1. Wage vs.

Salary:

“Wage” is the remuneration or earnings, however designated, capable of being expressed

in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, payable by an employer to an employee
under a written or unwritten contract of employment.

“Salary” on the other hand denotes a higher degree of employment, or a superior grade of
services, and implies a position of office and is suggestive of a larger and more important
service. The word salary is understood to relate to position of office, to be the
compensation given for official or other service. It is subject to execution or attachment.

In the case of Gaa v.CA, G.R. No. 44169, 3 Dec. 1985, the High Court had the occasion to
distinguish the term “wage” from salary as compensation for manual labor (skilled or
unskilled) also known as “blue-collared workers,” paid at stated times and measured by the
day, week, month or season; while the term “salary” is one paid to “white-collared
workers” and denotes a higher degree of employment or a superior grade of services and
implies a position or office; the former denotes a considerable pay for a lower and less
responsible character of employment, whereas the latter is suggestive of a larger and more
permanent or fixed compensation for more important service.

2. Facilities vs. Supplements:

“Facilities” include those articles or services of benefit to the employee and his family such
as rice ration, housing, recreational facilities, medical treatment to dependents, school
facilities, cost of light, water, fuel, meals or snacks. “Supplements” are extra remunerations
or benefits given to or received by laborers over and above their ordinary earnings or
wages.

Facilities may be distinguished from supplements according to the following: As to

inclusion: facilities form part of the wage, while supplement is independent of wage; As to
deduction: the former is deductible from wage, whereas the latter is not wage deductible;
As to whose benefit: facilities are for the benefit of the worker and his family, on the other
hand, supplements are granted for the convenience of the employer.

3. Requirements for deducting the amount of facilities:

The following are three requirements before the value of a facility may be deducted from
the employee’s wage:

a) Proof must be shown that such facilities are customarily furnished by the trade;

b) The provision of deductible facilities must be voluntarily accepted in writing by the

employee; and

c) The facilities must be charged at fair and reasonable value. (Mabeza v. NLRC, G.R. No.
118506, 18 April 1997)

4. Circumstances regarding payment of wages:

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 a) Forms of payment – The laborer’s wages shall be paid in legal currency (Art. 1705, NCC)
No employer shall pay the wages of an employee by means of: (1) Promissory notes; (2)
Vouchers; (3) Coupons; (4) Tokens; (5) Tickets; (6) Chits; or (7) Any object other than
legal tender.

Payment of wages by check or money order shall be allowed if: (1) it is customary on
the date of the effectivity of the Code; (2) necessary because of special circumstances
as specified in the regulation issued by the SLE; or (3) stipulated in the CBA (LC, Art.
102); (4) where the following conditions are met: a. There is a bank or other facility for
encashment within a radius of one (1) kilometer from the workplace; b. The employer
or any of his agents or representatives does not receive any pecuniary benefit directly
or indirectly from the arrangement; c. The employees are given reasonable time during
banking hours to withdraw their wages from the bank which time shall be considered
as compensable hours worked if done during working hours; and d. The payment by
check is with the written consent of the employees concerned if there is no collective
agreement authorizing the payment of wages by bank checks. (IRR, Book III, Rule VIII,
Sec. 2)

b) Time of payment - Wages shall be paid at least once every two (2) weeks, or twice a
month at intervals not exceeding sixteen (16) days, except: (1) On account of force
majeure or circumstances beyond the employer’s control, payment shall be made
immediately after such force majeure or circumstances have ceased; (2) If engaged to
perform a task which cannot be completed in two (2) weeks shall be subject to the
following conditions, in the absence of a CBA or arbitration award: a. That payments
are made at intervals not exceeding sixteen (16) days, in proportion to the amount of
work completed; b. That final settlement is made upon completion of the work. (LC,
Art. 103)

c) Place of payment – Shall be at or near the place of undertaking, except: (1) when
payment cannot be effected at or near the place of work by reason of the deterioration
of peace and order conditions, or by reason of actual or impending emergencies caused
by fire, flood, epidemic or other calamity rendering payment thereat impossible; (2)
When the employer provides free transportation to the employees back and forth; and,
(3) Under any other analogous circumstances; Provided, that the time spent by the
employees in collecting their wages shall be considered as compensable hours worked.

