Philippines Employment of Filipino Employees
Philippine labor law is constantly evolving and is often difficult to keep track of the
changes. K&C keeps itself constantly updated on the modifications in the law and
jurisprudence. K&C will draft employee contacts and manuals for your foreign and local
employees, which follow the labor law guidelines. We can advise you on salary structures
and suggest tax efficient compensation packages for your foreign employees as well. K&C
also lists down what every foreign employer should know before setting up a company in
the Philippines regarding hiring Filipino and foreign employees.
Salary Structure & Wages in the Philippines
In general, salaries are increasing in the Philippines due to economic growth, especially in
the BPO/IT/Call Center industries. However, IT professionals, tech support and call center
support representatives' salaries are still significantly lower than in the US, Canada,
Australia and Europe. The average monthly salary of tech or customer support
representatives in the Philippines ranges from US$300 to US$400. the price of and IT
professional in the Philippine can range anywhere from $300 - $2,000 depending on
experience and skill-set.
Mandatory Employee Benefits
Employee Benefits, Incentives, Coverage & Contributions
The Philippine Social Security System consists of the following bodies.
• Social Security System (SSS) - The SSS was created to provide private
employees and their families with protection against disability, sickness, old
age, and death. The Government Service Insurance System (GSIS) is an
equivalent system for Philippine government employees.
• Home Development Mutual Fund (HDMF) - The HMDF is a provident
savings system providing housing loans to private and Philippine government
employees, and to self-employed persons who elect to join the Fund.
• Philippine Health Insurance Corporation (PhilHealth) - PhilHealth is
administered by the Philippine National Health Corporation, which is designed
to provide employees with a practical means of paying for adequate medical
care in the Philippines.
Coverage in the Philippines
All persons under the age of 60 who earn income from employment of more than P1,000
per month are required to contribute to the SSS. Government employees are required to
contribute to the equivalent GSIS.
Employees are also required to contribute to the HDMF and PhilHealth. Membership is
optional, however, for self-employed persons. Foreign personnel are also required to make
contributions. Opting out is not possible, except in limited circumstances under some of the
Philippines' international social security agreements. In practice, however, the potential
savings involved are generally insufficient to justify the efforts required to effect the
exemption.
Contributions in the Philippines
Employee contributions for social security are deducted from employee's salary payments.
These are withheld by the employer on a monthly basis.
Employers in the Philippines are also required to make contributions. SSS contributions are
roughly 180% of the employee contributions, with the maximum employer contribution of
P1,090 per month. HDMF and Philhealth contribution by employers in the Philippines are
roughly the same with the maximum for 2008 set at P100 for HDMF and P500 for
PhilHealth monthly.
Termination of Employment in the Philippines
Termination of Employment in the Philippines Overview
The Philippine Constitution says, no involuntary servitude in any form shall exist except as
punishment for a crime whereof the party shall have been duly convicted. In view of the
prohibition on involuntary servitude, an employee is given the right to resign under art. 285
of the Labor Code. The provision recognizes two kinds of resignation – without cause and
with cause. If the resignation is without cause, the employee is required to give a 30-day
advance written notice to the employer, to enable the employer to look for a replacement to
prevent work disruption. If the employee fails to give a written notice, he or she runs the
risk of incurring liability for damages. The same provision also indicates the just causes for
resignation (with cause)
• Serious insult to the honor and person of the employee
• Inhuman and unbearable treatment;
• Crime committed against the person of the employee or any of the immediate
members of the employee’s family; and
• Other analogous causes.
In this second type of resignation, the employee need not serve a written notice. Forced
resignation is not allowed and is considered “constructive” dismissal – a dismissal in
disguise. Employee retirement is either voluntary or compulsory under art. 287 of the
Labor Code.
Dismissal of an Employee in the Philippines
An equality of rights exists between employer and employee. While the employer cannot
force the employee to work against his or her will, neither can the employee compel the
employer to continue giving him or her work if there is a lawful reason not to do so. Thus,
the employer may terminate the services of an employee for just or authorized causes after
following the procedure laid down by law, but the employer has the burden of proving the
lawfulness of the employee’s dismissal in the proper forum.
Just causes are blameworthy acts on the part of the employee such as serious misconduct,
