she is employed and his or her employment shall continue while the activity exists.

National Regular Holidays List - Philippines New Year's Day

January 1, 2009

Thursday

Bataan Day / Araw ng Kagitingan

April 6, 2009

Monday

Maundy Thursday

April 9, 2009

Thursday

Good Friday

April 10, 2009

Friday

Labor Day

May 1, 2009

Friday

Independence Day

June 12, 2009

Friday

Ninoy Aquino Day

August 21, 2009

Friday

National Heroes Day

August 31, 2009

Monday

Eid-ul-Fitr

To be declared

(in September)

All Saints Day

November 1, 2009

Sunday

Additional Special (Non-working) Day November 2, 2009 Bonifacio Day

Monday

November 30, 2009 Monday

Additional Special (Non-working) Day December 24, 2009 Thursday Christmas Day

December 25, 2009 Friday

Rizal Day

December 30, 2009 Wednesday

Last Day of the Year

December 31, 2009 Thursday

National Regular Holidays Compensation - Philippines a. If it is an employee’s regular workday

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If unworked - 100% If worked - 1st 8 hours - 200% Excess of 8 hours - plus 30% of hourly rate on said day

b. If it is an employee’s rest day

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If unworked - 100% If worked - 1st 8 hours - plus 30% of 200% Excess of 8 hours - plus 30% of hourly rate on said day

Term or Fixed Employment Nationwide Special Holidays List - Philippines Another category of employment in the Philippines recognized in jurisprudence is “term” or “fixed-period employment.” This is based on art. 1193 of the CC, which states that obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain – understood to be a day that must necessarily come. The decisive determinant in “term employment” should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of the employment relationship. Stipulations in employment contracts providing for “term employment” or “fixed-period employment” are valid when the period has been agreed upon knowingly and voluntarily by the parties, without force, duress or improper pressure exerted on the employee, and when such stipulations were not designed to circumvent the laws on security of tenure.

Ninoy Aquino day Monday nearest August 21 All Saints Day November 1, 2009 Last Day of the Year December 31, 2009 Special Days - Philippines For declared special days such as Special Non-Working Day, Special Public Holiday, Special National Holiday, in addition to the two nationwide special days (November 1, All Saints Day and December 31, Last Day of the Year), the following rules shall apply:

a. If unworked

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No pay, unless there is a favorable company policy, practice or collective bargaining agreement (CBA) granting payment of wages on special days even if unworked.

b. If worked

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1st 8 hours - plus 30% of the daily rate of 100% excess of 8 hours - plus 30% of hourly rate on said day

non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. Hours of Work in the Philippines Normal hours of work in the Philippines The normal hours of work of any employee shall not exceed eight hours a day. Hours worked shall include all time during which an employee is required to be on duty or to be at a prescribed workplace and all time during which an employee is suffered or permitted to work. Rest periods of short duration during working hours shall be counted as hours worked.

c. Falling on the employee’s rest day and if worked Meal periods

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1st 8 hours - plus 50% of the daily rate of 100% excess of 8 hours - plus 30% of hourly rate on said day

Subject to such regulations as the Secretary of Labor may prescribe, it shall be the duty of every employer to give his employees not less than 60 minutes time-off for their regular meals.

Special Working Holidays - Philippines Night shift differential For work performed, an employee in the Philippines is entitled only to his basic rate. No premium pay is required since work performed on said days is considered work on ordinary working days.

Every employee shall be paid a night shift differential of not less than 10% of his regular wage for each hour of work performed between ten o’clock in the evening and six o’clock in the morning.

