Constructive Dismissal in the Philippines

Constructive Dismissal in the Philippines

Constructive Dismissal

In a constructive dismissal, the employee resigned involuntarily due to unbearable working conditions created by the employer. And since the resignation is involuntary, it is essentially a termination of employment.

Elements of Constructive Dismissal

Constructive dismissal exists when continued employment is rendered impossible, unreasonable or unlikely due to one or more of the following acts: demotion; diminution in pay; or, a clear discrimination, insensibility, or disdain to the employee. It may also happen when an employee is placed on preventive suspension for more than 30 days or on a floating status for more than 6 months.

And in the case of a transfer of an employee, the employer is required to show that the act of transferring the employee is out of a legitimate business decision. And that the transfer is not unreasonable, inconvenient or prejudicial to the employee. Otherwise, the act of transferring the employee may also be an act of unlawful constructive dismissal.

Examples of Constructive Dismissal Cases in the Philippines

Transfer of Employee

In the case of Philippine Japan Active Carbon Corporation, et al. vs. NLRC, et al., the employee was transferred from Executive Secretary to the Executive Vice President and General Manager to Production Secretary with the same salary and workload. The court has ruled that since the transfer is not unreasonable, nor inconvenient, nor prejudicial to the employee, and it does not involve a demotion in rank or a diminution of the employee’s salaries, benefits, and other privileges, constructive dismissal, in this case, is invalid.

Discrimination against Employee

And, in the case of Globe Telecom, Inc., et al. vs. Joan Florendo-Flores, constructive dismissal was established as the court finds a clear discrimination from the immediate superior against the employee without reason.

Professional and Sexual Harassment

In this case of Digitel Telecommunications Philippines, Inc., et al., vs. Mariquit Soriano, the employee claims to suffer from professional and sexual harassment leading to the employee’s resignation. However, there was a lack of substantial, concrete and credible evidence to support so. Therefore, constructively dismissal is held invalid.

Labor Law and the Labor Code of the Philippines

Labor law of the Philippines

The most basic requirement of being a HR professional is to be in compliance with the labor law of the Philippines. However, there may be labor-related regulations that new HR professionals or companies are not aware of. So how can a company or HR professional be in compliance with the labor law and the labor code of the Philippines without knowing it? And where to stay updated with the latest regulations. So here’s a list of resources of the labor law and labor-related regulations in the Philippines.

  • Labor Law and the Labor Code of the Philippines
  • Additional Employee Benefits
  • Taxation-related Regulations

Labor Law and the Labor Code of the Philippines

These resources are all about the labor law in the Philippines.

Link Remarks
Renumbered Labor Code of the Philippines This document from DOLE is the renumbered labor code of the Philippines. The footnote in this document indicates the updates and changes in the labor law.
Presidential Decree No. 442, s. 1974 This document from gov.ph is regarding the labor law of the Philippines. It also provides the omnibus rules implementing the labor code.
DOLE Department Order No. 147-15 This document from DOLE is regarding the implementing rules and regulations for the just and authorized causes of termination of employment.
DOLE Department Advisory No. 4, Series of 2010 This document from DOLE is regarding implementation of the flexible work arrangements and the exemption from the nightwork prohibition for women employees in the BPO industry
Republic Act No. 10911 This document from gov.ph is regarding the ‘Anti-Age Discrimination in Employment Act’.
Implementing Rules and Regulations of Republic Act No. 10911 This document from DOLE is regarding the rules and regulations for the implementation of the ‘Anti-Age Discrimination in Employment Act’.
Bureau of Working Conditions – Handbook On Workers’ Statutory Monetary Benefits This is a handbook produced by the Bureau of Working Conditions on the workers’ statutory benefits.
DOLE National Wages and Productivity Commission Here you can find the minimum wage rate in the different areas of the Philippines. 
Supreme Court of the Philippines Here you can find all the court decisions including decisions made for labor cases.

Additional Employee Benefits

These are the list of additional employee benefits that are not included in the labor code of the Philippines. These benefits are passed into law through a separate act and you can find them below:

Link Remarks
Republic Act No. 8187 This document from gov.ph is regarding the paternity leave benefit in the Philippines.
Revised Implementing Rules and Regulations of Republic Act No. 8187 for the Private Sector This document from ChanRobles Publishing Company is regarding the revised rules and regulations for the implementation of the paternity leave benefit for the private sector.
Republic Act No. 9710 This document from gov.ph is regarding The Magna Carta of Women. Section 18 of this act provides for the special leave benefit for women.
DOLE Department Order 112-A This document from DOLE is regarding the guidelines for implementing the special leave benefit for women in the private sector.
Republic Act No. 8972 This document from gov.ph is regarding the Solo Parents’ Welfare Act of 2000. Section 8 of this act provides for the parental leave benefit for solo parents.
Implementing Rules and Regulations of Republic Act No. 8972 This document from ChanRobles Publishing Company is the rules and regulations for the implementation of the Solo Parent’s Welfare Act of 2000.
Republic Act No. 8282 This document is from the Social Security System of the Philippines regarding the social security law.
Republic Act No. 10606 This document from gov.ph is regarding the National Health Insurance Program.
The Revised Implementing Rules and Regulations of the National Health Insurance Act of 2013 This document from Philippine Health Insurance Corporation (PhilHealth) is regarding the implementation of the National Health Insurance Act of 2013.
Republic Act No. 9679 This document is regarding the HDMF law of 2009 from gov.ph.
Implementing Rules and Regulations of Republic Act No. 9679 This document from gov.ph is regarding the rules and regulations for the implementation of the HDMF law.

Taxation-related Regulations

These are all the taxation related regulations that the company is required to be familiar with. The tax code from the BIR is updated with the latest regulation. Read the whole of title II of the tax code of the Philippines for a thorough understanding of the taxation of income in the Philippines. The listed sections are highlighted for companies and HR professionals for emphasis.

Link Remarks
Tax Code of the Philippines This document from BIR is the tax code of the Philippines. Title II of the tax code of the Philippines is regarding tax on income.

  • Section 24 – Income Tax Rates
  • Section 32 – Gross Income
  • Section 33 – Special Treatment of Fringe Benefit
  • Section 35 – Allowance of Personal Exemption for Individual Taxpayer
  • Section 79 – Income Tax Collected at Source
  • Section 80 – Liability for Tax
Revenue Regulations 1-2015 This document from BIR is regarding the inclusion of benefits from CBA and productivity incentive schemes in the ‘De Minimis Benefits’.
Revenue Regulations 8-2012 This document from BIR is regarding the change of uniform and clothing allowance of the ‘De Minimis Benefits’.
Revenue Regulations 5-2011 This document from BIR is regarding the list of ‘De Minimis Benefits’.

 

If there are resources you would like to share with fellow HR professionals, please let me know here.

Project Based Employment in the Philippines

project based employment in the Philippines

Article 280 of the labor code and the jurisprudence of the Philippines contemplates 5 types of employment. Project based employment is one of them.

  • Project Based Employment
  • Regularization of Project Employees
  • Project Based Employment Benefits
  • Termination of Project Employees

Project Based Employment

Project based employment is a type of employment when employees are employed for a specific project. Therefore, the employee may be terminated at a predetermined time or upon the completion of the project.

However, the nature of employment is not dictated by the type of employment contract but rather by the definition of law. In order to determine that it is a project based employment, the employer must prove that the employee was assigned to carry out a specific project or undertaking. Besides that, the duration of the employment and the scope of responsibilities were specified to the employee at the time of engagement.

Regularization of Project Employees

Project based employment shall not be a means to circumvent the employee’s right to security of tenure. Therefore, when a project employee is continuously rehired to perform activities necessary to the business, the employee shall be deemed as a regular employee as seen in the case of Alejandro Maraguinot, Jr, el at. vs. NLRC.

Project Based Employment Benefits

Project employees also enjoy statutory benefits such as service incentive leave, holiday pay, and 13th month pay. Besides that, the project employees are also entitled to overtime pay and night shift differential, whenever applicable. The nature of employment is not a requirement to qualify for these benefits or additional compensation.

Termination of Project Employees

Project employees’ employment is coterminous with each project or phase of the project to which they are assigned. This means that project employees may be validly dismissed upon the completion of the project or phase of the project which they are assigned. When the project based employment is terminated due to the completion of the project or phase thereof, the employer is not required to provide prior notice. A project employee shall not be terminated without a just or authorized cause before the expiration of the term of his or her project employment.

Philippine Salary Grade – The Salary Standardization Law IV (SSL IV)

Philippine Salary Grade

The public service faces the same challenges of attracting and retaining good employees as the private sector. In order to be able to compete for good employees, the Philippines has passed a salary standardization law to adjust the compensation of government personnel to be competitive with the market rates.

Among the changes, one of it is to increase the compensation of government personnel to at least 70% of the median of the market for all salary grades. The increment of the monthly salary shall be carried out in 4 tranches:

  • 1st Tranche – Starting January 1, 2016
  • 2nd Tranche – Starting January 1, 2017
  • 3rd Tranche – Starting January 1, 2018
  • 4th Tranche – Starting January 1, 2019

The current compensation structure for government personnel has a total of 33 salary grades with a maximum of 8 steps within each grade. Step increment shall be granted based on the employee’s performance and length of service as prescribed in Presidential Decree No. 985.

The monthly salary used in this article are of step 1. To view the increment of all salary grades and steps, please refer to Executive Order No. 201, s. 2016.