willful disobedience, gross and habitual neglect of duties, fraud or willful breach of trust,
commission of a crime and other analogous causes (art. 282, Labor Code).
Authorized causes are of two types – business reasons and disease. The business reasons
are installation of labour-saving devices, redundancy, retrenchment and closure or
cessation of operation (art. 283, Labor Code). Before the employer can terminate on the
ground of disease, he must obtain from a competent public health authority a certification
that the employee’s disease is of such a nature and at such a stage that it can no longer be
cured within a period of six months even with medical attention (art. 284, Labor Code;
Implementing Rules of Book VI, Labor Code).
Those hired on a temporary basis, that is, for a “term” or “fixed period” are not regular
employees, but are “contractual employees.” Consequently, there is no illegal dismissal
when their services are terminated by reason of the expiration of their contracts. Lack of
notice of termination is of no consequence, because a contract for employment for a
definite period terminates by its own term at the end of such period.
An Illegal Strike can be cause for Termination of Employment
Employment is not deemed terminated when there is a bona fide suspension of the
operations of a business or undertaking for a period not exceeding six months, or when the
employee fulfills a military or civic duty (art. 286, Labor Code). Under the Corporation
Code (sec. 80), the surviving or consolidated entity in a merger or consolidation
automatically assumes all rights and obligations, assets and liabilities of the combining
entities. This includes obligations or liabilities under valid agreements, like labour
contracts. The surviving or consolidated entity must, therefore, recognize the security of
tenure and length of service of the workers of the merging or consolidating corporations.
By the fact of merger or consolidation, a succession of employment rights and obligations
occurs.
Notice and prior procedural safeguards
As stated above, dismissals based on just causes contemplate acts or omissions attributable
to the employee while dismissals based on authorized causes involve grounds – business or
health – allowing the employer to terminate. A termination for an authorized cause requires
payment of separation pay. When the termination of employment is declared illegal,
reinstatement and full backwages are mandated under art. 279 of the Labor Code. If
reinstatement is no longer possible where the dismissal was unjust, separation pay may be
granted.
Procedurally, (1) if the dismissal is based on a just cause under art. 282 of the Labor Code,
the employer must give the employee two written notices and a hearing or opportunity to
be heard before terminating the employment, that is, a notice specifying the grounds for
which dismissal is sought and, after hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based on authorized causes under arts. 283
and 284 of the Labor Code, the employer must give the employee and the Department of
Labour and Employment written notices 30 days prior to the effectivity of the separation.
Severance pay
As already noted, separation pay is required to be paid to the employee when there is
termination of employment by the employer for an authorized cause, the amount of which
depends on the cause. If the termination is due to the installation of labour-saving devices
or redundancy, the separation pay is one month’s pay for every year of service or one
month pay, whichever is higher (art. 283, Labor Code). If the termination is due to
retrenchment to prevent losses, or closure or cessation of operation of the establishment not
due to serious business losses, or due to disease, the separation pay is one-half month’s pay
for every year of service or one month pay, whichever is higher (arts. 283 and 284, Labor
Code). However, there is no requirement for separation pay if the closure is due to serious
business losses.
Avenues for redress
From the foregoing, four possible situations may be derived: (1) the dismissal is for a just
cause under art. 282 of the Labor Code, or for an authorized cause – business reason under
art. 283 or health reason under art. 284 – and due process was observed; (2) the dismissal is
without just or authorized cause but due process was observed; (3) and there no process;
(4) for a not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not incur any
liability, save for separation pay when the dismissal is for an authorized cause.
In the second and third situations, where the dismissals are illegal, art. 279 of the Labor
Code mandates that the employee is entitled to reinstatement without loss of seniority
rights and other privileges and full backwages, inclusive of allowances, and other benefits
or their monetary equivalent computed from the time the compensation was not paid up to
the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity
cannot be cured, it should not invalidate the dismissal. However, the employer should be
held liable for nominal damages for non-compliance with the procedural requirements of
due process. If the dismissal is for an authorized cause, the employee is also entitled to
separation pay.
Compulsory arbitration of illegal dismissal cases is conducted by the Labour Arbiters of