13th Month Pay in the Philippines Overtime work 13th Month Pay in the Philippines Overview The 13th-month pay in the Philippines is equivalent to 1/12 of the basic salary received by an employee within the year. If a Filipino employee worked for less than a year (regardless of the cause for the termination of his employment), the amount due to him is determined by dividing the total salary he received by the number of months he was employed. The computation of the basic salary does not include allowances and monetary benefits that are not considered or integrated as part of the employee’s regular compensation. The items that are taken off the list are: cash equivalent of unused vacation and sick leave credits; overtime, premium, night differential and holiday pay, and cost-of-living allowance. If, however, these benefits are, by agreement company practice or policy treated as part of the basic salary, then they shall be included in the computation of an employee’s 13th-month pay. Although the law requires that the extra pay be given not later than Dec. 24, the employer may give 50 percent before the opening of the regular school year and the balance on the cut-off date mentioned. 13th Month Pay Coverage The 13th month pay should not be confused with the bonus which is not part of the benefit mandated by Philippine law. It is already discretionary on the part of the employers to give a bonus to their employees on top of the 13th month pay which is mandatory. The early in December an employer can provide 13th month pay for its Filipino employees the more the employees will appreciate it. Not releasing 13th month pay by December 24 could result in sanctions of law and VERY disgruntled Filipino employees When the 13th-month pay decree came out in the Philippines, those who were already receiving a Christmas bonus from their employer thought the extra pay decreed by the government would be in addition to their company benefit. However, the decree states that employers already paying their employees the equivalent of a 13th-month pay are exempted from its coverage. Some companies though chose to maintain their Christmas bonus on top of the obligatory 13th-month pay in the Philippines. 13th Month Pay Tax Obligation The recipient of the 13th-month pay is not the only beneficiary of that Christmas-related gesture. The Philippine government shares in it by way of income tax. Under existing tax regulations, up to a maximum of P30,000 of that additional income is exempt from the income tax due from fixed wage earners. Anything beyond that cut-off amount must be included in the computation of the employee’s gross income for the applicable taxable year. Ordinarily, the tax due for income received by an employee should be withheld by the employer and, later, remitted to the Bureau of Internal Revenue, before he gets his pay check.

Work may be performed beyond eight hours a day provided that the employee is paid for the overtime work, an additional compensation equivalent to his regular wage plus at least 25% thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate of the first eight hours on a holiday or rest day plus at least 30% thereof. Undertime not offset by overtime Undertime work on any particular day shall not be offset by overtime work on any other day. Permission given to the employee to go on leave on some other day of the week shall not exempt the employer from paying the additional compensation required. Emergency overtime work Any employee may be required by the employer to perform overtime work in any of the following cases: 1. 2.

3. 4. 5.

When the country is at war or when any other national or local emergency has been declared by the National Assembly or the Chief Executive; When it is necessary to prevent loss of life or property or in case of imminent danger to public safety due to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or calamity; When there is urgent work to be performed on machines, installations, or equipment, in order to avoid serious loss or damage to the employer or some other cause of similar nature; When the work is necessary to prevent loss or damage to perishable goods; and Where the completion or continuation of the work started before the eighth hour is necessary to prevent serious obstruction or prejudice to the business or operations of the employer.

Computation of additional compensation For purposes of computing overtime and other additional remuneration as required by this Chapter, the "regular wage" of an employee shall include the cash wage only, without deduction on account of facilities provided by the employer.

Types of Employment in the Philippines

Weekly Rest Periods

Working Hours & Coverage in the Philippines Overview

Right to weekly rest day

The provisions of this Title shall apply to employees in all establishments and undertakings whether for profit or not, but not to 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 another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations. As used herein, "managerial employees" refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff. "Field personnel" shall refer to

1. 2.

It shall be the duty of every employer, whether operating for profit or not, to provide each of his employees a rest period of not less than 24 consecutive hours after every six consecutive normal work days. The employer shall determine and schedule the weekly rest day of his employees subject to collective bargaining agreement and to such rules and regulations as the Secretary of Labor and Employment may provide. However, the employer shall respect the preference of employees as to their weekly rest day when such preference is based on religious grounds.

When employer may require work on a rest day The employer may require his employees to work on any day: 1. 2. 3. 4. 5. 6.