Philippine Salary Grade

Benchmark Position Schedule Monthly Salary (Step 1)
Position Title Salary Grade 1st Tranche (2016) 2nd Tranche (2017) 3rd Tranche (2018) 4th Tranche (2019)
Laborer I 1 9,478 9,981 10,510 11,068
Messenger 2 10,159 10,667 11,200 11,761
Clerk I 3 10,883 11,387 11,914 12,466
Driver I 3 10,883 11,387 11,914 12,466
Stenographer I 4 11,658 12,155 12,674 13,214
Mechanic I 4 11,658 12,155 12,674 13,214
Carpenter II 5 12,488 12,975 13,481 14,007
Electrician II 6 13,378 13,851 14,340 14,847
Secretary I 7 14,331 14,785 15,254 15,738
Bookkeeper 8 15,368 15,818 16,282 16,758
Administrative Assistant 8 15,368 15,818 16,282 16,758
Education Research Assistant I 9 16,512 16,986 17,473 17,975
Cashier I 10 17,730 18,217 18,718 19,233
Teacher I 10 17,730 18,217 18,718 19,233
Agrarian Reform Program Technologist 10 17,730 18,217 18,718 19,233
Budget Officer I 11 19,077 19,620 20,179 20,754
Chemist I 11 19,077 19,620 20,179 20,754
Agriculturist I 11 19,077 19,620 20,179 20,754
Social Welfare Officer I 11 19,077 19,620 20,179 20,754
Engineer I 12 20,651 21,387 22,149 22,938
Veterinarian I 13 22,328 23,257 24,224 25,232
Legal Officer I 14 24,141 25,290 26,494 27,755
Nurse I 15 26,192 27,565 29,010 30,531
Administrative Officer II 15 26,192 27,565 29,010 30,531
Dentist II 16 28,417 30,044 31,765 33,584
Postmaster IV 17 30,831 32,747 34,781 36,942
Forester III 18 33,452 35,693 38,085 40,637
Associate Professor I 19 36,409 39,151 42,099 45,269
Rural Health Physician 20 39,768 43,250 47,037 51,155
Information Not Available 21 43,439 47,779 52,554 57,805
Information Not Available 22 47,448 52,783 58,717 65,319
Information Not Available 23 51,826 58,310 65,604 73,811
Information Not Available 24 56,610 64,416 73,299 83,406
Information Not Available 25 61,971 71,476 82,439 95,083
Information Not Available 26 67,690 78,960 92,108 107,444
Information Not Available 27 73,937 87,229 102,910 121,411
Information Not Available 28 80,760 96,363 114,981 137,195
Information Not Available 29 88,214 106,454 128,467 155,030
Member of a Constitutional Commission under Article IX, 1987 Constitution 30 96,354 117,601 143,534 175,184
Chairman of a Constitutional Commission under Article IX, 1987 Constitution 31 117,086 152,325 198,168 257,809
Associate Justices of the Supreme Court 31 117,086 152,325 198,168 257,809
Member of the House of Representatives 31 117,086 152,325 198,168 257,809
Senator 31 117,086 152,325 198,168 257,809
Chief Justice of the Supreme Court 32 135,376 177,929 233,857 307,365
Speaker of the House of Representatives 32 135,376 177,929 233,857 307,365
President of the Senate 32 135,376 177,929 233,857 307,365
Vice-President of the Philippines 32 135,376 177,929 233,857 307,365
President of the Philippines 33 160,924 215,804 289,401 388,096

With the increase of salary, the monthly salary of government personnel under grade 1 will increase from the original P9,000 to P11,068 in 2019. As the increment will be implemented in 4 tranches, effective January 1, 2017, their monthly salary were increased to P9,981 then to P10,510 in 2018, and eventually to P11,068 in 2019.

The monthly salary of Teacher I, salary grade 10, was also increased to P18,217 this year. Their monthly salary will be eventually increased to P19,233 in 2019.

Periodic revision of the compensation structure can ensure that the organization, whether public or private, to keep up with the market competition. As technology advances, the jobs evolve. The competencies required for the job also changes. Therefore, regular review of the compensation structure allows the organization to update and reflect these changes.

Due Process for Termination of Employment in the Philippines

Due Process

In this article, I will be referring to procedural due process simply as due process. This is to help human resources practitioners to understand the requirements of due process in termination of employment.

  • Due Process in the Philippines
  • Due Process for Just Causes
  • Due Process for Authorized Causes
  • Notice to Explain
  • Administrative Hearing in the Philippines
  • Common question: What if the employee refuse to explain or participate in the investigation?
  • Penalty for Failure to follow Due Process

Due Process in the Philippines

Due process is a requirement to ensure fairness to the employee by being notified of the reason for dismissal and to give the employee ample opportunity to defend himself or herself.

The due process is different for just and authorized cause. For just cause, it involves a 2-notice rule while for authorized cause, it requires a 30 days notice. If due process is not accorded to the employee before termination of the employment, the employee shall be entitled to payment of indemnity or nominal damages even if the termination is for a valid cause.

Due Process for Just Causes

The due process for termination of employment for just cause involves the two-notice rule:

  • A written notice, commonly known as notice to explain, served on the employee specifying the charges brought against the employee and giving the employee reasonable opportunity to explain himself.
  • A hearing or conference to allow the employee to defend himself against the charges brought against him; and
  • A notice of decision informing the employee the grounds of decision and the corresponding sanctions (if any) after consideration of all the evidence.

Due Process for Authorized Causes

The due process for termination of employment for authorized cause means:

  • A written notice of dismissal to the employee specifying the grounds at least 30 days before the date of termination, and
  • A copy of the notice, along with the completed RKS Form 5, shall also be furnished to the Regional Office of the Department of Labor and Employment (DOLE) where the employer is located.

Notice To Explain

A notice to explain is to provide an opportunity for the employee to explain himself. It should specify the charges brought against the employee and provide a reasonable opportunity for the employee to defend himself. This means to provide reasonable time and every kind of assistance so that the employee may prepare in his defense.

The notice to explain should include the details of the incident, the charges brought against the employee and a directive giving the employee at least 5 days to submit a written explanation.

The service of notice must be received and acknowledged by the employee. However, if that is not possible, the notices may be served by registered mail on the employee’s last known address.

It is the employer’s burden to prove that efforts were made to inform the charges against the employee and to provide the employee with the opportunity to explain himself. In the event that an employee refuses to receive the notice, the employer should also ensure that it is documented. Thus, a double precautionary measure would be to have the immediate superior or manager who served the notice to sign and indicate that the employee refuses to receive the notice along with the sending of the notice through registered mail.

Administrative Hearing in the Philippines

First and foremost, it must be understood that administrative hearing is not mandatory to be in compliance with the due process requirement in the termination of an employment. This is especially so in cases where the employee expressly admits to committing the infractions as stated in the notice to explain.

However, if the employee denies the charges brought against him or requests to have the hearing or it is a part of the company policy or practice, then the administrative hearing becomes mandatory.

In the case of King of Kings Transport, Inc. vs. Mamac, the court has explained that in the administrative hearing, the employee must be given the opportunity to explain and clarify his defense to the charge against him; present evidence in support of his defense and rebut the evidence presented against him by the management.

What if the employee refuse to explain or participate in the investigation?

If the employee refused to explain or participate in the investigation, the employee is deemed to have waived his right to defend himself. Consequently, the employer may impose the corresponding sanction based on the facts and evidence that the management has gathered.

Penalty for Failure to follow Due Process

If the employer fails to comply with the due process requirements, the employer may have to indemnify the employee of not more than 30,000 pesos in cases of termination for just cause, and 50,000 pesos in cases of termination for authorized cause as nominal damages.

Types of Employment in the Philippines

Types of Employment in the Philippines

Do you know how many types of employment are there in the Philippines? Other than probationary and regular employment, there are also other types of employment that an employer may consider depending on the business requirements.

  • Types Of Employment in the Philippines
    • Regular Employment
    • Project Employment
    • Seasonal Employment
    • Casual Employment
    • Fixed Term Employment

Types of Employment in the Philippines

The type of employment shall not be dictated by the employment contract but rather by the definition of law. It shall be determined by the nature of the activities to be performed, and in some cases, the duration of the engagement and the continued existence of such activities. Moreover, any terms and conditions of the employment contract that are constructed to circumvent employees’ security of tenure shall be disregarded as contrary to public policy.

In the case of Leyte Geothermal Power Progressive Employees Union ALU TUCP vs Philippine National Oil Company Energy Development Corporation, the court has differentiated 5 different types of employment:

  • Regular Employment
  • Project Employment
  • Seasonal Employment
  • Casual Employment
  • Fixed Term Employment

Regular Employment

Pursuant to Article 280 (Renumbered Art. 295) of the Labor Code of the Philippines, regular employees are those who have been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer.

Project Employment

Project employment refers to employment that is coterminous with the project. A project employee may not expect to be employed continuously beyond the completion of the project. As emphasized in the case of ALU-TUCP vs. NLRC and NSC, the principal test for determining as a project employee is whether or not the employees were assigned to carry out (1) a specific project or undertaking, (2) the duration and (3) scope of which were (4) specified at the time the employees were engaged for that project.

Seasonal Employment

Seasonal employment is a type of employment when an employee performs work that is seasonal or periodic in nature. However, the employment itself is not automatically considered seasonal so as to prevent the employee from acquiring regular status.

To categorize the employment as seasonal employment, the employer must show that the employee must be performing work or services that are seasonal in nature; and the employment is for the duration of the season.

Casual Employment

Casual employment refers to those that are not regular, project or seasonal in nature. It is a type of employment whereby employees are employed to perform activities that are not usually necessary to the employer’s business or trade.

However, casual employees shall be considered as regular employees with respect to the activity he is employed and while such activity exists after rendering 1 year of service, whether such service is continuous or broken.

Fixed-term Employment

Fixed-term employment is whereby the service of the employee is engaged only for a definite period of time and the contract shall be deemed terminated upon the end of such period irrespective of the existence of just cause and regardless of the activity the employee is called upon to perform (see Brent School, Inc., et al. vs. Ronaldo Zamora, et al.).  Fixed-term employment contracts are only upheld valid and not as a mean to circumvent the employee’s security of tenure when both parties entered into the agreement knowingly and voluntarily without external influence; or both parties were on more or less equal terms.

Overtime Pay in the Philippines

Overtime Pay

The term ‘overtime’ has been commonly used for work done beyond the normal working hours. However, how exactly does the Labor Code of the Philippines define overtime work? And how to compute overtime pay?

This article will help you to understand the following:

  • What is overtime work?
  • What is the overtime rate in the Philippines?
  • Overtime Pay for Managers in the Philippines
  • Common question: is not paying overtime illegal?
  • Computation of Overtime Pay

Overtime Work

Overtime is defined as work performed beyond 8 hours in a work day. A work day is also defined as a 24 hours period from the start of work. So if an employee works from 8am to 4pm and then from 12am to 8am, even though there is a 8 hours gap in between, it is still considered a single work day. Therefore, overtime premium shall apply.