the National Labour Relations Commission and their decisions are appealable to the
Commission (arts. 217 and 218, Labor Code).
In view of the stated preference for voluntary modes of settling labour disputes under art.
13 (3) of the Constitution and art. 211of the Labor Code, voluntary arbitration of illegal
dismissals is recognized on the basis of mutual agreement between the parties (art. 262,
Labor Code).
Compulsory arbitration is both the process of settlement of labour disputes by a
government agency which has the authority to investigate and issue an award binding on
all the parties, as well as a mode of arbitration where the parties are compelled to accept
the resolution of their dispute through arbitration by a third party.
While a voluntary arbitrator is not part of the labour department, he or she renders
arbitration services provided for under labour laws. Generally, the voluntary arbitrator is
expected to decide only questions that are expressly delineated by the submission
agreement. However, since arbitration is the final resort for the adjudication of disputes,
the arbitrator can assume that he or she has the power to make a final settlement. Thus,
assuming that the submission agreement empowers the arbitrator to decide whether an
employee was discharged for just cause, the arbitrator can reasonably assume that his or
her powers extend beyond giving a mere yes-or-no answer and include the authority to
reinstate with or without back pay.
Difference between a Just and Authorized Cause of Termination
Just cause refers to a wrong doing committed by the employer or employee on the basis of
which the aggrieved party may terminate the employer-employee relationship. Authorized
cause refers to a cause brought about by changing economic or business conditions of the
employer.
Causes for Termination by the Employer
1. Serious misconduct;
2. Willful disobedience of employer’s lawful orders connected with work;
3. Gross and habitual neglect of duty;
4. Fraud or breach of trust;
5. Commission of a crime or offense against the employer, employer’s family or
representative; and
6. Other analogous causes.
Just Causes for Termination by the Employee
1. Serious insult by the employer or his or her representative on the honor and
person of the employee;
2. Inhuman and unbearable treatment accorded the employee by the employer or
his or her representative;
3. Commission of a crime by the employer or his or her representative against the
person of the employee or any of the immediate members of his or her family;
and
4. Other analogous causes.
Authorized Causes for Termination
1. Installation of labor-saving devices;
2. Redundancy;
3. Retrenchment to prevent losses;
4. Closure or cessation of business; and
5. Disease not curable within six months as certified by competent public
authority, and continued employment of the employee is prejudicial to his or
her health or to the health of his or her co-employees.
Due Process in the Context of Termination of Employment
Due process means the right of an employee to be notified of the reason for his or her
dismissal and, in case of just causes, to be provided the opportunity to defend himself or
herself.
Components of Due Process in Termination Cases
In a termination for a just cause, due process involves the two-notice rule:
1. A notice of intent to dismiss specifying the ground for termination, and giving
to said employee reasonable opportunity within which to explain his or her
side;
2. A hearing or conference where the employee is given opportunity to respond to
the charge, present evidence or rebut the evidence presented against him or her;
3. A notice of dismissal indicating that upon due consideration of all the
circumstances, grounds have been established to justify the termination.
In a termination for an authorized cause, due process means a written notice of dismissal to
the employee specifying the grounds given, at least 30 days before the date of termination.
A copy of the notice shall be furnished the Regional Office of the Department of Labor and
Employment of the Philippines (DOLE).
An Employee may Question the Legality of his or her Dismissal
The legality of the dismissal may be questioned before the Labor Arbiter of the National
Labor Relations Commission (NLRC) of the Philippines, through a complaint for illegal
dismissal. In establishments with a collective bargaining agreement (CBA), the dismissal
may be questioned through the grievance machinery established under the CBA. If the
issue is not resolved at this level, it will be submitted to voluntary arbitration.
Proving the Dismissal is Legal
In a case of illegal dismissal, the employer as the burden of proving that the dismissal is
legal.
Grounds for an Employee to Question his or her Dismissal
An employee may question his or her dismissal based on substantive or procedural
grounds. The Substantive aspect pertains to the absence of a just or authorized cause
supporting the dismissal. The Procedural aspect refers to the notice of termination or the
opportunity to present an explanation.
What are the rights afforded to an unjustly dismissed employee?
An employee who is dismissed without just cause is entitled to any or all of the following:
1. Reinstatement without loss of seniority rights, or separation pay if
