HR 2

Wage and Wage-Related Benefits Overview
– At least the minimum wage per region and/or sector

– Holiday wage and overtime pay for work during holidays or rest days
– Overtime pay when working in excess of 8 hours
– Service Incentive Leave: 5 days of vacation per year of service
– Parental leaves (Maternity, Paternity and Solo parent leaves)
– Other Leaves
– 13th month
– Separation pay
WAGE AND WAGE-RELATED BENEFITS

1. MINIMUM WAGE
The Wage Rationalization Act, Republic Act No. 6727, sets the minimum wage rates applicable
per region, province and industry sector. The industry sectors are: non-agricultural, agriculture
(plantation and non-plantation), cottage and handicraft, retail and service sectors. Minimum
wage may vary depending on the number of employees and gross-sales of an enterprise and its
industry sector.
As of April 2015 the minimum wage of non-agricultural workers in Metro Manila is PHP 481
and PHP 444 for agricultural workers. Outside of Metro Manila, the minimum daily wage varies
from PHP 279 to PHP 337 for non-agricultural workers, depending on the region.
2. OVERTIME
Minimum wage is based on a work week of 40 hours or 8 hours per day. The daily 60 minute
mandatory lunch break is not included in the 8 hour work day and is not compensated.
Overtime pay rates vary depending on when the overtime work takes place: regular work day,
holiday, rest day, or night (between the hours of 10pm to 6am).
Overtime Rates:
– Regular work day: plus 25% of the hourly pay rate.
– Rest day, regular/special holiday: plus 30% of the hourly rate on said day.
3. PREMIUM PAY
Premium pay is given on non-working days (rest days/special holidays)
There are 3 special holidays:
– Ninoy Aquino Day
– All Saints Day
– Last Day of the Year
Premium Pay Rates:
– On a rest day or special holiday, an employee is entitled to an additional 30% of his daily basic
rate, or a total of 130%.
– On a rest day which is also a special holiday, an employee is entitled to an additional 50% of
his daily basic rate, or a total of 150%.
– On a regular holiday which is also an employee’s rest day, an employee is entitled to an
additional 30% of the regular holiday rate of 200%, or a total of 260%. Note that it is only
applicable to employees covered by the holiday-pay rule.
The “no work, no pay” principle applies during special non-working days and such other special
days as may be proclaimed by the President of the Philippines. Workers who are not required or
permitted to work on these days are, therefore, not entitled to any compensation. This, however,
is without prejudice to any voluntary practice or CBA providing for payment of wages and
benefits for declared special days even if unworked.
4. HOLIDAY PAY
The Labor Code requires the payment of an employee’s daily basic wage for all non working
regular holidays.
There are 12 regular and 3 special non working holidays (see above) in the Philippines.
12 regular holidays are (Republic Act No. 9849):
– New Year’s day
– Maundy Thursday
– Good Friday
– Araw ng Kagitingan
– Labour Day
– Independence Day
– National Heroes’ Day
– Eidl Fitr
– Eidl Adha
– Bonifacio Day
– Christmas Day
– Rizal Day
Rate Example:
If work is accomplished on a regular holiday (up to 8 hours), an employee is entitled to at least
twice (200%) of his basic wage. If the holiday corresponds to a scheduled rest day, the employee
is entitled to an additional 30% based on his regular holiday rate of 200%, which comes to a total
of at least 260%.
Absences
1. All covered employees shall be entitled to holiday pay when they are on leave of absence with
pay on the workday immediately preceding the regular holiday. Employees who are on leave of
absence without pay on the day immediately preceding a regular holiday may not be paid the
required holiday pay if they do not work on such regular holiday.
2. Employers shall grant the same percentage of the holiday pay as the benefit granted by
competent authority in the form of employee’s compensation or social security payment
whichever is higher, if the employees are not reporting for work while on such leave benefits.
3. Where the day immediately preceding the holiday is a non-work day in the establishment or
the scheduled rest day of the employee, he/she shall not be deemed to be on leave of absence on
that day, in which case he/she shall be entitled to the holiday pay if he/she worked on the day
immediately preceding the notwork day or rest day.
Successive Regular Holidays
Where there are two (2) successive regular holidays, like Maundy Thursday and Good Friday, an
employee may not be paid for both holidays if he/she absents himself/herself from work on the
day immediately preceding the first holiday, unless he/she works on the first holiday, in which
case he/she is entitled to his/her holiday pay on the second holiday.
5. NIGHT SHIFT DIFFERENTIAL

