This document discusses various components of employee compensation including wages, salaries, allowances, commissions, and bonuses. It provides definitions and explanations of these terms, and discusses when each component is considered part of an employee's wage or salary. Some key points include: - Wages refer to compensation for manual or lower-skilled work, while salaries imply higher-level employment. - Allowances, commissions, and bonuses are generally not considered part of an employee's wage unless they are regularly received or part of an employment contract. - Facilities like lodging provided by an employer are included in the definition of wage. - Commissions and regular allowances must be included in separation pay calculations.

1. WAGE
The most important component of the
reward package, at least for most
employees, is their monthly or weekly
salary. Because this also represents the
lion’s share of the pay bill for most
organizations, it is important both that it
is seen to be fair and that it is
administered accurately and
professionally.

2. A.1. Concept of wages
1. It is the remuneration or earnings;
2. Designation does not affect its nature;
3. It is capable of being expressed in terms of money
4. The basis of pay may be fixed or ascertained, on a
time, task, piece or commission or other method of
calculation;
5. Payable by an employer to employee under a
written or unwritten contract of employment for
work done or to be done, or for services rendered or
to be rendered; and
6.Includes the fair and reasonable value, as
determined by the Secretary of Labor and
Employment, of board, lodging, or other facilities
customarily furnished by the employer to the
employee.

3. A.1. Concept of wages
"Basic Wage" means all remuneration or
earnings paid by an employer to a worker for
services rendered on normal working days and
hours but does not include cost- of-living
allowances, profit sharing payments, premium
payments, 13th month pay or other monetary
benefits which are not considered as part of
or integrated into the regular salary of the
workers on the date the Act became effective.

4. On what basis though should we determine how much each job-holder should be paid?
Interestingly, according to a 2006 study
cited by Dickinson, employees favor the latter
method. According to surveys of workers'
opinions, market rates lead to pay structures
that are unfair because they don't adequately
account for things like the responsibility of the
position, the qualifications necessary for the
job, the working conditions, or the worker's
own performance. If it doesn't, it risks losing
some employees' trust, which in turn reduces
productivity and increases the likelihood that
workers may look elsewhere for work.

5. Salary Structures
Most organizations of any size
have in place some form of grading
structure which is used as the
basis for determining the basic
rate of pay for each job.

6. Salary Grade Sample

7. Ladders and Steps
Because employees are assumed to be career oriented,
salary arrangements are based on that assumption, so each
salary group has several ladders within it and each ladder has
a number of steps (often referred to as ‘scales’ and ‘points’).
In the traditional approach, people get raises every
year based on how senior they are. So, when someone new
starts working for the company, they usually start at the very
bottom of the job grade ladder.
People get an increase at the end of each year of
service until, after six or seven years, they hit the top of the
ladder, which is the highest level for their grade.
After this point, there is no more pay growth, unless
the cost of living goes up every year. In this company, the
only way to make more money is to get promoted to a
higher-level job.

8. Broad banding
Broad banding essentially involves retaining
some form of grading system while greatly
reducing the numbers of grades or salary
bands. The process typically results in the
replacement of a structure consisting of ten or
a dozen distinct grades with one consisting of
only three or four. Pay variation within grades
is then based on individual performance, skill
or external market value rather than on the
nature and size of the job.

9. Job Evaluation
One of the main tasks associated with the
administration of weekly or monthly salary payments is
setting the differential gaps. It is necessary always to juggle
the three factors of performance, market rate and equity.
It is rarely possible or wise to pay people only
according to their performance or contribution, and linking
payment only to developments in the labor market can
make working relationships very difficult.
There is always the vexed question of how much
more than Y and how much less than Z should X receive?
The relative contribution of each individual of the three is
difficult to measure, so some acceptable assessment of
each job is made. The difficult problem of assessing
performance is overlaid with the even more difficult
problem of making comparisons.

10. The National Minimum Wage
Minimum Wages in the non-agricultural sector in the
Philippines Metro Manila increased to 610 PHP/day in
2023 from 570 PHP/day in 2022.

11. Deductions from Wages
A third way in which the administration of salaries is
regulated concerns situations in which employers
make deductions from wage packets for one reason
or another. All employees in the Philippines are
entitled in law to receive an itemized pay statement
which sets out the gross rate of pay for the month
or week and any deductions that have been made.
Allowable Salary Deductions in the Philippines
Employers are required by law to deduct the
following items from employee salaries every
month: Employee's share of SSS, PhilHealth, and
Home Development Fund (HDMF)/Pag-IBIG
contributions, Withholding tax and or Loan
payments.

12. Unauthorized Deductions from Wages

13. A.1.1. Teacher's remuneration additional teaching load forms part of the basic wage
The Bureau of Working Conditions of the
DOLE dated December 9, 1991, February 28,
1992 and November 19, 1992 declares to the
effect that if overload is per- formed within a
teacher's normal eight-hour work per day, the
remuneration that the teacher will get from
the additional teaching load will form part of
the basic wage.

14. A.1.2. An indirect employer is liable only for unpaid wage within the context of Article 97
The term "indirect employer" arises
when a client of the independent contract is
held liable for the unpaid wages of the
workers of the latter. For example, in a
contract for security services, when the
security agency fails to pay the wage of its
security guard, the company where the guards
are detailed may be held liable as "indirect
employer." Meaning, such company shall pay
for the unpaid wages under the concept of
solidary liability, without prejudice to its right
of reimbursement against the erring party.