reinstatement is not possible;
2. Full backwages, inclusive of allowances and other benefits or their monetary
equivalent from the time compensation was withheld from him or her up to the
time of reinstatement;
3. Damages and attorney’s fees if the dismissal was done in bad faith.
Reinstatement
Reinstatement means restoration of the employee to the position from which he or she has
been unjustly removed.
Reinstatement without loss of seniority rights means that the employee, upon
reinstatement, should be treated in matters involving seniority and continuity of
employment as though he or she had not been dismissed from work.
When a Labor Arbiter rules for an illegal dismissal, reinstatement is immediately executory
even pending appeal.
Forms in which reinstatement be effected
Reinstatement may be actual or payroll in nature, at the option of the employer.
Full Backwages
Full backwages refer to all compensations, including allowances and other benefits with
monetary equivalent, that should have been earned by the employee but was not collected
by him or her because of unjust dismissal. It includes all the amounts he or she could have
earned starting from the date of dismissal up to the time of reinstatement.
In cases of illegal dismissal, a dismissed employee who has found another job may still be
entitled to collect full backwages from his or her former employer. Full backwages is a
form of penalty imposed by law on an employer who illegally dismisses his or her
employee. The fact that the dismissed employee may already be employed and earning
elsewhere does not extinguish the penalty.
The former position of the employee no longer exists at the time of reinstatement
In that case, the employee shall be given a substantially equivalent position in the same
establishment without loss of seniority rights and to backwages from the time
compensation was withheld up to the time of reinstatement.
Employee Benefits when the Establishment no longer exists
When an establishment no longer exisits at the time an order for reinstatement is made the
employee can claim benefits. The employee is entitled to a separation pay equivalent to at
least one-month pay or at least one month pay for every year of service whichever is
higher, a fraction of at least six months shall be considered as one whole year. The period
of service is deemed to have lasted up to the time of closure of the establishment. He or she
may also claim backwages to cover the period between dismissal from work and the
closure of the establishment.
Separation Pay
In authorized cause terminations, separation pay is the amount given to an employee
terminated due to retrenchment, closure or cessation of business or incurable disease. The
employee is entitled to receive the equivalent of one month pay or one-half month pay,
whichever is higher, for every year service.
In just cause terminations, separation pay is also the amount given to employees who have
been dismissed without just cause and could no longer be reinstated.
Reinstatement is not possible so that separation pay shall be given to an illegally
dismissed employee
1. When company operations have ceased;
2. When the employee’s position or an equivalent thereof is no longer available;
3. When the illegal dismissal case has engendered strained relations between the
parties, in cases of just causes and usually when the position involved requires
the trust and confidence of the employer;
4. When a substantial amount of years have lapsed from the filing of the case to
its finality.
Exception for an employee dismissed for just cause be entitled to separation pay
As a rule, no. But in instances where the just cause for dismissal is other than serious
misconduct or moral turpitude, the employee may be awarded Financial Assistance in the
amount of one month’s pay as a form of compassionate justice.
Proof of Financial Losses is Necessary to Justify Retrenchment
Yes. Proof of actual or imminent financial losses that are substantive in character must be
proven to justify retrenchment.
Proof of Financial losses is NOT necessary to justify redundancy
In redundancy, the existing manpower of the establishment is in excess of what is
necessary to run its operation in an economical and efficient manner.
Other Conditions before an Employee may be Dismissed on the Ground of
Redundancy
It must be shown that:
• Good faith in abolishing redundant position;
• There is fair and reasonable criteria in selecting the employees to be dismissed,
such as but not limited to less preferred status (e.g. temporary employee),
efficiency and seniority.
• A one-month prior notice is given to the employee as prescribed by law.
Failure to Comply with the Due Process Requirements
Failure to comply with the due process requirements will NOT invalidate a dismissal with
an otherwise established just or authorized cause. The employee, however, will be entitled
to backwages from the time of termination till finality of the decision confirming the
presence of a just or authorized cause.
Difference between Transfer and Promotion
Promotion is the advancement of an employee from one position to another with an
increase in duties and responsibilities, and is usually accompanied by an increase in salary.
