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MEMO
TO : ALL CLIENTS
In view thereof, we are likewise transmitting to you Proclamation No. 120-A, declaring Monday, 17 December 2001 as a special non-working holiday. In this connection, please take note
of the following for your guidance and easy reference. PART ONE: WAGE ORDER NO 9 PROVIDING FOR EMERGENCY COST OF LIVING ALLOWANCE IN THE NATIONAL CAPITAL REGION1. NATURE OF EMERGENCY COST OF LIVING ALLOWANCE:
The Emergency Cost of Living Allowance is intended as a compromise solution to address the need for increases in take-home pay of the employees, without giving additional burden to the employers and the viability of the employer’s business or industry.
Consequently, questions have arisen as to whether or not the ECOLA will be subjected to withholding tax or in the computation of the 13th month pay. We note that the Implementing Rules of the Wage Order No. 9 as issued by Department of Labor and Employment remains silent on the matter.
Preliminarily and as culled from our experiences with the previous ECOLAs issued during the Marcos administration[1], it is the opinion of our office that the ECOLA will not be subjected to withholding tax, nor be included as part of the basic pay. Otherwise, it will defeat the very purpose for the enactment of said emergency allowance.
As such, it is believed that the ECOLA will not result in increased employers’ contribution to the SSS/Medicare/Pag-Ibig. Neither will it be included in the computation of such benefits provided by law, e.g., overtime pay, premium pay, holiday pay, night shift differential, 13th month pay, and similar mandatory benefits.
In view thereof, we suggest that the payslips should clearly reflect the delineation of the ECOLA vis-à-vis the basic rate, as follows:
Basic pay P_______ ECOLA _______ Other allowances, if any _______ Gross Pay P_______ Deductions P_______ SSS/Pag-Ibig/Medicare _____ WHT _____ Others _____ Net Take-home pay P_______
2. HOW MUCH AND WHO ARE ENTITLED TO GET ECOLA: There are two categories of NCR employees and workers who will receive emergency cost of living allowance in the total amount of P30.00/day, payable in two (2) tranches as follows: CATEGORY A: For private sector workers and employees in the NCR who are presently receiving the prescribed daily minimum wage rate of P250.00/day to P290.00/day (Rule 2, Section 1, Wage Order NCR-09 IRR) Amount
of ECOLA:
P30.00/day. CATEGORY B: For private sector workers and employees in the NCR of the following sectors who are presently receiving the prescribed minimum wage of P213.00/day (Section 2, Wage Order): a.1 Agricultural Workers - Plantation and non-plantation a.2 Those employed by private hospitals with bed capacity of one hundred (100) or less a.3 Retail and/or Service Establishments who regularly employ fifteen (15) or less workers/employees a.4 Manufacturing establishments regularly employing less than ten (10) employees. Amount
of ECOLA:
P15.00/day. 3. PARAMETERS: 3.1 General Rule: ECOLA shall be given to private sector workers and employees in the National Capital Region, regardless of their positions, designation or status, and irrespective of the method by which their wages are paid. (Rule 2, Section 3, Wage Order NCR-09, IRR. Exceptions:
No ECOLA is required to be given to household or domestic
helpers, and persons in the personal service of another, including family
drivers. DOLE formula for wage distortion:
[Minimum Wage under
WO#NCR-08]
x Amount of ECOLA = Amount of Example: For an employee with a monthly salary of P7,500.00 on a regular 6-day workweek, with paid holidays and special days, in respect of the first tranche of ECOLA at P15.00/day
[P250.00/day x 26 days] x (15.00/day x 26 days) = (.86) x P390.00 = P335.40 (ECOLA due to wage distortion) = P7,500.00 + 335.40 = P7,835.40 (Adjusted salary due to ECOLA) 3.3 For workers paid by result (e.g., piecework, takay, pakyaw or task basis) – they shall be entitled to receive not less that the prescribed ECOLA under the Order for eight (8) hours work a day, or a proportion thereof for those working less than eight hours. (Rule II, Section 7, Wage Order NCR-09 IRR). The adjusted ECOLA for workers paid by results shall be computed in accordance with the following steps. 1.
