Wage policy and productivity Act

Policy and purpose of wage setting

The State shall rationalize the fixing of minimum wages.
The State shall promote productivity-improvement and gain-sharing to ensure a decent standard of living for workers and their families.
The State shall guarantee workers’ rights to their just share in the fruits of production.
The State shall enhance employment generation in the countryside through industry dispersal.
The State shall allow business and industry reasonable returns on investment, expansion, and growth.
Collective bargaining is promoted as the primary mode of setting wages and other terms and conditions of employment.
Minimum wage rates shall be adjusted fairly and equitably, considering regional disparities in the cost of living and other socio-economic factors and national economic and social development plans.

Minimum wages: amendments and structure

Article 99 of Presidential Decree No. 442 (Labor Code of the Philippines) is amended to provide that regional minimum wages for agricultural and non-agricultural employees and workers in each region shall be those prescribed by the Regional Tripartite Wages and Productivity Boards.
Articles 120, 121, 122, 123, 124, 126, and 127 are incorporated into Presidential Decree No. 442 and govern the wage determination system.
Minimum wage rates shall be set for each and every region of the country through the regional tripartite wage mechanism.

National Commission and its functions

Article 120 creates the National Wages and Productivity Commission (the Commission), which is attached to DOLE for policy and program coordination.
The Commission acts as a national consultative and advisory body to the President and Congress on matters relating to wages, incomes and productivity.
The Commission formulates policies and guidelines on wages, incomes, and productivity improvement at enterprise, industry, and national levels.
The Commission prescribes rules and guidelines for determining appropriate minimum wage and productivity measures at regional, provincial, or industry levels.
The Commission reviews regional wage levels fixed by Regional Boards to determine whether they conform to prescribed guidelines and national development plans.
The Commission undertakes studies, researches, and surveys; collects and compiles data; and disseminates information on wages and productivity and related matters including employment, cost-of-living, labor costs, investments and returns.
The Commission reviews Regional Boards’ plans and programs to determine consistency with national development plans.
The Commission exercises technical and administrative supervision over Regional Boards.
The Commission calls a national tripartite conference to consider measures to promote wage rationalization and productivity.
The Commission performs such powers and functions as may be necessary to implement the Act.

Commission composition and appointments

The Commission is composed of the Secretary of Labor and Employment as ex-officio chairman.
The Commission includes the Director-General of the National Economic and Development Authority (NEDA) as ex-officio vice-chairman.
The Commission includes two (2) members each from the workers and employer sectors, appointed by the President of the Philippines upon recommendation of the Secretary of Labor and Employment, based on nominee lists submitted by the respective sectors.
The sectoral members serve a term of five (5) years.
The Executive Director of the Commission Secretariat is also a member.
The Secretariat is headed by an Executive Director and includes two (2) Deputy Directors, all appointed by the President upon recommendation of the Secretary of Labor and Employment.
The Executive Director has the rank, salary, benefits, and emoluments of a Department Assistant Secretary.
The Deputy Directors have the rank, salary, benefits, and emoluments of a Bureau Director.
Labor and management members of the Commission have the same rank and emoluments as labor and management representatives in the Employees Compensation Commission.

Regional wage boards and wage orders

Regional Boards are created in all regions, including autonomous regions as may be established by law, and the Commission determines their offices/headquarters.
Regional Boards develop plans, programs, and projects on wages, incomes, and productivity improvement for their regions.
Regional Boards determine and fix minimum wage rates applicable in their region, provinces, or industries and issue corresponding wage orders, subject to Commission guidelines.
Regional Boards conduct studies and surveys and collect and compile wage, income, productivity, and related data for periodic dissemination.
Regional Boards coordinate with other Regional Boards when necessary to attain the policy and intention of the Labor Code system as amended by this Act.
Regional Boards receive, process, and act on applications for exemption from prescribed wage rates as may be provided by law or any Wage Order.
Regional Boards exercise other powers necessary to carry out their mandate.
Regional Board plans and programs are implemented through the respective regional offices of DOLE within their territorial jurisdiction, while the Regional Boards have technical supervision over the DOLE regional office implementation.
Each Regional Board is composed of the Regional Director of DOLE as chairman, the Regional Directors of NEDA and the Department of Trade and Industry as vice-chairmen, and two (2) members each from workers and employers, appointed by the President upon recommendation of the Secretary of Labor and Employment based on sectoral nominees.
Regional Board sectoral members serve a five (5) year term, and each Regional Board is assisted by a Secretariat.

How wage orders take effect and can be appealed

When regional conditions warrant, a Regional Board investigates pertinent facts, and based on standards and criteria, determines whether to issue a Wage Order.
A Wage Order takes effect after fifteen (15) days from its complete publication in at least one (1) newspaper of general circulation in the region.
In determining minimum wages, the Regional Board conducts public hearings/consultations and gives notices to employees’ and employers’ groups, provincial/city/municipal officials, and other interested parties.
Any aggrieved party may appeal a Wage Order to the Commission within ten (10) calendar days from the Wage Order’s publication.
The Commission must decide the appeal within sixty (60) calendar days from filing.
The filing of an appeal does not stay the Wage Order unless the person appealing files with the Commission an undertaking with surety or sureties satisfactory to the Commission for payment to the affected employees of the corresponding increase if the order is affirmed.