Promotion is a privilege and as such may be declined by the employee.
Transfer is a lateral movement that does not amount to a promotion. It constitutes a valid
exercise of management prerogative, unless it is done to defeat an employee’s right to self-
organization, to get rid of undesirable workers, or to penalize an employee of his or her
union activities. If done in good faith, management’s decision to transfer an employee may
not be questioned. An employee’s refusal to transfer may constitute willful disobedience, a
just cause for his or her dismissal.
An Employer Transferring an Employee to another place of work without prior
notice
Generally, an employer can not transfer an employee to another place of work without
prior notice. But if the urgency of the service requires a transfer, and such transfer is
exercised in good faith for the advancement of the employer’s interest and will not
adversely affect the rights of the employee, the transfer may be undertaken even without
the employee’s consent.
Non-union member availing of the grievance machinery in case of termination
If a non-union member belonging to an appropriate bargaining unit of the recognized
bargaining agent and pays agency fees to the union and accepts the benefits under the
collective agreement, said non-union members may avail of the grievance machinery. On
the other hand, if the non-union member is not part of the appropriate bargaining unit of
the recognized bargaining agent and is expressly excluded in the collective agreements,
said employee cannot avail of the grievance machinery.
Reasonable period for an Employee subjected to Dismissal to answer charges against
him or her by the Employer
A reasonable period should be provided wherein the employee can answer all the charges
against him or her, gather evidence and confront the witnesses against him or her. It should
include the opportunity to secure the assistance of a representative who could be a union
officer. Reasonableness of the period should be based, among others, on the gravity of the
charges against the employee.
An employee charged with an offense may be placed under preventive suspension
while he or she is preparing to answer charges filed against him or her by the
employer
Only on grounds that his or her continued presence inside the company premises poses a
serious imminent threat to the life or property of the employer or his or her co-workers, and
only for a period of 30 days may be placed under preventive suspension. After 30 days, the
employee should be reinstated to his or her former position or in a substantially equivalent
position.
The employer, however, may extend the period of suspension provided that the employee
is paid his or her wages and other benefits during the extension. If the employer decides to
dismiss the employee after completion of the investigation, the employee is not bound to
reimburse the amount paid to him or her during the extended period. The employer is
required to immediately notify the employee in writing of a decision to dismiss him or her
stating clearly the reasons for the dismissal.
Preventive suspension is not a disciplinary measure, and should be distinguished from
suspension imposed as a penalty.
Validity of the Employer’s Decision on Termination
A dismissed employee may still question the validity or legality of his or her dismissal by
filing a complaint for illegal or unjust dismissal before the Arbitration Branch of NLRC. In
such a case, the burden of proving that the dismissal is for a valid or authorized cause rests
on the employer.
During the pendency of the termination case, an employee may be be retained in his
or her work
An employee may be retained in his or her work even during the pendency of a termination
case under the following circumstances:
1. Upon serving the preventive suspension period of 30 days; and
2. Upon management prerogative allowing the employee to be retained at work
and his or her continued employment poses no serious nor imminent threat to
the life or property of the employer or his or her co-employees.
The Effects of Termination may be Suspended Pending Resolution of the Case
The Secretary of Labor of the Philippines may provisionally order a reinstatement in the
event of prima facie finding that the dismissal may cause a serious labor dispute as in a
strike or lock-out, or is in implementation of mass lay-off.
Probationary Employment
Probationary employment is not necessarily a category of employment in the Philippines. It
pertains to a period of time in which the employee is being observed and evaluated to
determine whether or not he is qualified for permanent employment. Under art. 281 of the
LC, probationary employment shall not exceed six months. An employee who is allowed to
work after a probationary period shall be considered a regular employee. A probationary
employee is, for a given period of time, under observation and evaluation to determine
whether or not he or she is qualified for permanent employment. During the probationary
period, the employer is given the opportunity to observe the skills, competence and attitude
of the employee while the latter seeks to prove to the employer that he or she has the
qualifications to meet the reasonable standards for permanent employment.
National, Official and Non-working Holidays in the Philippines