Amount of ECOLA 2. Existing rate/piece x % increase (ECOLA) = Increase (ECOLA) in rate/piece 3. Existing rate/piece + increase (ECOLA) in rate/pc. = Adjusted rate/piece
3.4 For wages of apprentices, learners and handicapped workers: minimum wage shall be no less than 75% of prescribed minimum wage, or P210.00 per day. (Rule II, Section 8, Wage Order No. NCR-09 IRR) 3.5 Mobile/Branch Workers. -- Workers who are required to travel or go on field shall be entitled to ECOLA, based on the applicable domicile or head office of the employer. Workers working in branches or agencies of the establishment outside the NCR shall receive the applicable ECOLA in the place where they are stationed. (Rule II, Section 9, Wage Order No. NCR-09 IRR). 3.6 Personnel transferred to areas outside the NCR after implementation of Wage Order No. 9. -- Personnel who are transferred by the employer to areas outside the NCR after the implementation of this Wage Order, are still required to be given their respective ECOLA. The transfer shall not be considered a valid ground for the reduction of the ECOLA being enjoyed by the workers prior to such transfer. (Rule II, Section 10, Wage Order No. NCR-09 IRR).
4.1 Private educational institutions and the incremental
proceeds from tuition fee increases (Rule II, Section 5, Wage Order NCR-09
IRR) 4.2
Service contracts between Company (principal)
and Agency · Example: janitorial or security guard services. This presupposes that the company has entered into a contract with a security agency or a janitorial services firm, whereby the Agency shall provide security or janitorial services to the company. · While the Agency remains the employer of the security guards or janitors so assigned to the company, the prescribed wage increases shall be borne mainly by the company as principal. Any contracts executed by and between the company and the agency shall be deemed amended accordingly. Hence, the Agency may very well charge the appropriate wage increases (per contract rate of security guard or janitor) to the company. · The reason behind making the company primarily liable for the wage increases is that the services of the security guard for the janitor ultimately redound to the benefit of the company. 4.3 For those employers who have already given an increase prior to the effectivity of this Wage Order: (Rule IV, Wage Order NCR-09 IRR) (a) If the company/school work-force is unionized – · Wage increases granted by the employer within three (3) months before the effectivity of this Wage Order shall be credited as compliance herewith; PROVIDED, that the CBA entered into between the company and the majority union allows for creditability, or that a separate agreement to this effect has been entered into by the company and majority union. · Otherwise, where the CBA does not provide for creditability or where there is no separate agreement as aforestated, then the increases granted are not creditable. (b) If the company/school work-force is not unionized – · Wage increases granted by the employer within three (3) months before the effectivity of this Wage Order shall be credited as compliance herewith. (c) In any event, whether unionized or not unionized, these general provisions shall apply: · If increases given by the employer are less than the prescribed adjustment in this Wage Order, the employer shall pay the difference. · Increases by virtue of anniversary increases (CBA year), regularization, promotion or merit wage increases are not the creditable “wage increases” contemplated in this Wage Order. 5. PENALTY CLAUSE: (Wage Order No. NCR-09, Section 15; in conjunction with Section 15 cf. Republic Act No. 6727 Sec. 10 as amended by Republic Act No. 8188) · Any employer who refuses or fails to pay the wage increase provided by this Order shall be punished by a fine not more than P25,000.00 and/or imprisonment of not less than one (1) year or more than two (2) years. · If the violation is committed by a corporation, partnership, association or other similar juridical entity, the penalty of imprisonment shall be imposed upon the entity’s responsible officers, including but not limited to the President, Vice-President, CEO, General Manager, Managing Director or Partner. 6. APPLICATION FOR EXEMPTION: (Sections 9 to 12, inclusive) 6.1 The following may apply for exemption from coverage of this Wage Order: · Retail/Service establishments regularly employing not more than 10 workers; · Distressed establishments as defined in the NWPC Guidelines NO. 01, series of 1996 (copy of which may be furnished by the law office upon request); · Establishments Facing Potential Losses as defined in National Wages and Productivity Commission (NWPC) Policy Guidelines No. 01, series of 2001. 6.2 All applications for exemption from compliance with this Wage order shall be filed within seventy five (75) days from the date of the publication of the Rules Implementing this Order, with complete supporting documents as specified in the Rules.
