KNOW YOUR SME LAW: Minimum wage & other labor standards employers must comply with

Labor_Employment_Law_2013_IMECEmployers must comply with the labor standards embodied in the Philippine Labor Code.

The following are the basic compliance standards as prescribed in the law:

The minimum wage

This is paid to an employee as a remuneration or earnings and can be expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis.  Working hours is normally eight hours a day.

Minimum wage varies among sectors and areas.  Monthly paid employees factor is 365 days, while daily-paid employees factor is 313 days for six days of work in a week or 261 days for five days a work in a week. 

The formula used is:

Applicable daily rate x factor/13 months = Monthly Salary

Holiday pay

Employers must pay  the regular daily wage for any unworked regular holiday (New Year’s Day, January 1; Maundy Thursday, moveable date; Good Friday, moveable date; Araw ng Kagitingan, April 9; Labor Day, May 1; Independence Day, June 12; National Heroes Day, last Monday of August; Eidl Ftr, movable date; Eidl Adha, moveable date; Bonifacio Day, November 30; Christmas day, December 25; Rizal Day, December 30.

When employees work during holidays, they should be paid a premium, that is, plus 100% of the minimum wage rate of 100% or 200%.

For work performed on a regular holiday that is also the employee’s rest day (not applicable to employees not covered by the holiday-pay rule): plus 30% of the regular holiday rate of 200% based on his or her daily wage rate or 260%.

Premium pay

The additional compensation for work performed 8 hours on non-work days, such as rest days and special holidays (Ninoy Aquino Day, August 21; All Saints Day, November 1; last day of the year, December 31).

For work performed on rest days on special days: Plus 30% of the daily basic rate of 100% or 130%.

For work performed on a rest day, that is also a special day: Plus 50% of the daily basic rate of 100% or 150%.

For work performed on a regular holiday, which is also the employee’s rest day (not applicable to employees who are not covered by the holiday-pay rules): Plus 30% of the regular holiday rate of 200% based on his or her daily basic wage rate or 230%

Overtime pay

This is the additional compensation for work performed beyond 8 hours a day.

For work in excess of 8 hours performed on ordinary working days: Plus 25% of the hourly rate.

For work in excess of 8 hours performed on a scheduled rest day, regular holiday or a special day: Plus 30% of the hourly rate on said day.

Night shift differential

Not less than 10% of the employee’s regular wage of each hour of work performed between 10 pm to 6 am.

Service incentive leave

Employees who has rendered 1 year of service is entitled to yearly 5 days of service incentive leave equivalent to 5 days pay.

Maternity leave

This is is a benefit applied to all female employees whether married or unmarried and who are members of the SSS.

For Caesarian section delivery, 78 days is given as leave after the operation; for normal delivery, 60 days is given as leave.  Benefits are the equivalent to 100% of the average daily salary credit of the mployee.

Paternity leave

A married employee is given 7 days of paternity leave for the first four deliveries of his legitimate wife.

Parental leave for solo parent

This is a leave granted to any solo parent or individual who is left alone with the responsibility of parenthood due to: death of spouse, crimes against chastity, detention of spouse, physical or mental incapacity of spouse, legal separation, annulment, abandonment by spouse, out of wedlock, licensed foster parent/legal guardian.  The leave is 7 days a year with full pay.

Special leave for women

This is granted to women who are victims of RA 9262: Violence against Women and Children.  The leave is up to 10 days with full pay including allowances

13th month pay

This amounts to 1/12 of the basic salary received by an employee within the year, given not later than December 24 every year.

Separation pay

The amount due to separated employees  is 1 month pay for every year of service; a fraction of at least six months shall be rounded up to a month.

This is given to those separated due to work redundancy, retrenchment to prevent losses/closure/cessation of operation but not due to serious losses.

Retirement pay

The employer is mandated by law to match the contribution of the employee to the retirement fund.  Entitled to this pay are employees who have served at least five years who are 60 years of age but not beyond 65 years old.

PhilHealth/SSS/Pag-ibig benefits

PhilHealth is a health insurance program

SSS provides a package of benefits in the event of disability, sickness, maternity and retirement/old age.

Pag-ibig provides national saving programs and affordable shelter financing.

Employees pay their contribution through salary deductions.

Employers remit counterpart contributions as follows:  PhilHealth, P500 a month; SSS, 180% of the employee’s contribution with a maximum of P1,090 a month; Pag-ibig-maximum of P100.

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