Standards for minimum wage fixing

Regional minimum wages must be as adequate as economically feasible to maintain the minimum standards of living necessary for workers’ health, efficiency, and general well-being within the national economic and social development framework.
In determining regional minimum wages, Regional Boards shall consider:
- (a) demand for living wages;
- (b) wage adjustment vis-a-vis the consumer price index;
- (c) cost of living and changes or increases;
- (d) workers’ and their families’ needs;
- (e) the need to induce industries to invest in the countryside;
- (f) improvements in standards of living;
- (g) prevailing wage levels;
- (h) fair return of capital invested and employers’ capacity to pay;
- (i) effects on employment generation and family income; and
- (j) equitable distribution of income and wealth aligned with economic and social development imperatives.
The wages prescribed under the Title are the standard prevailing minimum wages in every region.
Regional Boards may prescribe wages varying with industries, provinces, or localities when conditions make local differentiation proper and necessary to effectuate the Title’s purpose.
Any person/company/corporation/partnership/other entity engaged in business must file and register annually with the appropriate Regional Board, the Commission, and the National Statistics Office an itemized listing of its labor component, including names of workers and employees below managerial level (including learners, apprentices, and disabled/handicapped workers hired under prescribed employment contract terms) and their corresponding salaries and wages.

Wage distortions and dispute handling

When a wage increase under law or a Wage Order results in wage structure distortions within an establishment, the employer and union must negotiate to correct the distortions.
Disputes on wage distortions under a collective bargaining relationship are resolved through the grievance procedure under the collective bargaining agreement and, if unresolved, through voluntary arbitration.
Unless parties agree in writing otherwise, a voluntary arbitrator or panel of voluntary arbitrators decides within ten (10) calendar days from referral for voluntary arbitration.
Where there are no collective agreements or recognized labor unions, employers and workers must endeavor to correct distortions.
Disputes without collective agreements or recognized unions are settled through the National Conciliation and Mediation Board; if unresolved after ten (10) calendar days, they are referred to the appropriate branch of the National Labor Relations Commission (NLRC).
It is mandatory for the NLRC to conduct continuous hearings and decide within twenty (20) calendar days from submission for compulsory arbitration.
The pendency of a wage distortion dispute does not delay the applicability of increases prescribed under the law or Wage Order.
“Wage distortion” means a wage increase that eliminates or severely contracts intentional quantitative differences in wage or salary rates among employee groups in an establishment, thereby obliterating distinctions based on skills, length of service, or other logical bases of differentiation.

Payment minimums and contract modifications

Workers paid by result, including piecework, takay, pakyaw, or task basis, must receive not less than the prescribed wage rates for eight (8) hours work a day, or a proportion for less than eight (8) hours.
Recognized learnership and apprenticeship agreements are automatically modified insofar as their wage clauses reflect prescribed wage rates.

Injunction ban; non-diminution guarantee

Article 126 prohibits the issuance of any preliminary or permanent injunction or temporary restraining order by any court, tribunal, or other entity against proceedings before the Commission or Regional Boards.
Article 127 forbids any Wage Order from providing wage rates lower than the statutory minimum wage rates prescribed by Congress.

Wage increases: amounts, regions, and exceptions

Upon effectivity, the statutory minimum wage rates for all private sector agricultural and non-agricultural workers and employees are increased by PHP 25.00 per day.
The increase is PHP 20.00 per day for workers and employees in plantation agricultural enterprises outside National Capital Region (NCR) with annual gross sales less than PHP 5,000,000.00 in the preceding year.
The increase is PHP 15.00 for workers and employees of:
- cottage/handicraft industries;
- non-plantation agricultural enterprises;
- retail/service establishments regularly employing not more than ten (10) workers; and
- business enterprises with capitalization of not more than PHP 500,000.00 and employing not more than twenty (20) employees,
- located or operating outside the NCR.
Workers already receiving above minimum wage rates up to PHP 100.00 must also receive an additional PHP 25.00 per day.
Workers under the plantation agricultural exception (gross sales threshold outside NCR) must receive PHP 20.00.
Workers under the cottage/handicraft and other outside-NCR small-employer exceptions must receive PHP 15.00.
The appropriate Regional Board may grant additional increases to workers and employees covered by the exception clauses when such increases are necessary based on determinations under Article 124.
The PHP 25.00 (or applicable) per day increase applies to private educational institutions as soon as they have increased or are granted authority to increase tuition fees during school year 1989-1990; otherwise, the increase must apply not later than the opening of the next school year beginning 1990.
Household or domestic helpers and persons employed in the personal service of another, including family drivers, are exempt from the Act.
Retail/service establishments regularly employing not more than ten (10) workers may be exempted upon application to, and determination by, the appropriate Regional Board in accordance with Commission rules and regulations.
When an exemption application is duly filed, action on any complaint for alleged non-compliance is deferred pending resolution of the exemption application.
If exemption applications are not granted, employees must receive the applicable compensation plus interest of 1% per month, retroactive to the Act’s effectivity.
Employers may credit increases to daily basic wage rates granted three (3) months before the Act’s effectivity as compliance when expressly provided for and agreed upon in collective bargaining agreements, but:
- Employers must pay the difference when prior increases are less than the prescribed increases;
- The credit does not include anniversary wage increases, merit wage increases, and increases resulting from regularization or promotion.
If applying the wage increases causes wage distortions under existing laws and a dispute arises, parties must settle voluntarily first; if there is deadlock, the dispute is resolved through compulsory arbitration by the regional arbitration branch of the NLRC having jurisdiction over the workplace.
The NLRC must conduct continuous hearings and decide disputes under this wage-increase credit framework within twenty (20) calendar days from formal submission for arbitration.
Pendency of a wage distortion dispute does not delay the applicability of the increases prescribed under this section.