Services of an Employee Terminated due to Disease National, Official and Non-working Holidays in the Philippines Overview

The employer may terminate employment on ground of disease only upon the issuance of a
certification by a competent public health authority that the disease is of such nature or at
such stage that it cannot be cured within a period of six months even with proper medical
treatment.
Suspending Operations of a Business
In general, providing a fixed list of holiday dates is difficult because most of the 2009
regular holidays and nationwide special holidays in the Philippines are movable, as
provided under Republic Act 9492 (an Act rationalizing the celebration of national
holidays). For these movable holidays, the President is tasked by law to issue a
Proclamation, at least 6 months prior to a movable holiday, fixing the specific date of that
non-working day.

If the period of suspension of operations do not exceed six months, the workers shall be National Regular Holidays List - Philippines
reinstated to their respective positions without loss of seniority rights if they indicated their
desire to resume work not later than one month from the resumption of operations of
business. New Year's Day January 1, 2009 Thursday
Bataan Day / Araw ng Kagitingan April 6, 2009 Monday
If the shutdown is for a period of not more than six months such as may occur in Maundy Thursday April 9, 2009 Thursday
equipment check or repair, stock inventory or lack of raw materials, the employee is only
Good Friday April 10, 2009 Friday
temporarily laid off and, therefore, employer-employee relationship is not severed. If it will
last for a period of more than six months and is of an indefinite character, it may be Labor Day May 1, 2009 Friday
considered as equivalent to closure of the establishment leading to termination of
Independence Day June 12, 2009 Friday
employment. In such a case, the requirements of the law and rules on employee dismissals
must be observed. Ninoy Aquino Day August 21, 2009 Friday
National Heroes Day August 31, 2009 Monday
Types of Employment in the Philippines Eid-ul-Fitr To be declared (in September)
All Saints Day November 1, 2009 Sunday
Employment in the Philippines Overview
Additional Special (Non-working) Day November 2, 2009 Monday
Bonifacio Day November 30, 2009 Monday
Depending on the company and or industry there are various types or categories of
employment in the Philippines. This essentially comes down to how the employer wants Additional Special (Non-working) Day December 24, 2009 Thursday
the employee's employment to be structured, which should be bound by a contract signed
Christmas Day December 25, 2009 Friday
by both the employer and employee.
Rizal Day December 30, 2009 Wednesday
Project Employment Last Day of the Year December 31, 2009 Thursday