For work done between the hours of 10pm to 6am, employees are entitled to Night Shift
Differential (NSD), which represents an additional 10% to the regular wage for each hour of
work performed.
6. SERVICE CHARGES
Employees of employers collecting service charges are entitled to an equal share in the 85% of
the total of such charges, except managerial employees. The remaining 15% of the charges may
be retained by the management to answer for losses and breakages and for distribution to
managerial employees, at the discretion of the management in the latter case. Service charges are
collected by most hotels and some restaurants, night clubs, cocktail lounges, among others.
Exceptions to Coverage of Benefits granted under the provisions on Overtime, Premium,
Holiday, Night Shift Differential Pays and Service Charges
These mentioned benefits apply to all employees except:
1. Government employees.
2. Workers of retail and service establishments regularly employing less than 10 workers.
3. Managerial employees and officers or members of a managerial staff.
4. Househelpers and persons in the personal service of another.
5. Workers who are paid by results/output.
6. Field personnel if they regularly perform their duties away from the office or place of
business.
7. SERVICE INCENTIVE LEAVE

Every employee who has rendered at least one (1) year of service is entitled to a Service
Incentive Leave (SIL) of five (5) days with pay. SIL may be used for sick and vacation leave
purposes. The unused SIL at the end of the year can be converted into cash using the salary rate
at the date of conversion. It is the employer’s prerogative to grant additional vacation leave.
Meaning of “one year of service”
The phrase “one year of service” of the employee means service within 12 months, whether
continuous or broken, reckoned from the date the employee started working. The period includes
authorized absences unworked weekly rest days, and paid regular holidays. Where by individual
or collective agreement, practice or policy, the period of working days is less than 12 months,
said period shall be considered as one year for the purpose of determining entitlement to the
service incentive leave.
8. PARENTAL LEAVES
a) Maternity Leave
b) Paternity Leave
c) Solo-Parent Leave
9. Other Leaves
a) Gynecological Leave
b) Leave for Women and their children who are victims of Violence
10. 13th MONTH PAY

Each year, a 13th month pay is given to all rank-and-file employees. By law, this benefit must be
paid before December 24th and is mandatory. Employees who have resigned or have been
severed from the company before the payment of the 13th month pay are still entitled to it in
proportion to the length of time they worked for during that year.
The 13th month pay must be at least 1/12th of the total basic salary of each employee earned
during that calendar year.
11. SEPARATION PAY

Following the labor code of the Philippines, articles 283 and 284 state that an employee can
claim separation pay if his contract is ended under authorized causes. According to article 282 an
employee terminated for just cause (neglect of duties, fraud, crime…) is generally not entitled to
separation pay.
A separation pay of ½ month pay for every year of service can be claimed under the following
authorized causes:
– Retrenchment of person for loss prevention.
– Cessation of operation of a branch not due to serious losses or financial difficulties.
– If the employee has contracted a disease not curable within 6 months and that his presence at
work can be harmful to himself or his co-workers.
A separation pay of 1 month pay for every year of service can be claimed under the following
authorized causes:
– Labor-saving devices installed by the employer.
– Redundancy of the employee’s services for the company.
– Impossibility to reinstate the employee to his former position or to an equivalent position, for
reasons outside of the employer’s power.
The employer has the right to terminate the contract of an employee following any of the above
authorized causes through a written notice to both the employee and the Department of Labor
and Employment of the Philippines at least one month before the contract cessation date.
12. RETIREMENT PAY

All employees from the private-sector may retire from age 60 up to age 65, at which retirement
becomes compulsory, and must have served the establishment for at least 5 years.
Retirement pay must at least be equivalent to half of a month’s salary for each year of service
and a fraction of at least 6 months is therefore considered as one whole year.
One “half month salary” must include the following: a) 15 days salary based on the last salary
pay, b) the pay equivalent of a five days of incentive leave, c) 1/12 of the 13th month pay.
Therefore, one ½ month salary is equivalent to 22.5 days.
Minimum Retirement pay = Latest daily pay rate x 22.5 days per month x number of years of
service
Depending on the agreements between the employer and employee other benefits can be
included in the retirement pay such as a Collective Bargaining Agreement (CBA).

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Wage and Wage-Related Benefits Overview

– At least the minimum wage per region and/or sector

WAGE AND WAGE-RELATED BENEFITS

5. NIGHT SHIFT DIFFERENTIAL

7. SERVICE INCENTIVE LEAVE

10. 13th MONTH PAY

11. SEPARATION PAY

12. RETIREMENT PAY

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