Overtime Rates

According to article 87 of the Labor Code of the Philippines, there are 2 different overtime rates. The overtime rate for a normal working day in the Philippines is 25% plus the employee’s regular wage. However, if overtime time is performed on a rest day or holiday, the overtime rate shall be increased to 30% plus the employee’s regular wage.

Overtime Pay for Managers in the Philippines

Managerial employees and officers or members of the managerial staff are not entitled to overtime pay. However, the designation or the employee’s job title does not automatically exclude the employee from overtime pay entitlement. It depends if the employee’s duties and responsibilities qualify to be considered as a managerial employee or a member of the managerial staff.

Is not paying overtime illegal?

If the employee does not fall under the exempted categories then the employer is required to pay the employee the overtime premium for work performed beyond 8 hours in a work day.

However, if the company is under the compressed work week scheme, then the employee may work up to 12 hours in a single workday without the corresponding overtime premium. This is also provided that the total number of working hours should not exceed 48 hours in a week. Exceeding which, overtime premium shall apply.

Illustration for Overtime in Compressed Work Week Scheme

Weekly Work Example 1 Example 2
Hours of Work Overtime Hours of Work Overtime
Monday 8.5 hours 0 12 0
Tuesday 8.5 hours 0 12 0
Wednesday 8.5 hours 0 10 0
Thursday 8.5 hours 0 10 0
Friday 8.5 hours 0 10 0
Total Working Hours: 42.5 hours 54 hours
Overtime for the week: 0 hours 54 – 48 = 6 hours

Total number hours of overtime for example 1 is 0 hours because hours of work for each day did not exceed 12 hours and the total number of working hours for the week did not exceed 48 hours.

Total number hours of overtime for example 2 is 6 hours because the total number of working hours for the week exceeded 48 hours.

Overtime Computation

Example 1: How to compute overtime pay
Regular Hourly Wage P50
Overtime Hourly Wage P50 × 125% = P62.50
Example 2: How to compute overtime pay with night differential
Regular Hourly Wage P50
Overtime Rate 25%
Night Differential 10%
Overtime with Night Differential Hourly Rate 125% × 110% = 137.5%
Actual Hourly Wage P50 × 137.5% = P68.75
Example 3: How to compute overtime pay on special non working holiday
Regular Hourly Wage P50
Overtime Rate 30%
Overtime Hourly Rate
on Special Holiday
130% × 130% = 169%
Actual Hourly Wage P50 × 169% = P84.50
Example 4: How to compute overtime with night differential on special non working holiday
Regular Hourly Wage P50
Night Differential Rate 10%
Overtime Rate 30%
Overtime with Night Differential Hourly Rate on Special Holiday 130% × 110% × 130% = 185.9%
Actual Hourly Wage P50 × 185.9% = P92.95
For more information on labor regulations, please see Presidential Decree No. 442, s. 1974.

Rest Day Pay in the Philippines

Rest Day in the Philippines

Every employee is entitled to at least 1 rest day after every 6 consecutive normal work days. However, there may be times when you are required to work on your rest day. So what is the rest day regulation in the Philippines? And how much is your rest day pay?

Find out the rest day regulation and the corresponding pay rules:

  • Rest Day in Labor Code of the Philippines
  • Common question: how much is Sunday premium pay?
  • Rest Day Pay
  • Rest Day Overtime Rate
  • Chart: Rest Day Pay Rate

Rest Day in Labor Code of the Philippines

Every employee is entitled to at least 1 rest day per week which shall be determined and scheduled by the employer with respect to the preference of employees as to their weekly rest day when such preference is based on religious grounds.

The employer shall make known of the employees’ scheduled weekly rest day by means of written notices posted conspicuously in the workplace at least 1 week before the effectivity of the schedule.

How much is Sunday premium pay?

Sunday is not necessarily the employee’s rest day. The employer may schedule the rest day(s) to be any other day of the week. If the employee’s rest day does not fall on Sunday, the employee shall not be entitled to additional compensation for working on Sunday. If the employee’s rest day falls on Sunday and the employee is required to work on Sunday, then the employee shall be entitled to rest day pay.

However, if the employee does not have a regular rest day, the employee may be entitled to an additional compensation equivalent to 30% of his regular wage for work performed on Sundays.

Rest Day Pay

Article 93 of the Labor Code stipulates that when the employee is required to work on his scheduled rest day, the employee shall be entitled to additional compensation of at least 30% of his regular wage. However, if a special non-working holiday falls on the scheduled rest day, the additional compensation shall be equivalent to at least 50% of the employee’s regular wage.

Illustration

Rest Day Special Holiday falls on Rest Day
Regular Daily Wage P500 P500
Premium Rate 30% 50%
Rest Day Pay P50 × 130% = P650 P50 × 150% = P750

Rest Day Overtime Rate

When the employee works beyond 8 hours on a rest day, the employee shall be entitled to additional compensation equivalent to 30% on top of his hourly wage of that day or a total of 130% of his rest day hourly wage.

Illustration

Rest Day Special Holiday falls on Rest Day
Regular Hourly Wage P50 P50
Premium Rate 30% 50%
Overtime Rate 30% 30%
Hourly Wage Rate 130% × 130% = 169% 150% × 130% = 195%
Actual Hourly Wage P50 × 169% = P84.50 P50 × 195% = P97.50

Rest Day Pay Rate

Rest Day Pay Rate

For more information on labor regulations, please see Presidential Decree No. 442, s. 1974.

Special Non Working Holiday Pay

Special Holiday Pay

There are 2 types of holidays in the Philippines, regular holidays and special non-working days. This article will you to understand more about the special non-working day:

  • Special Non Working Holiday Meaning
  • Special Holiday Rate
  • Example: How to compute the pay on special non-working day

What is Special Non Working Holiday?

Special non working day, also known to be special non-working holiday or special holiday is an additional holiday enacted by the congress or declared under the judgment of the President of the Philippines. It means an exclusive no work day. However, the ‘No Work, No Pay’ rule applies.

Unlike regular holiday which is commemorated nationwide, such additional holiday may be celebrated in a specific region, province or city. However, there are also nationwide special non working holiday such as 26 December 2016 (Monday) and 2 January 2017 (Monday) declared through Proclamation No. 117.

What is the Special Holiday Rate?

According to the ‘No Work, No Pay’ principle, if the employee did not work on the special non-working holiday, the employee shall not be paid for that day unless there is a favorable company policy, practice or collective bargaining agreement granting payment for that day.

If the employee reported for work on the special non-working holiday, the employee shall be entitled to an additional compensation equivalent to 30% of his regular daily wage. This means that if an employee’s regular daily wage is P500, on a special non-working holiday, the employee’s daily wage shall become P650.

Special Non Working Holiday Pay Rules

Special Holiday Pay

Special Holiday Computation

Example 1: How to compute special non working holiday pay
Regular Daily Wage P500
Daily Wage on Special Holiday P500 × 130% = P650
Example 2: How to compute overtime pay on special non working holiday
Regular Hourly Wage P50
Overtime Rate 30%
Overtime Hourly Rate
on Special Holiday
130% × 130% = 169%
Actual Hourly Wage P50 × 169% = P84.50
Example 3: How to compute night differential on special non working holiday
Regular Hourly Wage P50
Night Differential Rate 10%
Night Differential Hourly Rate
on Special Holiday
130% × 110% = 143%
 Actual Hourly Wage P50 × 143% = P71.50
Example 4: How to compute overtime with night differential on special non working holiday
Regular Hourly Wage P50
Night Differential Rate 10%
Overtime Rate 30%
Overtime with Night Differential Hourly Rate on Special Holiday 130% × 110% × 130% = 185.9%
Actual Hourly Wage P50 × 185.9% = P92.95

For more information on labor regulations, please see Presidential Decree No. 442, s. 1974.

Authorized Causes of Termination

Authorized Causes of Termination

The Labor Code of the Philippines has established the authorized causes for termination under Article 298 (previously article 283) and Article 299 (previously article 284). The authorized causes permit the employer to dismiss the employee on grounds that do not arise from the employee’s fault or negligence.

Employment concerns the livelihood of the employee, therefore, termination of employment must be done in a most ethical and professional manner. Furthermore, it must be accordance with established rules, principles and in a manner as required by law.

Therefore this article will help you to understand the following:

  • Understanding Authorized Causes
  • Authorized Causes for Termination
  • Requirements for Authorized Termination
  • Difference between Just Cause and Authorized Cause
  • Consequences of an Authorized Termination

What are authorized causes of termination?

Authorized causes are valid causes that usually derives from business decisions to ensure the sustainability of the company or to improve the economic conditions of the company which comes in precedence over the continued employment of the employees. In terminating based on an authorized cause, the employer shall bear the burden of proof to justify the dismissal was for a lawful cause and in a manner required by law. The termination shall not be done in bad faith or to deprive the employees of any privilege or benefit.

What are the authorized causes for termination?

The authorized causes can be found in Article 298 (previously article 283) and Article 299 (previously article 284) of the Labor Code of the Philippines. They are:

  • Installation of labor-saving devices;
  • Redundancy;
  • Retrenchment to prevent losses;
  • Closure or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of the Labor Code; or
  • Disease / illness.

What are the requirements in terminating an employee due to authorized causes?

The employer must establish and comply with the following as part of the requirements in terminating an employee for authorized causes:

  • Good faith in the termination of employee, i.e., the implementation of the company program resulting in termination of employees must be for a valid cause and not merely a tool to circumvent the law on employee’s security of tenure;
  • The employer must adopt fair and reasonable criteria in the selection of employee to be dismissed; and,
  • The employee must be paid separation pay not less than the amount fixed by law.

In the selection of the employee to be dismissed, the employer must adopt of fair and reasonable criteria which must be applied in good faith such as the less preferred status of employee, efficiency rating and seniority unless the employee voluntarily asks to be separated.

What is the difference between just cause and authorized cause?

In contrast to just causes, termination for an authorized cause is due to the business needs and in general does not arise from an employee’s fault or negligence and thus, an employee terminated on grounds of authorized causes shall be entitled to separation pay.