Where the employment has been fixed for a specific project or undertaking, the completion National Regular Holidays Compensation - Philippines
or termination of which has been determined at the time of the engagement of the
employee in the Philippines.
a. If it is an employee’s regular workday

Seasonal Employment
• If unworked - 100%
Where the work or services to be performed is seasonal in nature and the employment is • If worked - 1st 8 hours - 200%
for the duration of the season in the Philippines.
• Excess of 8 hours - plus 30% of hourly rate on said day

Casual Employment
b. If it is an employee’s rest day

Where the employment is not covered by the foregoing, provided that an employee who
has rendered at least one year of service, whether continuous or broken, shall be considered • If unworked - 100%
regular with respect to the activity in which he or she is employed and his or her
employment shall continue while the activity exists. • If worked - 1st 8 hours - plus 30% of 200%
• Excess of 8 hours - plus 30% of hourly rate on said day
Term or Fixed Employment
Nationwide Special Holidays List - Philippines
Another category of employment in the Philippines recognized in jurisprudence is “term”
or “fixed-period employment.” This is based on art. 1193 of the CC, which states that Ninoy Aquino day Monday nearest August 21
obligations with a resolutory period take effect at once, but terminate upon arrival of the
All Saints Day November 1, 2009
day certain – understood to be a day that must necessarily come. The decisive determinant
in “term employment” should not be the activities that the employee is called upon to Last Day of the Year December 31, 2009
perform, but the day certain agreed upon by the parties for the commencement and
termination of the employment relationship. Stipulations in employment contracts Special Days - Philippines
providing for “term employment” or “fixed-period employment” are valid when the period
has been agreed upon knowingly and voluntarily by the parties, without force, duress or
improper pressure exerted on the employee, and when such stipulations were not designed For declared special days such as Special Non-Working Day, Special Public Holiday,
to circumvent the laws on security of tenure. Special National Holiday, in addition to the two nationwide special days (November 1, All
Saints Day and December 31, Last Day of the Year), the following rules shall apply:
 a. If unworked
• No pay, unless there is a favorable company policy, practice or collective
bargaining agreement (CBA) granting payment of wages on special days even
if unworked.
b. If worked
• 1st 8 hours - plus 30% of the daily rate of 100%
• excess of 8 hours - plus 30% of hourly rate on said day
c. Falling on the employee’s rest day and if worked
• 1st 8 hours - plus 50% of the daily rate of 100%
• excess of 8 hours - plus 30% of hourly rate on said day
Special Working Holidays - Philippines
For work performed, an employee in the Philippines is entitled only to his basic rate. No
premium pay is required since work performed on said days is considered work on
ordinary working days.
13th Month Pay in the Philippines
13th Month Pay in the Philippines Overview
The 13th-month pay in the Philippines is equivalent to 1/12 of the basic salary received by
an employee within the year. If a Filipino employee worked for less than a year (regardless
of the cause for the termination of his employment), the amount due to him is determined
by dividing the total salary he received by the number of months he was employed. The
computation of the basic salary does not include allowances and monetary benefits that are
not considered or integrated as part of the employee’s regular compensation. The items that
are taken off the list are: cash equivalent of unused vacation and sick leave credits;
overtime, premium, night differential and holiday pay, and cost-of-living allowance. If,
however, these benefits are, by agreement company practice or policy treated as part of the
basic salary, then they shall be included in the computation of an employee’s 13th-month
pay. Although the law requires that the extra pay be given not later than Dec. 24, the
employer may give 50 percent before the opening of the regular school year and the
balance on the cut-off date mentioned.
13th Month Pay Coverage
The 13th month pay should not be confused with the bonus which is not part of the benefit
mandated by Philippine law. It is already discretionary on the part of the employers to give
a bonus to their employees on top of the 13th month pay which is mandatory. The early in
December an employer can provide 13th month pay for its Filipino employees the more the
employees will appreciate it. Not releasing 13th month pay by December 24 could result in
sanctions of law and VERY disgruntled Filipino employees
When the 13th-month pay decree came out in the Philippines, those who were already
receiving a Christmas bonus from their employer thought the extra pay decreed by the
government would be in addition to their company benefit. However, the decree states that
employers already paying their employees the equivalent of a 13th-month pay are
exempted from its coverage. Some companies though chose to maintain their Christmas
bonus on top of the obligatory 13th-month pay in the Philippines.
13th Month Pay Tax Obligation
The recipient of the 13th-month pay is not the only beneficiary of that Christmas-related
gesture. The Philippine government shares in it by way of income tax. Under existing tax
regulations, up to a maximum of P30,000 of that additional income is exempt from the
income tax due from fixed wage earners. Anything beyond that cut-off amount must be
included in the computation of the employee’s gross income for the applicable taxable
year. Ordinarily, the tax due for income received by an employee should be withheld by the
employer and, later, remitted to the Bureau of Internal Revenue, before he gets his pay
check.
Types of Employment in the Philippines
Working Hours & Coverage in the Philippines Overview
The provisions of this Title shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by
results as determined by the Secretary of Labor in appropriate regulations. As used herein,
"managerial employees" refer to those whose primary duty consists of the management of
the establishment in which they are employed or of a department or subdivision thereof,
and to other officers or members of the managerial staff. "Field personnel" shall refer to
non-agricultural employees who regularly perform their duties away from the principal
place of business or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty.
Hours of Work in the Philippines
Normal hours of work in the Philippines
The normal hours of work of any employee shall not exceed eight hours a day. Hours
worked shall include all time during which an employee is required to be on duty or to be
at a prescribed workplace and all time during which an employee is suffered or permitted
to work. Rest periods of short duration during working hours shall be counted as hours
worked.
Meal periods