PART TWO: COMPUTATION OF WAGES DUE TO REGULAR HOLIDAYS AND SPECIAL NON-WORKING DAYS In the light of the onset of the Christmas season, and the legal holidays/special non-working days, please be guided as to the computation of the employees’ remuneration relative thereto. 1. Coverage of the HOLIDAY PAY benefit: ALL employees are entitled to REGULAR holiday pay, viz., that he/she is entitled to 100% basic wage even if he/she did not report for work on said day; provided, that the employee was present or was on leave of absence with pay on the work day immediately preceding the holiday. Exceptions: (Those who may not avail) · Those who were absent on the work day immediately preceding the holiday · Government employees · Employees of retail and service establishments regularly employing less than ten (10) workers · Domestic helpers and persons in the personal service of another; · Managerial employees · Field personnel and other employees whose time and performance is unsupervised by the employer, including those who are engaged on task or contract basis, purely commission basis or those who are paid a fixed amount for performing work irrespective of time consumed in the performance thereof. 2. Question: Will there be an increase in premium payments in the light of the implementation of the ECOLA? Answer: No. The computation of the holiday premium, overtime pay, nightshift differential and the like will still be based on the minimum wage rate, excluding the ECOLA. As had been stated in the previous section on nature of ECOLA (see page 1 hereof), the allowance is not intended to be considered part of the basic wage of the employees for purposes of computing fringe benefits. 3. Definition of terms: Regular Holidays: Employee shall be paid 100% wages, even if not worked But employee should have been present, or on authorized leave with pay, on the day prior to the holiday. December 25
-- Christmas Day Special Non-working Days: Principle of “no-work, no-pay”. Employee who is not required to work on said days, are not entitled to any compensation. However, if the corporate policy or CBA provides for a better arrangement, then the corporate/CBA policy shall prevail. December 17
– End of Ramadan (Procl. No. 120-A) Note: Contrary to the common belief, December 24 is not among the special non-working holidays listed in Executive Order No. 203. As such, December 24 is not automatically a holiday, and it is necessary that the President or Congress first issue a declaration to that effect yearly. 4. Computations on scenarios below will have the following assumptions: · Employee works only six (6) days a week, rest day being Sunday · Monthly paid employee at P250.00/day minimum wage · Dec. 24 is declared a special non-working holiday. Situation 1: Employee does not work on 23 December because it is his rest day (Sunday), and was not required to work on 24 December. Effect and computations: December 24: Principle of “no-work, no-pay” applies. Since he did not report for work, he will not get paid any remuneration, considering that December 24 is only a special non-working holiday. Note: This will affect only those who are daily paid workers. Monthly paid workers are already considered paid for said days. December 25: Employee shall be paid holiday pay (100%) of salary for 25 December, only if he was present for work or on official leave with pay on the workday immediately preceding the holiday (22 December). If he was absent without leave (AWOL, and hence, without pay) on 22 December, then he will not be paid his holiday pay. Hence, employee shall be paid P250.00 for December 25 even if he did not work on said day (legal holiday), provided he reported for work on immediately preceding workday. Situation 2: Employee does not work on 23 December because it is his rest day, but was required to work on 24 December and 25 December due to peak season/necessity of the business (e.g., restaurant, hotel and other service industries) Note: It could be argued that the employee should have worked on 22 December in order to fully avail of this holiday pay. The DOLE Labor Standards Office has however opined that so long as the employee had worked on the holiday itself, the full 200% benefit should be given, regardless of whether or not he worked on 22 December. (liberality in favor of employee) Effect: For 24 December, employee shall be entitled to 130% holiday pay, as it is merely a special non-working day. Example: 30% of P250 = P 75.00 Total pay for December 24: P250.00