On the other hand, a termination due to a just cause is directly attributable to the fault or negligence of the employee. As such, when an employee is terminated due to a just cause, the employee is not entitled to separation pay unless provided for under the collective bargaining agreement, employment contract or the company policy.

What are the consequences of a termination due to an authorized cause?

Valid Authorized Cause Due Process Followed Consequences
Yes Yes Valid dismissal, no other consequences
Yes No Valid dismissal but may be liable for payment of indemnity or nominal damages
No Regardless Invalid dismissal. The employee may be entitled to one or more of the following:

  • Reinstatement without loss of seniority rights;
  • In lieu of reinstatement, an employee may be given separation pay of one month pay for every year of service;
  • Full backwages, inclusive of allowances and other benefits or their monetary equivalent from the time compensation was withheld up to the time of reinstatement;
  • Damages if the dismissal was done in bad faith.

For more information about labor regulations, please refer to Presidential Decree No. 442, s. 1974.

13th Month Pay Law and Computation

13th Month Pay

Section 1 of Presidential Decree No. 851 is modified by Memorandum Order No. 28, s. 1986 to the extent that all employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year.

This article will help you to understand the following:

  • Employees Entitlement to 13 month Pay
  • 13th Month Pay Computation
  • How to compute 13th month pay for resigned employee?
  • Is 13th month pay taxable?

Who is entitled to 13th month pay?

All rank-and-file employees are entitled to the 13th-month pay regardless of the nature of their employment and irrespective of the methods by which they are paid provided they worked for at least one month during a calendar year. This means that probationary, project and contractual employees are also entitled to the 13th-month pay.

How to compute 13th month pay?

The basis in computing the 13th month pay is the employee’s basic salary. The following items are not included in the computation of the 13th-month pay unless these salary-related benefits are treated as part of the basic salary of the employee, through individual or collective bargaining agreement, company practice or policy.

Items  
Cost of Living Allowance Not Included
Overtime Pay Not Included
Night Differential Not Included
Holiday Pay Not Included
Premium Pay Not Included
Unused Paid Leave converted to Cash Not Included
Maternity Leave* Not Included

*Maternity leave is not included as Maternity Benefit is paid by SSS, the employee essentially has no compensation income from the company.

The 13th month pay is computed based on 1/12 of the total basic salary earned during the year.

Example of 13th-month pay computation
Month Attendance Basic Salary
Jan no absence P11,372.33
Feb no absence P11,372.33
Mar 1 day leave with pay P11,372.33
Apr no absence P11,372.33
May no absence P11,372.33
Jun 2 days leave with pay P11,372.33
Jul no absence P11,372.33
Aug 2 days leave with pay P11,372.33
Sep on maternity leave no salary
Oct on maternity leave no salary
Nov no absence P11,372.33
Dec 5 days leave without pay P9,192.33
Total Salary for the Year   P111,543.33
13th Month Pay P111,543.33 / 12 P9,295.28

How to compute 13th month pay for resigned employee?

An employee who separated from the company, by resignation or termination, is still entitled to the 13th-month pay in proportionate to the employee’s length of service. In other words, 13th-month pay is computed on a pro-rata basis.

Illustration:

An employee was hired on 1 January 2015 and effectively resigned on 1 March 2016. Assuming that the employee earn a monthly basic salary of PHP 12,000, the employee shall be entitled to 13th month pay equivalent to:

Basic Salary   P12,000
Total Months Worked 2 months
13th Month Pay (2/12) X P12,000 P2,000

*Illustration is based on perfect attendance with no deduction. Please check below example on how to compute 13th-month pay.

13th Month Pay Tax Computation

Under Republic Act No. 10653, 13th month pay and other benefits such as productivity incentives and Christmas bonus are non-taxable. However, the total exemption amount shall not exceed Php 82,000. Any amount in excess thereof may be subjected to tax.

For more information about the 13th month pay, please refer to Presidential Decree No. 851

Night Differential Rate and Computation of Night Differential Pay

Night Differential Pay Rate

Night Differential or Night Shift Differential (NSD) is an additional compensation provided to workers who worked during the night. This additional pay is also commonly known as Night Differential Pay or Night Shift Differential Pay.

This article will provide you with information on Night Differential entitlement; rate and examples on how to compute it with overtime and on holidays.

Who is entitled to night differential pay?

According to the Labor Code of the Philippines, all employees are entitled to night differential pay except government personnel; employees of retail and service establishments with not more than 5 employees; domestic helpers; managerial employees; and, those employees whose time and performance are unsupervised.

When is the night shift differential hours?

It starts from 10 p.m. to 6 a.m the following day.

What is the night differential rate?

Unless the company provides a higher night differential rate, the rate shall be 10%. This means that for every hour of work, the employee shall be paid a total 110% of his regular hourly wage. If the employee regular hourly wage is P50, then with night differential, his hourly wage shall become P55.

Computation of Night Differential

Example 1: How to compute Overtime Pay with Night Differential
Regular Hourly Wage: P50
Overtime Rate: 25%
Night Differential Rate: 10%
Actual Hourly Rate: 125% × 110% = 137.5%
Actual Hourly Wage: P50 × 137.5% = P68.75
Example 2: How to compute Night Differential on Special Non-Working Day
Regular Hourly Wage: P50
Special Holiday Rate: 30%
Night Differential Rate: 10%
Actual Hourly Rate: 130% × 110% = 143%
Actual Hourly Wage: P50 × 143% = P71.50
Example 3: How to compute Night Differential on Regular Holiday
Regular Hourly Wage: P50
Regular Holiday Rate: 100% (additional)
Night Differential Rate: 10%
Actual Hourly Rate: 200% × 110% = 220%
Actual Hourly Wage: P50 × 220% = P110

For more information on labor regulations, please refer to Presidential Decree No. 442, s. 1974.

Quitclaim and Final Pay

Quitclaim Deed

An employee is usually required to sign a quitclaim deed and discharge the company of any liability upon receipt of the final pay (including the 13th month, income tax refund, etc) in the Philippines. This is done after the completion of the turnover and clearance from the company.

This article will help you to understand the following:

  • What is a Quitclaim deed?
  • The Validity of a Quitclaim deed
  • Components of the Final Pay
  • Example on Computation of Final Pay
  • The legality for Withholding of Final Pay

What is a Quitclaim deed?

An employer usually requires the employee to sign a quitclaim deed to quitclaim, release and discharge the employer of any liability to prevent the employee from any future monetary claims by reason of or arising from the employment with the employer.

The quitclaim deed shall serve as proof of complete and final settlement of all claims the employee has against the employer. Therefore the employee has waived the right to make future claims against the employer pertaining to the employment.

Is Quitclaim deed a valid legal document?

The quitclaim shall be held a valid legal document if:

  • The employee executes a deed of quitclaim voluntarily;
  • There was no fraud or deceit on the part of any of the parties;
  • The consideration for the quitclaim is credible and reasonable; and
  • The contract is not contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law.

What does final pay include?

The final pay generally includes the following:

  • The last salary due to the employee;
  • Monetized unused leave credits;
  • Income tax claim for the excess withholding tax withheld;
  • Prorated 13th-month pay;
  • Separation pay if applicable; and
  • Other compensation agreed upon in the collective bargaining agreement (CBA) or employment contract.

Example: How to compute final pay?

Illustration

An employee with monthly salary P16,000 worked for 9 full months in the calendar year and resigned.

Items Amount
Daily Rate – using 261 day factor: P735.63
Last Salary: P14,000
Unused Leave Credits – 5days: P3,678.15
Income Tax Refund: P8,402.13
Pro-rated 13th-month: P12,000
Total: P38,080.28

 

Can an employer withhold the final pay of the employee?

It is a common practice in the Philippines for employers to withhold the last salary or final pay due to the separated employee until the employee has been cleared of all accountability and liabilities from the company.

According to the Civil Code article 1706, “Withholding of the wages, except for a debt due, shall not be made by the employer.” Debt shall refer to any obligation due including any accountability that the employee may have to the employer. Therefore the institution of clearance procedures before the release of the employees’ final pay is a valid exercise of management prerogative, granted that it is within the limits of the law. This was also seen in the case of Emer Milan, et al. vs NLRC, et al. Despite so, the company is obligated to make the payment within a reasonable time after the employee has completed the clearance.

For more information on the Civil Code of the Philippines, please refer to Republic Act No. 386.

Separation Pay in the Philippines

Separation Pay

An employee who is terminated for an authorized cause is entitled to separation pay of at least 1 month pay. It is a form of compensation provided for the transitional period during which the employee is looking for another employment after the employee is separated from the company.

This article will provide you with information on:

  • Who is entitled to Separation Pay?
  • Components of Separation Pay
  • The Basis and Examples of computation of Separation Pay

Who is entitled to separation pay?

According to the Labor Code of the Philippines, an employee who is terminated due to an installation of labor-saving devices; redundancy; retrenchment to prevent losses; closing or cessation of operation of the establishment or undertaking; or disease is entitled to separation pay.

It can also be provided to an employee when the termination of the employee was ruled illegal but reinstatement rendered impossible; as a measure of social justice; or when the grant of it was established through a contract or agreement.

Is a resigned employee entitled to separation pay?

An employee who voluntarily resigned from employment is not entitled to it unless provided for under an existing company policy, practice or agreement.

What is included in the separation pay?

Separation pay is computed based on the employee’s salary at the time of separation from the company. All regular allowances and benefits such as transportation allowance and cost of living allowance, whichever applicable, should be included in the computation.

On the other hand, items such as 13th-month pay, monetized unused leave credits are not included in the computation.

Basis of Separation Pay

The employee shall be entitled to 1-month pay or 1-month pay for every year of service whichever is higher if the cause of termination is due to:

  • Installation of labor-saving devices;
  • Redundancy; or
  • Illegal dismissal (depending on court order).

The employee shall be entitled 1-month pay or 1/2 month pay for every year of service whichever is higher if the cause of termination is due to:

  • Retrenchment to prevent losses; or
  • Closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses; or
  • Disease.

Examples: How to compute separation pay?