Subject to such regulations as the Secretary of Labor may prescribe, it shall be the duty of
every employer to give his employees not less than 60 minutes time-off for their regular
meals.
Night shift differential
Every employee shall be paid a night shift differential of not less than 10% of his regular
wage for each hour of work performed between ten o’clock in the evening and six o’clock
in the morning.
Overtime work
Work may be performed beyond eight hours a day provided that the employee is paid for
the overtime work, an additional compensation equivalent to his regular wage plus at least
25% thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an
additional compensation equivalent to the rate of the first eight hours on a holiday or rest
day plus at least 30% thereof.
Undertime not offset by overtime
Undertime work on any particular day shall not be offset by overtime work on any other
day. Permission given to the employee to go on leave on some other day of the week shall
not exempt the employer from paying the additional compensation required.
Emergency overtime work
Any employee may be required by the employer to perform overtime work in any of the
following cases:
1. When the country is at war or when any other national or local emergency has
been declared by the National Assembly or the Chief Executive;
2. When it is necessary to prevent loss of life or property or in case of imminent
danger to public safety due to an actual or impending emergency in the locality
caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or
other disaster or calamity;
3. When there is urgent work to be performed on machines, installations, or
equipment, in order to avoid serious loss or damage to the employer or some
other cause of similar nature;
4. When the work is necessary to prevent loss or damage to perishable goods; and
5. Where the completion or continuation of the work started before the eighth
hour is necessary to prevent serious obstruction or prejudice to the business or
operations of the employer.
Computation of additional compensation
For purposes of computing overtime and other additional remuneration as required by this
Chapter, the "regular wage" of an employee shall include the cash wage only, without
deduction on account of facilities provided by the employer.
Weekly Rest Periods
Right to weekly rest day
1. It shall be the duty of every employer, whether operating for profit or not, to
provide each of his employees a rest period of not less than 24 consecutive
hours after every six consecutive normal work days.
2. The employer shall determine and schedule the weekly rest day of his
employees subject to collective bargaining agreement and to such rules and
regulations as the Secretary of Labor and Employment may provide. However,
the employer shall respect the preference of employees as to their weekly rest
day when such preference is based on religious grounds.
When employer may require work on a rest day
The employer may require his employees to work on any day:
1. In case of actual or impending emergencies caused by serious accident, fire,
flood, typhoon, earthquake, epidemic or other disaster or calamity to prevent
loss of life and property, or imminent danger to public safety;
2. In cases of urgent work to be performed on the machinery, equipment, or
installation, to avoid serious loss which the employer would otherwise suffer;
3. In the event of abnormal pressure of work due to special circumstances, where
the employer cannot ordinarily be expected to resort to other measures;
4. To prevent loss or damage to perishable goods;
5. Where the nature of the work requires continuous operations and the stoppage
of work may result in irreparable injury or loss to the employer; and
6. Under other circumstances analogous or similar to the foregoing as determined
by the Secretary of Labor and Employment.
Compensation for rest day, Sunday or holiday work
1. Where an employee is made or permitted to work on his scheduled rest day, he
shall be paid an additional compensation of at least 30% of his regular wage.
An employee shall be entitled to such additional compensation for work
performed on Sunday only when it is his established rest day.
2. When the nature of the work of the employee is such that he has no regular
workdays and no regular rest days can be scheduled, he shall be paid an
additional compensation of at least 30% of his regular wage for work
performed on Sundays and holidays.
3. Work performed on any special holiday shall be paid an additional
compensation of at least 30% of the regular wage of the employee. Where such
holiday work falls on the employee’s scheduled rest day, he shall be entitled to
an additional compensation of at least 50% of his regular wage.
4. Where the collective bargaining agreement or other applicable employment
contract stipulates the payment of a higher premium pay than that prescribed
under this Article, the employer shall pay such higher rate.
• Home Development Mutual Fund (HDMF) - The HMDF is a provident
savings system providing housing loans to private and Philippine government
employees, and to self-employed persons who elect to join the Fund.
• Philippine Health Insurance Corporation (PhilHealth) - PhilHealth is
administered by the Philippine National Health Corporation, which is designed
to provide employees with a practical means of paying for adequate medical
care in the Philippines.
Coverage in the Philippines
All persons under the age of 60 who earn income from employment of more than P1,000
per month are required to contribute to the SSS. Government employees are required to
contribute to the equivalent GSIS.
Employees are also required to contribute to the HDMF and PhilHealth. Membership is
optional, however, for self-employed persons. Foreign personnel are also required to make
contributions. Opting out is not possible, except in limited circumstances under some of the
Philippines' international social security agreements. In practice, however, the potential
savings involved are generally insufficient to justify the efforts required to effect the
exemption.
Contributions in the Philippines
Employee contributions for social security are deducted from employee's salary payments.
These are withheld by the employer on a monthly basis.
Employers in the Philippines are also required to make contributions. SSS contributions are
roughly 180% of the employee contributions, with the maximum employer contribution of
P1,090 per month. HDMF and Philhealth contribution by employers in the Philippines are
roughly the same with the maximum for 2008 set at P100 for HDMF and P500 for
PhilHealth monthly.

Holidays, Service Incentive Leaves and Service Charges

Right to holiday pay

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

Right to service incentive leave

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

Service charges

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

Mandatory Employee Benefits

Employee Benefits, Incentives, Coverage & Contributions

The Philippine Social Security System consists of the following bodies.

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