Temporary exemptions for new enterprises

New business enterprises established outside the NCR and export processing zones whose operations or investments require initial assistance as determined by DOLE in consultation with the Department of Trade and Industry or the Department of Agriculture are exempt from the Act for not more than three (3) years from the start of operations.
The exemption applies only within four (4) years from the Act’s effectivity.
Enterprises established in Region III (Central Luzon) and Region IV (Southern Tagalog) are exempt for only two (2) years from the start of operations.
Enterprises established in the provinces of Palawan, Oriental Mindoro, Occidental Mindoro, Marinduque, Romblon, Quezon, and Aurora receive exemption for not more than three (3) years from the start of operations.

Construction and service contracts liability

In construction project contracts and in contracts for security, janitorial, and similar services, the prescribed wage increases must be borne by the principals or clients of the construction/service contractors, and the contract is deemed amended accordingly.
If the principal or client fails to pay prescribed wage rates, the construction/service contractor is jointly and severally liable with the principal or client.

Bank-facilitated wage payment within 1 kilometer

Upon written petition of the majority of employees or workers concerned, all private establishments, companies, businesses, and other entities with twenty five (25) or more employees, located within one (1) kilometer radius to a commercial, savings, or rural bank, must pay wages and other benefits through any of those banks.
The wage and benefit payment must be made within the period for payment of wages fixed by Presidential Decree No. 442 as amended (the Labor Code).

Wage payment certification by banks

Whenever applicable and upon request of a concerned worker or union, the bank must issue a certification of the record of payment of wages for a particular worker or workers for a particular payroll period.

Labor inspection and worker participation

DOLE must conduct inspections as often as possible within manpower constraints to determine whether workers are paid the prescribed wage rates and other benefits granted by law or any Wage Order, based on payroll and other financial records kept by the company or business.
In unionized companies, DOLE inspectors must always be accompanied by the president or any responsible officer of the recognized bargaining unit or of any interested union during inspection.
In non-unionized companies, inspection is carried out in the presence of a worker representing the workers in the company.
The worker representative has the right to submit personal findings to DOLE and to testify on the same if unable to concur with the labor inspector’s findings.

Funding of implementation

Funds necessary to carry out the Act are taken from the Compensation and Organizational Adjustment Fund, the Contingent Fund, and other savings under Republic Act No. 6688 (the General Appropriations Act of 1989), or from any unappropriated funds of the National Treasury.
Funding requirements for implementation in succeeding years must be included in the annual General Appropriations Act.

Abolition and transfer of commissions

The National Wages Council created under Executive Order No. 614 and the National Productivity Commission created under Executive Order No. 615 are abolished.
Properties, records, equipment, buildings, facilities, assets, liabilities, appropriations, and matters pending in those offices are transferred to the Commission.
Personnel of abolished offices continue in holdover capacity and receive preferential consideration for appointments to or placement in the Commission.
Officials or employees separated due to abolition receive appropriate separation pay and retirement and other benefits accruing under existing laws.
At the employee’s option, separated personnel are preferentially considered for employment in the government or its subdivisions, instrumentalities, agencies, including government-owned or controlled corporations and their subsidiaries.

Criminal penalties for non-payment

Any person, corporation, trust, firm, partnership, association, or entity that refuses or fails to pay prescribed wage increases or adjustments under the Act is punished by:
- a fine not exceeding PHP 25,000.00, and/or
- imprisonment of not less than one (1) year nor more than two (2) years.
A person convicted under the Act is not entitled to the benefits provided for under the Probation Law.
If the violation is committed by a corporation, trust, or firm, partnership, association, or other entity, imprisonment is imposed on the entity’s responsible officers, including but not limited to: president, vice president, chief executive officer, general manager, managing director, or partner.

Rules and regulations; repealing and separability

The Secretary of Labor and Employment shall promulgate the necessary rules and regulations to implement the Act.
All laws, orders, issuances, rules and regulations, or parts inconsistent with the Act are repealed, amended, or modified accordingly.
If any provision of the Act or its application is held invalid or unconstitutional, the remainder of the Act or its application to other persons or circumstances is not affected.
Nothing in the Act is construed to reduce existing wage rates, allowances, and benefits of any form under existing laws, decrees, issuances, executive orders, or under any contract or agreement between workers and employers.