+ 75.00 = P325.00 or For 25 December, the employee shall be paid holiday pay of (100%) plus his salary for said 25 December (100%), or an equivalent of 200% salary for 8 hours worked on 25 December. Example: 200% of P250 = P500.00 (pay for 8 hours work, 25 Dec) Situation 3: Same situation as above, but employee also renders overtime work of two (2) hours on 24 December and 25 December. Effect: For 24 December, employee shall be entitled to 130% holiday pay for the first 8 hours, and an additional 30% of the hourly rate of said special non-working day for every hour worked in excess of 8 hours. Example:
130% of P250 = P325 divided by 8 hours = P40.62/hour
P325+105.60 = P430.60
(pay for December 24, 8 hours work plus Another way of computing overtime pay is: 30%
(130% of P250) = .30 (1.3 x 250) = .30 (325) = .30
(40.62) = P12.18 + 40.62 = P52.80 per hour of overtime or P105.60 for 2 hours For 25 December, the employee shall be paid 200% for the first 8 hours, and an additional 30% of the hourly rate of said holiday for every hour worked in excess of 8 hours. Example: 200% of P250 = P500 divided by 8 hours = P62.50/hour
30% (P62.50) = 18.75 + 62.50 =
P81.25 per hour (O.T. rate for Dec 25)
30% (200% of P250.00) = .30 (2 x 250) = .30 (500)
= .30 (62.50) Another way of computing overtime pay is: = P18.75 + 62.50 = P81.25 per hour of overtime or P162.50 for two hours Situation 4: Employee works on December 24, but did not work on December 25 as it is equally his rest day. Effect: For 24 December, the employee shall be paid 130% of his salary, it being a special non-working. (See computation for Situation #2) For 25 December, employee shall be paid 100% of his daily salary even if not worked due to holiday pay; provided however, that employee reported for work on the workday immediately preceding the holiday (22 December). (See Situation #1). Situation 5: Employee is required to work on December 24. Rest day is December 25 but is also required to work on said day due to peak season. Effect: For 24 December, the employee shall be paid 130% of his salary, it being a special non-working. (See computation in Situation #2) For 25 December, the employee shall be paid additional 30% of the regular holiday rate of 200% based on the daily wage rate or an equivalent of 260% of regular salary rate. Example: (200% +
[30% of 200%]) of P250/day or (200% + [30% of 200%]) of P250/day or 260% of P250/day = P650.00 Situation 6: Same situation as above (#5) but employee also renders overtime work of two hours on December 25. Effect: For 24 December, the employee shall be paid 130% of his salary, it being a special non-working. (See computation in Situation #2) For 25 December, the employee shall be paid 260% of his daily salary as shown above, plus 30% of the holiday/rest premium pay per hour worked. Example:
260% of P250 = P650.00 divided by 8 hours = P81.25/hour
30% (260% of P250.00) = .30 (2.6 x 250)
= .30 (650) = .30 (81.25) = P24.37 + 81.25 = P105.62/overtime hour or P211.24 for 2 hrs OT
Total pay for December 25 = P650.00 (8 hrs) + 211.24 (2 hrs) Situation 7: Employee’s rest day is on Monday, 24 December 2001. However, employee is required to work on 24 December 2001 due to peak season. Effect: For 24 December, employee shall be paid 169% of his daily salary, as he shall be paid 130% for the special non-working day, plus 30% of the hourly rate thereof as his rest day premium. (130% +
[30% of 130%]) of P250/day (130% + [30% of 130%]) of P250/day or 169% of P250/day = P422.50 Should you
have any further queries relative to the foregoing, please do not hesitate
to call us or e-mail us at
ablelaw@vasia.com or
ada@vasia.com. ANTONIO H. ABAD & ASSOCIATES
[1] Presidential Decree No. 1614, New Minimum Wage and Living Allowance Law, Sec. 5 Sec. 5: Special Features of the Allowance. – Allowances granted to employees in compliance with this Decree need not be considered as part of the (basic) wage of the employees for purposes of determining overtime and premium pay, fringe benefits, as well as premium contributions to the State Insurance Fund, Social Security and Medicare, maternity pay and private welfare/retirement funds. In lieu of allowances, the employers may grant wage increases which shall be considered as compliance with the Decree, provided that the amount is not less than that required by law.
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