d) Whom payment of wage is undertaken - Wages shall be paid directly to the workers to
whom they are due, except: (1) Payment through another person may be made in cases
of force majeure which renders the payment impossible, provided that such person is
under a written authority given by the worker for the purpose; (2) Where the employer
is authorized in writing by the employee to pay his wages to a member of his family; (3)
Where payment to another person of any part of the employee's wages is authorized
by existing law, including payments for the insurance premiums of the employee and
union dues where the right to check-off has been recognized by the employer in
accordance with a collective agreement or authorized in writing by the individual
employees concerned; (IR, Book III, Rule VIII, Sec. 5; LC, Art. 105) or (4) In case of death
of the employee the employer may pay the wages to the heirs without the necessity of
intestate proceedings. Heirs shall: a. Execute an affidavit attesting to their relationship
to the deceased and the fact that they are his heirs to the exclusion of all other
persons. b. In case any of the heirs is a minor, such affidavit shall be executed in his
behalf by his natural guardian or next of kin. c. Upon presentation of the affidavit to the
employer, he shall make payment to the heirs as representative of the Secretary of
Labor and Employment. (IRR, Book III, Rule VIII, Sec. 6)

5. Minimum wage/Living wage:

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 Minimum wage is the lowest wage rate fixed by law that an employer can pay his workers.
(RA 6727, Implementing Rules); A living wage is defined as the minimum income necessary
for a worker to meet their basic needs. Needs are defined to include food, housing, and
other essential needs such as clothing. The goal of a living wage is to allow a worker to
afford a basic but decent standard of living through employment without government
subsidies.

6. Who determines minimum wage?

The Regional Tripartite Wage and Productivity Board (RTWPB) is empowered to determine
and fix minimum wage rates applicable in a particular region/s, and to issue the
corresponding wage order/s. However, RTWPB issuances should accord with guidelines
issued by the National Wages Productivity Board (NWPC) but, the Labor Code does not
require NWPC’s approval of wage order.

7. Factors in determining minimum wage:

In the determination of such regional minimum wages, the Regional Board shall, among
other relevant factors consider the following: (1) The demand for living wages; (2) Wage
adjustment vis-a-vis the consumer price index; (3) The cost of living and changes or
increases therein; (4) The needs of workers and their families; (5) The need to induce
industries to invest in the countryside; (6) Improvements in standards of living; (7) The
prevailing wage levels; (8) Fair return on the capital invested and capacity to pay by
employers; (9) Effects on employment generation and family income; (10) The equitable
distribution of income and wealth along the imperatives of economic and social
development. (LC, Art. 124)

8. Non-diminution of benefits, when applicable?

Non-diminution of benefits provides that nothing in the Labor Code shall be construed to
eliminate or in any way diminish supplements, or other employee benefits being enjoyed at
the time of the promulgation of the Code.

The philosophy behind the principle is to prohibit employers from reducing benefits
already enjoyed by employees. A contrary rule will corrupt the employer's mind to abuse
and exploit employees, prostituting the social justice and protection to labor clauses
enshrined in the fundamental charter.

9. Exceptions to the Non-diminution of Benefits Principle:

Benefits being given to employees cannot be taken back or reduced unilaterally by the
employer because the benefit has become part of the employment contract, whether
written or unwritten, except for the following: (1) Correction of error (2) Contingent benefit
or conditional bonus (3) Wage order compliance (4) Benefits on reimbursement basis (5)
Reclassification of position (6) Negotiated benefits, and (7) Productivity incentives.

10. What is bonus? Is bonus a demandable right?

Bonus refers to the payment in excess of regular or guaranteed wages. It is granted to an

employee for his tangible contribution to the success of the employer’s business, without
which the employer may not realize bigger profits. The contribution may be in the form of

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 an employee’s commitment to the job, his industry and loyalty. (Metro Transit Org., Inc. v.
NLRC, G.R. No. 116008, July 11, 1995)
As a general rule, the payment of bonus is a management function, not a demandable and
enforceable obligation. By way of exception, bonuses can be demanded as a matter of right
if: (1) Given without any condition; hence, part of the wage or salary (Atok Big Wedge
Mining Co., Inc. v. Atok Big Wedge Mutual Benefit Assn., 92 Phil. 754); (2) Grant thereof is a
result of an agreement such as the CBA (Gery v. Insular Lumber, 93 Phil. 807); (3) Given on
account of company policy or practice (Claparols v. CIR, 65 SCRA 613); and (4) Grant is
mandated by law.