In case of actual or impending emergencies caused by serious accident, fire, flood, typhoon, earthquake, epidemic or other disaster or calamity to prevent loss of life and property, or imminent danger to public safety; In cases of urgent work to be performed on the machinery, equipment, or installation, to avoid serious loss which the employer would otherwise suffer; In the event of abnormal pressure of work due to special circumstances, where the employer cannot ordinarily be expected to resort to other measures; To prevent loss or damage to perishable goods; Where the nature of the work requires continuous operations and the stoppage of work may result in irreparable injury or loss to the employer; and Under other circumstances analogous or similar to the foregoing as determined by the Secretary of Labor and Employment.

Compensation for rest day, Sunday or holiday work 1.

2.

3.

4.

Where an employee is made or permitted to work on his scheduled rest day, he shall be paid an additional compensation of at least 30% of his regular wage. An employee shall be entitled to such additional compensation for work performed on Sunday only when it is his established rest day. When the nature of the work of the employee is such that he has no regular workdays and no regular rest days can be scheduled, he shall be paid an additional compensation of at least 30% of his regular wage for work performed on Sundays and holidays. Work performed on any special holiday shall be paid an additional compensation of at least 30% of the regular wage of the employee. Where such holiday work falls on the employee’s scheduled rest day, he shall be entitled to an additional compensation of at least 50% of his regular wage. Where the collective bargaining agreement or other applicable employment contract stipulates the payment of a higher premium pay than that prescribed under this Article, the employer shall pay such higher rate.

Holidays, Service Incentive Leaves and Service Charges Right to holiday pay 1. 2. 3.

Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than 10 workers; The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate; and As used in this Article, "holiday" includes: New Year’s Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of December and the day designated by law for holding a general election.

Right to service incentive leave 1. 2.

3.

Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay. This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave with pay of at least five days and those employed in establishments regularly employing less than ten employees or in establishments exempted from granting this benefit by the Secretary of Labor and Employment in the Philippines after considering the viability or financial condition of such establishment. The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any court or administrative action.

Service charges All service charges collected by hotels, restaurants and similar establishments shall be distributed at the rate of 85% for all covered employees and 15% for management. The share of the employees shall be equally distributed among them. In case the service charge is abolished, the share of the covered employees shall be considered integrated in their wages.

Mandatory Employee Benefits Employee Benefits, Incentives, Coverage & Contributions The Philippine Social Security System consists of the following bodies.

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Social Security System (SSS) - The SSS was created to provide private employees and their families with protection against disability, sickness, old age, and death. The Government Service Insurance System (GSIS) is an equivalent system for Philippine government employees.

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Home Development Mutual Fund (HDMF) - The HMDF is a provident savings system providing housing loans to private and Philippine government employees, and to self-employed persons who elect to join the Fund. Philippine Health Insurance Corporation (PhilHealth) - PhilHealth is administered by the Philippine National Health Corporation, which is designed to provide employees with a practical means of paying for adequate medical care in the Philippines.

Coverage in the Philippines All persons under the age of 60 who earn income from employment of more than P1,000 per month are required to contribute to the SSS. Government employees are required to contribute to the equivalent GSIS. Employees are also required to contribute to the HDMF and PhilHealth. Membership is optional, however, for self-employed persons. Foreign personnel are also required to make contributions. Opting out is not possible, except in limited circumstances under some of the Philippines' international social security agreements. In practice, however, the potential savings involved are generally insufficient to justify the efforts required to effect the exemption. Contributions in the Philippines Employee contributions for social security are deducted from employee's salary payments. These are withheld by the employer on a monthly basis. Employers in the Philippines are also required to make contributions. SSS contributions are roughly 180% of the employee contributions, with the maximum employer contribution of P1,090 per month. HDMF and Philhealth contribution by employers in the Philippines are roughly the same with the maximum for 2008 set at P100 for HDMF and P500 for PhilHealth monthly.