The amount depends on the following 3 factors:

  • The cause of termination;
  • The employee’s last salary; and
  • The employee’s length of service;
    (noting that a fraction of at least 6 months shall be considered 1 whole year)
Example 1 Example 2 Example 3 Example 4
Last Salary P 20,000 P 20,000 P 20,000 P 20,000
Length of Service 2 months 2 yrs 7 mths 2 months 2 yrs 7 mths
Cause of Termination Redundancy Redundancy Retrenchment Retrenchment
Separation Pay P20,000 P20,000 × 3
= P60,000
P20,000 P20,000 × 1.5
= P30,000

For more information on labor regulations, please refer to the Presidential Decree No. 442, s. 1974.

The Magna Carta of Women – Special Leave Benefits for Women

Special Leave Benefits for Women

What are the Special Leave Benefits for Women

The special leave benefits for women are mandated under Republic Act No. 9710, also known as ‘The Magna Carta of Women’ stipulating that a female employee may be entitled to 2 months of special leave with full pay following surgery caused by gynecological disorders.

What are the gynecological disorders covered for?

“Gynecological disorders” refers to disorders that would require surgical procedures such as, but not limited to dilatation and curettage and those involving female reproductive organs such as the vagina, cervix, uterus, fallopian tubes, ovaries, breast, adnexa and pelvic floor, as certified by a competent physician. It shall also include hysterectomy, ovariectomy and mastectomy.

What are the requirements to avail the special leave benefits for women?

A woman employee who meets all of the following requirements shall be entitled to the special leave benefit:

  • She has rendered at least six (6) months continuous aggregate employment service for the last twelve (12) months prior to surgery;
  • She has filed an application for special leave with her employer within a reasonable period of time from the expected date of surgery or within such period as may be provided by company rules and regulations or collective bargaining agreement; and
  • She has undergone surgery due to gynecological disorders as certified by a competent physician.

For more information on The Magna Carta of Women, please refer to Republic Act No. 9710.

Solo Parent Leave in the Philippines

Solo Parent Leave

An employee who is assuming sole responsibility for parenthood may be entitled to parental leave or more commonly known as solo parent leave.

Solo Parent Leave

Under Republic Act No. 8972 also known as the “Solo Parents’ Welfare Act of 2000”, a solo parent may be entitled to 7 days of parental leave, or solo parent leave, per year. It is a leave benefit granted to solo parents to perform their parental duties and responsibilities where physical presence is required.

Who is considered as a solo parent?

A solo parent is any individual who falls under the following categories:

  • A woman who gives birth as a result of rape and other crimes against chastity even without a final conviction of the offender, provided that mother keeps and raises the child;
  • Parent left solo or alone with the responsibility of parenthood due to the following circumstances
    • Due to death of spouse;
    • Spouse is detained or is serving sentence for a criminal conviction for at least 1 year;
    • Physical and/or mental incapacity of spouse as certified by a public medical practitioner;
    • Legal separation or de facto separation from spouse for at least 1 year, as long as he/ she is entrusted with the custody of the children; or
    • Declaration of nullity or annulment of marriage as decreed by a court or by a church as long as he/ she is entrusted with the custody of the children.
  • Unmarried mother/father who has preferred to keep and rear her/ his child/ children instead of having others care for them or give them up to a welfare institution;
  • Any other person who solely provides parental care and support to a child or children; or
  • Any family member who assumes the responsibility of head of family as a result of the death, abandonment, disappearance or prolonged absence of the parents or solo parent.

What are the requirements to avail the Solo Parent Leave?

An employee who meets all of the following requirements shall be entitled to solo parent leave:

  • Rendered at least 1 year of service;
  • Notified the employer of his/ her intention to avail the parental leave within a reasonable period of time; and
  • Has a valid Solo Parent Identification Card.

How to apply for Solo Parent ID?

  1. The applicant shall bring the following documents to City/Municipal Social Welfare and Development Office:
    • Barangay certification certifying Solo Parent’s residency in the barangay for the last six months;
    • Certificates e.g., birth certificates of children, death certificate of spouse and other appropriate documentary support; and
    • Income tax return or any document that will establish the income level of the solo parent.
  2. The social worker receives and ensures that all documents are complete and registers the applications with an appropriate case number in the log-book Registry of Solo Parents.

Note: The ID will be issued after 30 days from filing. The validity of the ID is one year and is renewable.

Information to apply for Solo Parent ID can be found here.

Nonconversion to Cash

In the event that the parental leave is not availed of, it shall not be convertible to cash, unless specifically agreed on previously.

For more information on the Solo Parent Welfare Act of 2000, please refer to Republic Act No. 8972.

Paternity Leave Act of 1996 in the Philippines

Paternity Leave Act of 1996 Philippines

Under Republic Act No. 8187 also known as the ‘Paternity Leave Act of 1996’, a male employee is entitled to 7 days of leave for the first 4 deliveries of his wife.

  • Who is entitled to Paternity Leave?
  • When can an employee avail the Paternity Leave?
  • Why there is no Paternity Leave provision in the Labor Code of the Philippines?

Paternity Leave Entitlement

The employee length of service and employment status are not part of the criteria to determine an employee’s eligibility. Therefore, the male employee shall be entitled to this benefit if he meets all the requirements below regardless of his length of service and employment status (probationary, regular, contractual or project-based):

  • He is an employee at the time of the delivery of his child;
  • He is cohabiting with his spouse at the time that she gives birth or suffers a miscarriage;
  • He has applied for paternity leave with his employer within a reasonable period of time from the expected date of delivery by his pregnant spouse, or within such period as may be provided by company rules and regulations, or by collective bargaining agreement; and
  • His wife has given birth or suffered a miscarriage.

Availment of Paternity Leave

The employee may avail the leave after the delivery of his wife. This is without prejudice to existing company policy, practice or agreement allowing the employee to avail the benefit before or during the delivery. If this leave benefit is not availed of, the benefit is not convertible to cash.

Why there is no Paternity Leave provision in the Labor Code of Philippines?

As mentioned above, this leave benefit is mandated under Republic Act No. 8187 and not in the Labor Code of Philippines.

For more information about the Paternity Leave Act of 1996, please refer to Republic Act No. 8187.

Maternity Leave Policy and SSS Maternity Benefit

Maternity Leave Policy and SSS Maternity Benefit

While Article 131 (previously article 133) of the Labor Code of the Philippines provides for maternity leave benefit, it has since been integrated with the Social Security Law which provides maternity leave benefit of 60 days for normal delivery and 78 days for cesarean delivery.

  • Maternity Leave Policy in the Philippines
  • Payment for Maternity Benefit
  • Maximum SSS Maternity Benefit
  • Computation of Maternity Benefit

Maternity Leave Policy Philippines

Under the Labor Code of Philippines, pregnant female employee who has served at least 6 months in the 12 months period immediately preceding the expected date of delivery, or the complete abortion or miscarriage, shall be entitled to a total of 6 weeks of maternity leave with full pay based on her regular wages or average weekly wages. Maternity leave benefit is only given to the first 4 deliveries or miscarriages of the employee.

This is however integrated and provided through the maternity benefit of the social security system under Republic Act No. 8282. Under SSS maternity benefit, a pregnant female member who has contributed at least 3 months in the 12 months period immediately preceding the semester of her childbirth or miscarriage shall be entitled to 60 days of paid maternity leave benefit for normal delivery or 78 days of paid maternity leave benefit for cesarean delivery. Maternity leave benefit is only given to the first 4 deliveries or miscarriages of the said member.

Who shall pay for the Maternity Benefit?

The employer shall make an advance payment of the maternity leave benefit within 30 days from the filing of the maternity leave application which is 100% reimbursable from SSS upon submission of all required documents.

However, the employer shall borne the cost of the maternity leave benefits if the employer fails to remit the required contributions; or the employer fails to notify SSS upon receipt of the maternity leave application.

How much is the Maximum Maternity Benefit

The maternity benefit received by the employee is dependent on the monthly SSS contribution. Effective 1 January 2014, the maximum monthly salary credit is PHP 16,000 as reflected in the SSS schedule of contribution. With that, the maximum maternity benefit that an employee may receive shall be PHP 32,000 for normal delivery and PHP 41,600 for cesarean delivery, assuming that every of the 6 highest monthly salary credit is PHP 16,000.

How to compute Maternity Benefit

The maternity benefit is equivalent to 100% of the member’s average daily salary credit, using the 6 highest monthly salary credit of the past 12 months before the semester of contingency as the basis.

  • A semester refers to a period of 6 consecutive months or 2 consecutive quarters
  • A quarter refers to a period of 3 consecutive months ending March, June, September or December

Illustration

An employee delivered her child on 4th of April, 2016. Assuming that the employee’s monthly salary credit is P15,000 a month. Compute her SSS Maternity benefit below:

  • Identify the semester (6 months period) of contingency. In the example, the semester of sickness would be from Jan 2016 to Jun 2016.
  • Identify the six highest monthly salary credits that were contributed to the SSS within the last 12 month before the semester. So that will be from Jan 2015 to Dec 2015.
Add the six highest monthly salary credits P15,000 x 6 = P90,000
Divide the total by 180 days to get the average daily salary credit P90,000 / 180 = P500
If Normal delivery: Multiply the daily maternity allowance by approved number of days (60 days) P500 x 60 = P30,000
If CS delivery: Multiply the daily maternity allowance by approved number of days (78 days) P500 x 78 = P39,000

Absent Without Official Leave (AWOL)

Absence Without Official Leave AWOL

AWOL is the abbreviation for absent without official leave. It refers to the absence of an employee without seeking prior approval before the day of absent. AWOL may be a valid ground for termination when it constitutes gross or habitual neglect of duty.

  • When does an employee need to file for a leave?
  • Can an employee be terminated for AWOL?
  • What is an employee is AWOL and does not return to work?
  • What if an employee submits resignation and AWOL?

When does an employee need to file for a leave?

It is the employer’s prerogative to provide a reasonable time frame for the employee to seek approval prior to the day of absence or notify the employer or authorized representative in cases of emergency and unforeseen circumstances.

Can an employee be terminated for AWOL?