11. Bonus vs. 13th Month Pay:

Both bonus and 13th month pay are treated as not part of wage. 13 th month pay is a form of
monetary benefit equivalent to the monthly basic compensation received by an employee,
computed pro-rata according to the number of months within a year that the employee
has rendered service to the employer. Such is in the nature of additional income granted to
employees who are not receiving the same (Agabon v. NLRC, G.R. No. 158693, November
17, 2004). It is imposed as a ‘minimum service requirement’ that the employee should have
worked for at least one (1) month during a calendar year.

On the other hand, bonus is an amount granted and paid to an employee for his industry
and loyalty which contributed to the success of the employer’s business and made possible
the realization of profits. Bonus is not considered part of wages if it is paid only upon
realization of profits or amount of production or output (Atok Big Wedge Mining Co., Inc. v.
Atok Big Wedge Mutual Benefit Assn., 92 Phil. 754). Where the bonus is not payable to all
but only to some employees and only when their labor becomes more efficient or more
productive, it is only an inducement for efficiency, a prize therefore, not a part of the wage.
(Poquiz, 2012)

12. Wage distortion:

Wage distortion contemplates a situation where an increase in wage results in the

elimination or severe contraction of intentional quantitative differences in wage or salary
rates between and among- the employee-groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills, length of
service or other logical bases of differentiation. (LC, Art. 124)

13. When does wage distortion happen?

Wage distortion happens as a result of: (1) Government decreed increases in minimum
wages; (2) Merger of two companies (with differing classifications of employees and
different wage rates) where the surviving company absorbs all the employees of the
dissolved corporation; (3) Wage distortion arose because the effectivity dates of wage
increases given to each of the two classes of employees (rank-and-file and supervisory) had
not been synchronized in their respective CBAs. (Metro Transit Org., Inc. v NLRC, 67 SCRA
477)

14. Elements of wage distortion:

The following are elements of wage distortion: (1) An existing hierarchy of positions with
corresponding salary rates. (2) A significant change or increase in the salary rate of a lower
pay class without a corresponding increase in the salary rate of a higher one; (3) The
elimination of the distinction between the 2 groups or classes; and (4) The WD exists in the

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 same region of the country. (Alliance Trade Unions v. NLRC, G.R. No. 140689, February 17,
2004)

15. How do you correct wage distortion?

The law recognizes the validity of negotiated wage increases to correct wage distortion.
The legislative intent is to encourage the parties to solve the problem of wage distortion
through voluntary negotiations or arbitration, rather than strikes, lockouts, or other
concerted activities. Unilateral grant of wage increase on the part of an employer is
recognized as a means of correcting wage distortions including wage adjustments under a
collective bargaining agreement. Recognition and validation of wage increases given by
employers after unilaterally or as a result of collective bargaining negotiations for the
purpose of correcting wage distortions are in keeping with the public policy of encouraging
employers to grant wage and allowance increases to their employees which are higher
than the minimum rates of increases prescribed by statute or administrative regulation.
(ALU v NLRC, 235 SCRA 395)

The application of wage increases brought about by Wage Orders issued by the Board may
result in distortions in the wage structure within the establishment. The employer and the
workers are mandated by law to resolve such wage distortion problems in the following
manner:

ORGANIZED ESTABLISHMENT UNORGANIZED ESTABLISHMENT

(with union) (without union)
The employer and the union shall The employer and the workers shall
negotiate to correct distortion. endeavor to correct the distortion.
Any dispute shall be resolved through a Any dispute shall be settled through the
grievance procedure under the CBA. NCMB.
If it remains unresolved, it shall be dealt If it remains unresolved within 10 days it
with through voluntary arbitration. shall be referred to the NLRC.
The dispute will be resolved within 10 days The NLRC shall conduct continuous
from the time the dispute was referred to hearings and decide the dispute within 20
voluntary arbitration. days from the time the same was referred.

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