An employee may be terminated for the unauthorized absences when it constituted gross or habitual neglect of duty prejudicial to its business operations. In terminating an employee for habitual absenteeism, the employer must prove that the dismissal is proportionate to the infractions committed, such as the impact to the company’s operations and the time frame which the infractions occurred leading to the termination of employment.

What if an employee is AWOL and does not return to work?

If an employee is absent from work with a clear intent of terminating the employer-employee relationship, the employee may be charged with abandonment of duty, which is a valid cause of termination. Abandonment refers to a deliberate unjustified refusal of the employee to resume the employment. It is not merely absences from work, it must also show the employee’s intention to sever the employer-employee relationship such as the submission of a resignation letter. Without which, the charge of abandonment shall be invalid.

If the employee has no clear signs of terminating the employment relationship but is absent without official leave, the employer may mete out corresponding disciplinary actions after the due process. In the event that the employee’s unauthorized absences constitute gross or habitual neglect of duty, the employer may dismiss the employee based on the just cause.

What if an employee submits resignation and AWOL?

An employee may terminate the employment relationship without a just cause by serving a written notice, or commonly known as a resignation letter to the employer at least 1 month in advance unless otherwise agreed upon. If the employee resigned from the employment without a just cause and without providing the 1-month notice, the employer may hold the employee liable for damages.

Service Incentive Leave (SIL) and Vacation Leave Regulations and Computation

Service Incentive Leave

Service incentive leave is a leave benefit covered in Article 95 of the Labor Code of the Philippines. However, most people know it as Vacation Leave.

This article will explain about the service incentive leave and vacation leave in the Philippines:

  • What is Service Incentive Leave (SIL)
  • What is Vacation Leave
  • Are part-time employees entitled to service incentive leave?
  • Common question: are probationary employees entitled to vacation leave?
  • Common question: can my employer deny my vacation request?
  • Is service incentive leave convertible to cash?
  • Is vacation leave convertible to cash?
  • How to compute Service Incentive Leave

Service Incentive Leave (SIL)

Service incentive leave is a leave entitlement regulated through Article 95 of the Labor Code of the Philippines. An employee who has rendered at least 1 year of service shall be entitled to 5 days of paid service incentive leave (SIL) per year. However, in practice, most employers do not provide service incentive leave to their employees. Instead, the employers grant vacation leave benefit to their employees. Employers who grant at least 5 days of vacation leave per year is deemed to be in compliance with this provision.

Vacation Leave Philippines

Vacation leave benefit is not covered in the Labor Code of the Philippines.

There is no provision in the Labor Code that requires an employer to grant vacation leave. However, a company that provides vacation leave with pay of at least 5 days per year is deemed to be in compliance with the service incentive leave provision. Therefore, most employers have a vacation leave policy instead of a service incentive leave policy.

In granting the vacation leave, the employer has the right to impose certain conditions such as the scheduling of the leave. An employee is thereby required to seek official approval from the employer to avail the vacation leave benefit.

Are Part-Time Employees entitled to Service Incentive Leave (SIL)?

Part-time employees are also entitled to 5 days of service incentive leave with pay after rendering 1 year of service. The availment and commutation of the SIL will be proportionate to the daily work rendered and the regular daily salary, respectively.

Illustration

Full-time Part-time
Regular Daily Wage P70/ hr × 8 hours = P560 P70/ hr × 4 hours = P280
Conversion of 5 days of SIL P560 × 5 = P2,800 P280 × 5 = P1,400

Can my employer deny my vacation request?

The grant of vacation leave benefit is a management prerogative. Therefore, the employer may impose certain conditions on it such as the scheduling of the leave. In the case of Rene Soriano vs PNCC Skyway Corporation, the court has explained that the employer may approve or deny any vacation leave request, or to compel its employees to exhaust all their vacation leave credits.

Service Incentive Leave Convertible to Cash?

The 5-day unused SIL is commutable to its money equivalent at the end of the year or upon separation from the company.

Is Vacation Leave Convertible to Cash?

Employers must allow employees to use, convert to its money equivalent or carry forward a total of at least 5 days of vacation leave per year to be in compliance with the service incentive leave provision.

However, the employer may impose other conditions such as limiting the maximum number of vacation leave credits to be converted to its money equivalent or to be carried forward to the following year.

Service Incentive Leave Computation

Upon completion of the first 12 months of service, an employee shall be entitled to 5 days of SIL. Beyond the first 12 months of service, the use and conversion of the leave may be on a pro rata basis. This is without prejudice to any existing arrangement more favorable to the employee.

Illustration

An employee was hired on 1 January 2015 and effectively resigned on 1 March 2016. Assuming that the employee has not used any SIL, the employee shall be entitled to the following as of 1 March 2016:

SIL earned as of 31 December 2015   5 days
Proportionate SIL for January and February 2016 (2/12) x 5 days = 0.833 day
Total accrued SIL as of 1 March 2016   5.833 days

For more information on labor regulations, please see Presidential Decree No. 442, s. 1974.

What is Income Tax Refund and how to compute your Tax Refund in the Philippines

Income Tax Refund in the Philippines

Income tax refund refers to the return of excess taxes withheld from the employees. This situation may occur when the total amount of withheld taxes for the year is more than the employee’s annual income tax for the year. Therefore, the employer will refund the excess withheld amount back to the employee. And here’s how to compute the income tax refund in the Philippines.

What You Will Learn

  • What is income tax refund?
  • When is tax refund given in the Philippines?
  • How to compute income tax refund for resigned employees?
  • Income Tax Refund Computation

Income Tax Refund in the Philippines

Income tax refund refers to the return of the excess withholding tax that the employer withheld from the employee. The employer is also authorized to withhold any shortfall income tax from the employee’s salary in December in the current year to be remitted to BIR.

At the end of the calendar year but prior to the payment of the compensation for the last payroll period, the employer shall perform a reconciliation process also known as annualization to determine each employee’s income tax based on the employee’s actual annual compensation.

The employer shall then withhold the shortfall or refund the excess through the employee’s salary in December of the current calendar year, not later than January 25 of the succeeding year. Separated employees shall have the shortfall withheld or excess refund to them in the final pay.

When is tax refund given in the Philippines?

Employers shall provide a tax refund upon employee’s separation from employment or not later than January 25 of the succeeding year. There will be a tax refund only when excess withholding tax is withheld. This may be due to one or more of following reasons:

  • Changes in taxation and related regulations;
  • Changes in the tax exemption amount due to change in employee’s status;
  • Shift in tax salary bracket due to situations such as absences without pay or additional compensation;
  • Employee who joined or separated from the company in the calendar year; or
  • Other similar reasons that may affect the employee’s taxable income or tax rate.

How to compute income tax refund for resigned employees?

The employer shall compute the income tax refund for the resigned employee upon the employee’s separation from the company. In fact, the tax refund computation for the resigned employee is the same as the rest of the employees. The only difference is the time when the tax refund will be computed and returned to the employee.

Income Tax Refund Computation

The employer shall compute the total compensation paid to the employee to determine the employee’s actual income tax. The shortfall or excess between the actual income tax and the tax withheld from the employee is the amount to be either deducted from the employee’s salary or returned to the employee.

Illustration

An employee started working on 1st of July with no compensation earned from 1st January to 30th June. He is married with 1 dependent, earns P16,000 basic salary without any additional compensation.

Item Computation Amount
Basic Salary   P16,000.00
SSS Contribution   P581.30
Philhealth Contribution   P200.00
Pag Ibig Contribution   P100.00
Taxable Income P16,000 – P881.30 = P15,118.70

Based on employee’s information, use the MONTHLY table B item (1) – ME1/ S1. As the employee’s taxable income is P15,118.70, the corresponding withholding tax amount shall be:

P708.33 + [(P15,118.70 – P12,083) x 20%] = P1,315.47

Month Salary Earned Tax Withheld
July P15,118.70 P1,315.47
August P15,118.70 P1,315.47
September P15,118.70 P1,315.47
October P15,118.70 P1,315.47
November P15,118.70 P1,315.47
December P15,118.70  
Total P90,712.20 P6,577.35

*Total tax withheld is P6,577.35

Actual Taxable Amount = P90,712.20 – P75,000 = P15,712.20
Actual Income Tax = P500 + [(P15,712.20 – P10,000) x 10%] = P1,071.22
Excess Withholding Tax to be returned = P6,577.35 – P1,071.22 = P5,506.13

For more information on taxation issues, please refer to the tax code of the Philippines.

Computation of Withholding Tax in the Philippines

Withholding Tax Computation

In the Philippines, employers act as the withholding agent for the Bureau of Internal Revenue (BIR). So employers are required to compute, deduct and remit the employees’ taxes to the BIR. And the employer shall be liable for the taxes not withheld or remitted to BIR. So it is imperative that employers are familiar with the withholding tax regulations and the computation of withholding tax in the Philippines.

What You Will Learn

  • What is withholding tax?
  • BIR Withholding Tax Table
  • What is the withholding tax formula?
  • How to compute withholding tax in the Philippines?

Withholding Tax in the Philippines

In this case, I will be explaining the withholding tax on compensation or the withholding of taxes from income payments arising from an employer-employee relationship. The employer must note that the employee’s total withheld taxes for the year may be different from the employee’s actual income tax. So the employer is required to perform a reconciliation to ensure it matches.

BIR Withholding Tax Table

Withholding Tax Table
You can download the withholding tax table from BIR here.

 

The BIR withholding tax table includes 4 different sections for the daily paid; weekly paid; semi-monthly paid; and, the monthly paid employees. However, the computation method is the same. But before that, let’s understand the withholding tax table and formula.

 

 

 

 

Understanding the Withholding Tax Formula

compute withholding tax exemption amount

Personal and Additional Exemption Amount

Under every section, there are 2 tables – A and B. Each row refers to a different amount of employee’s personal and additional exemption. For example, an employee who is single (S) or married (M) without any qualified dependent will be under row 2 with a P50,000 personal exemption.

And if you use the first amount of every row multiply by 12, you will get back the exemption amount. For example, 4,167 multiply by 12 = 50,004. The slight discrepancy is due to rounding differences in the entire table. The multiplying factor for ‘Daily’ section is 303; ‘Weekly’ section is 52; and, ‘Semi-Monthly’ section is 24.

withholding tax rateNext, what does the ‘0.00’ and the ‘+5% over’ means? It means the employer is required to withhold 5% tax for salary above P4,167. So if the employee earns P4,800 a month, the employer is required to withhold [5% × (P4,800 – P4,167)] + 0.00 = P31.65 tax. If the employee earns P12,000, then the employer will be required to withhold [20% × (P12,000 – P10,000)] + P708.33 = P1,108.33 tax.

And what is the P708.33? It is the total amount of [5% × (P5,000 – P4,167)] + [10% × (P6,667 – P5,000)] + [15% × (P10,000 – P6,667)] = P708.30. The slight discrepancy is due to the rounding differences in the entire table. Now you know how to compute the withholding tax, let’s go through an example below.

Computation of Withholding Tax in the Philippines

Example of Computation of Withholding Tax

  1. Ensure you are using the “Monthly” section.
  2. Determine the exemption status
    • Use table A for employees without qualified dependent
      • Status Z – for employees with zero exemption (those who failed to file Application for Registration and those with multiple employers)
      • Status S/ME – for both single and married employee with no qualified dependent
    • Use table B for single/married employee with qualified dependent child(ren)
      • Status ME1/S1 – with 1 qualified dependent
      • Status ME2/S2 – with 2 qualified dependent
      • Status ME3/S3 – with 3 qualified dependent
      • Status ME4/S4 – with 4 qualified dependent
  3. Determine the gross income.
    • Assuming the gross income is Php 14,000.
    • Gross Income = (Basic Salary + Allowances + Overtime Pay + Night Shift Differential + Holiday Pay) – (Absences + Tardiness + SSS + Philhealth + HDMF contributions)
  4. Computation of the withholding tax.
    • Assuming the employee has 1 qualified dependent – Status ME1/S1
    • Assuming the employee’s gross income is Php 14,000.
    • Using the row of ME1/S1, look for the highest amount not exceeding the gross income – which is in this case, Php 12,083 (Column 5)
    • Withholding tax formula for Column 5 is Php 708.33 + 20% above Php 12,083
    • 708.33 + (20% * (14,000 – 12,083)) = Php 1091.73

For more information about taxation, please refer to the tax code of the Philippines.

Personal Income Tax and Withholding Tax on compensation

Income Tax and Withholding Tax Philippines

Employers are required to act as withholding agents to ensure that their employees’ pay the right amount of income tax every year. Failure to do so may be liable to penalties. And therefore it is important to understand the income tax rate and the exemptions of taxation to compute the right amount of income tax.

This will provide you with a basic understanding of the current and new personal income tax and the Philippines withholding tax on compensation.

  • What is the income tax rate?
  • New Income Tax Table
  • What is not included in taxable income?
  • What are ‘De Minimis’ benefits?
  • What is included in non taxable income?
  • Income Tax Exemptions in the Philippines
  • Withholding Tax Table

What is the income tax rate?

Annual Income Tax Table Philippines:

Annual Income Tax Table Philippines
However, the government is working on the income tax reform bill which aims to reduce individual income tax. With the new income tax rate, 83% of the taxpayers will be exempted from paying personal income tax (according to data from BIR).

new income tax table philippines
Key Highlights

  • The reform will be carried out in 2 phases – 1st phase in 2017 onwards, 2nd phase in 2020 onwards.
  • Employees who earned less than 250,000 a year will be exempted from personal income tax.

Taxable Income Philippines

All compensation (including basic salary, allowances, overtime pay, etc) is taxable unless:

  • The employee is a minimum wage earner;
  • It is part of de minimis benefits;
  • It is the employee’s contribution for SSS, Philhealth and HDMF;
  • It is a non-taxable item such as 13th-month pay;
  • It was deducted from the salary for absences or tardiness.

De Minimis Benefits

Revenue Regulations Nos. 2-98 and 3-98 were amended by Revenue Regulations 5-2008, 5-2011, 8-2012 and 1-2015 to reflect the current ‘De Minimis’ benefits.

De Minimis Benefits are facilities or privileges that are of relatively small value given to the employees by the employer which are not subjected to income tax nor fringe benefit tax.

The 11 ‘De Minimis’ Benefits are:

  1. Monetized unused vacation leave credits of private employees not exceeding 10 days during the year;
  2. Monetized value of vacation and sick leave credits to government official and employees;
  3. Medical cash allowance to dependents of employees, not exceeding PHP 750 per employee per semester or PHP 125 per month;
  4. Rice subsidy of PHP 1,500 or 1 sack of 50kg of rice per month amounting to not more than PHP 1,500;
  5. Uniform and clothing allowance not exceeding PHP 5,000 per annum;
  6. Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/ executive check-up, maternity assistance, and routine consultations, not exceeding PHP 10,000 per annum;
  7. Laundry allowance not exceeding PHP 300 per month;
  8. Employees achievement awards, e.g. for length of service or safety achievement, which must be in the form of tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding PHP 10,000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees;
  9. Gifts made during Christmas and major anniversary celebrations not exceeding PHP 5,000 per employee per annum;
  10. Daily meal allowance for overtime work and night/ graveyard shift not exceeding 25% of the basic minimum wage on a per region basis, and
  11. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes provided that the total monetary value received from both CBA and productivity incentive schemes combined do not exceed PHP 10,000 per employee per taxable year.

Any amount in excess of the stipulated de minimis benefit may still be exempted from taxation under Republic Act No. 10653, provided that the total exclusion shall not exceed P82,000.

Non Taxable Income Philippines

According to Republic Act No. 10653, 13th-month pay, productivity incentives, Christmas bonus and other benefits shall not be included in gross income and shall be exempt from taxation. The total exclusion shall not exceed eighty-two thousand pesos (P82,000).

Income Tax Exemption Philippines

Every employee is entitled to P50,000 income tax exemption and an additional P25,000 income tax exemption for each qualified dependent children, not exceeding 4 children.

However, if an employee has multiple employers, only the main employer shall claim personal and additional exemption. All other employers shall declare zero exemption for the employee. An employee who failed to file an application for registration shall likewise not entitled to any exemption.

Withholding Tax Table

Employers can withhold employee’s withholding tax based on the BIR Withholding Tax Table.

BIR Withholding Tax Table:
Withholding Tax Table
From Bureau of Internal Revenue

Understanding Probationary Employment Contract & Extension Of Probation Period

Probationary Employment

A probationary employment contract is an employment contract given during the initial employment of an employee. It allows an employer to determine the suitability of the employee within the fixated period. Before the end of the probation period, the employer shall evaluate whether the employee possesses the skill, competence, and attitude to qualify for regular employment.

But do you know what are the regulations regarding the probationary employment?

  • What is a probationary employee?
  • How long is the probation period for new employees?
  • Probationary Employee Benefits in the Philippines
  • Non-Regularization of Probationary Employee in the Philippines
  • Termination of Probationary Employee
  • Extension of Probation Period

Probationary Employee

A probationary employee is an employee who will be assessed and evaluated over a period of time to determine if he is qualified for regular employment.

Probation Period

According to the Labor Code of the Philippines, an employee shall not be placed on probation for more than 6 months; with the standards to qualify as a regular employee made known to the employee at the time of engagement.

In normal circumstances, an employee who is allowed to work after the probation period shall be considered a regular employee. This probation period may be mutually agreed to be less than 6 months as seen in the case of Dusit Hotel Nikko vs. Renato M. Gatbonton.

Furthermore, if the duration of the probationary contract or the standards to qualify as a regular employee is not make known to the employee at the time of engagement, the employee shall be deemed as a regular employee from the start of the employment.

Probationary Employee Benefits in the Philippines

Are probationary employees entitled to vacation leave?

No, probationary employees are not entitled to vacation leave.

Explanation:

The Labor Code of the Philippines does not require employers to grant vacation leave benefit to their employees. What is required is the grant of service incentive leave benefit. However, employers who grant at least 5 days of vacation leave to their employees is exempted from granting the service incentive leave benefit.

In order to qualify for the service incentive leave benefit, the employee is required to render at least 1 year of service. Since probation period shall not exceed 6 months, the probationary employee shall not be entitled to service incentive leave. Therefore, the employer is also not required to grant vacation leave benefit to probationary employees. This is without prejudice to any favorable agreement granting the vacation leave benefit to the employee.

Are probationary employees entitled to 13th month pay?

Yes, all rank-and-file employees, including probationary employees, are entitled to 13th month pay.

Explanation:

In general, all rank-and-file employees are entitled to the 13th-month pay regardless of the nature of their employment and irrespective of the methods by which they are paid provided they worked for at least one month during a calendar year.

Other Benefits

Probationary employees are also entitled to the members’ benefits under SSS, Philhealth and HDMF if they meet the respective institution requirements.

Non-Regularization of Probationary Employee in the Philippines

At the end of the probation period, if the employee failed to meet the standards to qualify as a regular employee, the employer may choose not to regularize the employee.

DOLE has advised that if the termination of the employment relationship is due to the employee’s failure to meet the standards for regular employment, the employer shall serve a written notice to the employee within a reasonable time prior to the expiration of the probationary employment contract.

However, in the case of Radin C. Alcira vs NLRC et. al., the court has ruled that the employee is not illegally dismissed when the employer chose not to regularize the employee on the last day of his probationary employment. As the employee failed to meet the standards for regular employment, the employer exercised its option not to renew the employment contract upon the expiration of the probationary employment contract.

As a rule of thumb and to prevent possible labor dispute, employers should evaluate the suitability of the employee and inform the employee 1 month before the end of the probation period.

Termination of Probationary Employee

A probationary employee may only be terminated for a just cause or when the employee fails to qualify for regular employment. Therefore, if the employee is terminated without a just cause before the end of his probation period, the act of termination shall constitute illegal dismissal.

Extension of Probation Period

There may be times when an employee has shown exemplary performance in certain areas but failed in the others. This situation often results to a dilemma on whether to qualify the employee for regular employment. The employee may have failed the evaluation, but if he is given a longer period of time, he may be able to perform his duties as demanded.

As seen in the case of Mariwasa Manufacturing, Inc., et al. vs. Hon. V. Leogardo Jr., et al, the employer may offer to extend the probationary period out of goodwill and upon mutual understanding and agreement. The court has ruled that such goodwill of the employer to grant a second chance to the employee cannot be unjustly turned against the employer to compel the employer to keep an employee who could not perform according to its work standards.

However, an employer may not extend the probation period as a mean to circumvent the employee’s right to become a regular employee. The qualification to become a regular employee shall be based on the standard as made known to the employee at the time of engagement. And it is the employer’s duty to evaluate the probationary employee before the end of the probation period. In the absence of an evaluation, the employee shall automatically acquire regular status upon the expiration of the probationary employment contract.

For more information on labor regulations, please refer to the Presidential Decree No. 442, s. 1974.

Overview of Leave Benefits in the Philippines

Leave Benefits in Philippines

This is the overview of the different types of leave benefits in the Philippines. Surprisingly (or not), not all of these leave benefits can be found in the Labor Code of the Philippines.

Vacation Leave

Contrary to popular belief, there is actually no vacation leave provision in the Labor Code of the Philippines. However, employers who grant at least 5 days of vacation leave per year is deemed to be in compliance with the service incentive leave provision. Find out more about vacation leave and its computation here.

Service Incentive Leave

An employee who has rendered at least 1 year of service shall be entitled to 5 days of paid service incentive leave (SIL) per year. Find out more about the service incentive leave and its computation here.

AWOL – Absent Without Official Leave

AWOL is the abbreviation for absent without official leave. It refers to the absence of an employee without seeking prior approval before the day of absent. AWOL may be a valid ground for termination when it constitutes gross or habitual neglect of duty. Find out what employer can do and should do when an employee is AWOL here.

Sick Leave

Sick leave benefit is also not covered in the Labor Code of the Philippines. Consequently, it is part of the employer’s prerogative to grant such leave benefit and decide on the corresponding pay rules on the day of absence. However, an employee may claim SSS sickness benefit for work absences due to sickness or injury if the employee meets the criteria. Find out more about the sick leave policy in the Philippines and the SSS sickness benefit here.

Bereavement Leave

Bereavement leave, also known as compassionate leave or funeral leave, is not covered in the Labor Code of Philippines. It is a management prerogative and usually granted to an employee upon the death of the employee’s immediate family member. Find out more about the bereavement leave here.

Calamity Leave or Special Emergency Leave

For government employees, 5 days special emergency leave shall be granted to those directly affected by natural calamity or disaster. For employees in private sector, it is part of the employer’s discretion to grant emergency leave. Emergency leave is not covered in the Labor Code of the Philippines. Find out the rules on suspension of work due to calamities here.

Maternity Leave

Although Article 131 (previously article 133) of the Labor Code of the Philippines provides for maternity leave benefits, it has since been integrated with the Social Security Law which provides maternity leave benefit of 60 days for normal delivery and 78 days for cesarean delivery. Find out the maximum maternity benefit and how to compute it here.

Special Leave Benefits for Women

The special leave benefits for women are mandated under Republic Act No. 9710, also known as ‘The Magna Carta of Women’ stipulating that a female employee may be entitled to 2 months of special leave with full pay following surgery caused by gynecological disorders. Find out the gynecological disorders that are covered here.

Paternity Leave

Paternity leave is mandated under Republic Act No. 8187 also known as the ‘Paternity Leave Act of 1996’ stipulating that a male employee may be entitled to 7 days of paternity leave. Find out if you meet all of the requirements here.

Solo Parent Leave

Parental leave, or more commonly known as solo parent leave, is mandated under Republic Act No. 8972 also known as the “Solo Parents’ Welfare Act of 2000”. A solo parent is entitled to 7 days of parental leave per year. Find out who is entitled to solo parent leave and how to avail the solo parent leave here.

Employment Contract, Employer Employee Relationship

Employment Contract, Employer Employee Relationship

Contrary to popular belief, the employment contract is not the sole indicator of an employer employee relationship. So how do you establish an employer employee relationship?

  • Employer Employee Relationship
  • 4 Elements of Employer Employee Relationship
  • Control Test Labor Law
  • Employment Contract Philippines
  • Labor Disputes in the Philippines

Employer Employee Relationship

The agreement binding both the employer and the employee is known as an employment contract. However, the absence of an employment contract does not indicate an absence of an employer employee relationship. When the existence of the employer employee relationship is in question, the court has generally applied the four fold test.

If the employer employee relationship can be established, the employer may not terminate the service of the employee without a just or authorized cause.

4 Elements Of Employer Employee Relationship

Therefore, to determine the existence of an employer-employee relationship, the four fold test is usually applied:

  1. the selection and engagement of the employee;
  2. the payment of wages;
  3. the power of dismissal; and,
  4. the employer’s power to control the employee on the means and methods by which the work is accomplished.

And in the case of Victor Meteoro et. al. vs Creative Creatures, Inc.the court stated that to establish the 4 elements of employer employee relationship, any competent and relevant evidence may be considered including but not limited to:

  • Identification Cards;
  • Cash Vouchers;
  • Social Security Registration;
  • Appointment Letters;
  • Employment Contracts;
  • Payrolls;
  • Organization Charts; and
  • Personnel List.

Control Test Labor Law

Of the 4 elements of employer employee relationship, the control test is generally regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under this test, an employer-employee relationship is said to exist where the person for whom the services are performed reserves the right to control not only the end result but also the manner and means utilized to achieve the same.

However, as seen in the case of Royale Homes Marketing Corporation vs. Fidel P. Alcantaranot every form of control is indicative of an employer-employee relationship. The subjection of the service provider to the client’s rules, regulations, and code of ethics does not make the service provider an employee when the level of control does not dictate the methodology in performing the tasks. The client has the right to establish guidelines towards the achievement of a mutually desired result.

Employment Contract Philippines

An employment contract is not just a legally binding agreement between the employer and employee. It is also one that is imbued with public interest and therefore is subject to the police power of the state.

It is the employer’s duty to ensure that terms and conditions of employment are in compliance with the Labor Code of the Philippines. Employment terms and conditions that are in violation of the Labor Code shall be unlawful and deemed null and void even when both the employer and employee mutually consented to it. Moreover, any doubts, uncertainties, ambiguities and insufficiencies shall be resolved in favor of labor.

Regularization of Employee

Regularization of Employee

Regularization is used to describe the process of becoming a regular employee. It means that the employee qualifies for the permanent position in the company. But what is the regularization policy and what if the employee does not qualify for regular employment?

What You Will Learn

  • What does it mean to be a regular employee?
  • When is the employee regularized?
  • What is the regularization policy in the Philippines?
  • Termination of Regular Employees

Regular Employee in the Philippines

A regular employee is one who enjoys the security of tenure and may not be terminated without a just or authorized cause. In the event that the employee is illegally terminated, the employee may be entitled to the twin reliefs of reinstatement and backwages.

On the other hand, a probationary employee is one who is being evaluated to determine his qualifications for the job. Therefore, other than just and authorized causes, the employee may also be terminated if he fails to qualify to become a regular employee.

Regularization of Employee

The employer shall review the performance of the probationary employee before the end of the probationary employment contract in accordance with the standards made known to the employee at the time of engagement. If the employee meets the standards as required for the job, the employee shall be regularized to become a regular employee.

However, there are certain circumstances whereby the employee may automatically be considered as a regular employee:

  • The standards to qualify for regular employment was not make known to the probationary employee at the time of his engagement
  • There was no evaluation of the employee’s work performance throughout the probationary period
  • The employee is allowed to continue working after the expiration of the probationary employment contract

Regularization Policy

Different companies may adopt different employee regularization policy. This may include differences in the probationary period, evaluation criteria, and the evaluation methodology. However, regardless of the differences, the probationary period shall not exceed 6 months.

Upon regularization, employees may receive salary increment and/ or be entitled to additional benefits. It may include allowances, vacation leave benefit, health insurance and others. However, these are dependent on the company’s policy. Employers are not required to grant additional privileges upon the regularization of an employee.

Termination of Regular Employees Philippines

According to the Labor Code of the Philippines, regular employees can only be dismissed for a just or authorized cause and only after due process is accorded. Just causes are causes of termination due to an employee’s fault or negligence while authorized causes are causes of termination as permitted by law not attributed to an employee’s fault or negligence.

Working Hours in the Philippines

Working Hours Philippines

In the Philippines, most employees are paid by the number of hours they work. And when an employee receives a fixed monthly salary, the salary is for a fixed number hours of work. So the number of working hours of employee matters. But what is the normal working hours in the Philippines? And is break time paid? What about the waiting time and training time?

What You Will Learn

  • Working Hours in the Philippines
  • Break Time Policy
  • Common question: is waiting time considered work hours?
  • Common question: should I be paid for training?

Labor Code of the Philippines – Working Hours

According to the Labor Code of the Philippines, normal working hours should be 8 hours a day, 6 days a week. And the employee shall be entitled to overtime pay for work done beyond the 8 hours in a single workday. However, the company may adopt flexible work arrangement such as compressed workweek that allows an employee to work up to 12 hours without overtime premium.

However, there are some scenarios where employers and employees may not agree on the actual working hours which may result in a labor dispute. These common disputes include those involving travelling time, training time and, meal and rest period. In general, hours worked includes all the time an employee is required to be at a specific place and all the time the employee spent working.

Break Time Policy

The employer is required to provide the employee with at least 1 hour meal period and such time-off may not be considered as part of the working hours. However, coffee breaks not more than 20 minutes are considered as work time. In practice, such rest period or coffee break is regulated by company policy.

Is waiting time considered work hours?

The time spent waiting to perform work by an employee shall be considered as working time if the time spent waiting is controlled by the employer even if no work is performed. Furthermore, an employee whose duty requires him to maintain his availability for work purposes shall also be compensated for the said period.

Should I be paid for training?

When employees (1) voluntarily participate in training activities, (2) which are conducted outside office hours, and (3) no work was done, it shall not be considered as work time. However, if any of the conditions is not met, the time spent shall be part of the working hours.

For more information on labor regulations, please refer to Presidential Decree No. 442, s. 1974.