15. A.1.3. Wage vs. Salary
HR practitioners are bombarded with terms like "basic wage"
and "basic salary" every day of their working life. For most of them
the distinction is not clear. Searching for the difference does not
appear interesting and compelling since people also use them
without minding if there are distinctions in the first place.
But "wages" as distinguished from "salary" applies to compensation
for manual labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while "salary" denotes
a higher degree of employment, or a superior grade of services, and
implies a position or office; by contrast, the term "wages" indicates
inconsiderable pay for a lower and less responsible char- acter of
employment, while "salary" is suggestive of a lar- ger and more
permanent or fixed compensation for more important service. By
some of the authorities, it has been noted that the word "wages" in
its ordinary acceptance, has a less extensive meaning than the word
"salary," "wages" being ordinarily restricted to sums paid as hire or
reward to domestic or menial servants and to sums paid to artisans,
mechanics, laborers, and other employees of like class, as
distinguished from the compensation of clerks, officers of public
corporations, and public offices. In many situations, however, the
words "wages" and "salary" are synonymous.

16. A.1.4. Basis of claim for wages
In an employment situation, there is pay
only where there is work rendered. In the first
place, it is the service that is being paid by the
employer.
The principle "no work, no pay" still
proves relevant today. It is only when the
employee works that he gets paid consistent
with the policy on "fair day's wage for a fair
day's labor."

17. A.1.5. "No Work, No Pay" and the monthly-paid employees
In deciding a case where the employees claimed
payment for un-worked days of Sunday and half of Saturday
relying upon the said implementing rules, the Supreme
Court held that even assuming that Section 2, Rule IV of
Book III is valid, employees' claim will still fail. The basic rule
in this jurisdiction is "no work, no pay." The right to be paid
for un-worked days is generally limited to the ten legal
holidays in a year. Employees' claim is based on a mis- taken
notion that Section 2, Rule IV of Book III gave rise to a right
to be paid for un-worked days beyond the ten legal
holidays. In effect, they demand that the company should
pay them on Sundays, the un-worked half of Saturdays and
other days that they do not work at all. Employees' line of
reasoning is not only a violation of the “no work, no pay"
principle, it also gives rise to an invidious classification, a
violation of the equal protection clause. Sustaining their
argument will make monthly-paid employees a privileged
class who are paid even if they do not work.

18. A.2. Facilities
Some employers, particularly those
operating as manufacturing business, provide
lodging and other accommodations to their
employees.
Instead of paying for their separate
shelter, employees opt for these
accommodations so it is easier for them to go
to work. On the part of the employer, he is
guaran- teed that his employees are just
nearby to discharge the duties when needed.

19. A.2.1. Facilities are included in the definition of wage
Article 97 provides in part that:
"Wage" paid to any employee shall mean the
remuneration or earnings, however designated,
capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece,
or com- mission basis, or other method of calculating
the same, which is payable by an employer to an
employee under a written or unwritten contract of
employment for work done or to be done, or for
services rendered or to be rendered and includes the
fair and reasonable value, as determined by the
Secretary of Labor and Employment, of board,
lodging, or other facilities customarily furnished by
the employer to the employee." [Emphasis supplied]

20. A.2.4. Authorized meal and snacks subsidy
The implementing rules provide that an
employer may provide subsidized meals and
snacks to his employees provided that the
subsidy shall not be less than thirty per- cent
(30%) of the fair and reasonable value of such
facilities. In such a case, the employer may
deduct from the wages of the employees not
more than seventy percent (70%) of the value
of the meals and snacks enjoyed by the
employees, provided that such deduction is
with the written authorization of the
employees concerned.

21. A.2.5. Wage and Allowances
Are allowances included in the
computation of wage? What are the instances
when allowances are so included? Allowances
are excluded from the basic salary or wage in
the computation of the amount of retirement
and other benefits payable to an employee,
the Court will not adopt a different meaning
of the terms "salaries or wages" to mean the
opposite, i.e., to include allowances in the
concept of salaries or wages.
Allowances which are regularly received
should be included in the separation pay. If
not so received in like manner, they are to be
excluded.

22. A.2.5. Allowances in the form of fringe benefits do not form part of basic salary
In another case, the catch-all phrase
"allowances" and "monetary benefits" which
are deemed not considered or integrated as
part of "basic salary" was construed to refer to
"any and all additions which may be in the
form of allowances or 'fringe' benefits." These
fringe benefits include payments for sick
leave, vacation leave or maternity leave;
premium pay for work performed on rest day
and special holidays; premium pay for regular
holidays and night differential pay; and cost of
living allowances.

23. A.2.6. Regular allowances form part of the separation pays of illegally dismissed employees
It may happen that an employee would file a labor
claim involving payment of monetary benefits and illegal
dismissal. If the employee wins, a judgment is rendered
against the employer to pay among others, the separation
pay instead of reinstatement. That is, if reinstatement is not
possible due to strained relations of the parties.
The question now is what should be included in the
computation of the separation pay? We know that
separation pay is equivalent to one (1) month salary of the
employee. But does it include allowances?
It is the obligation of the employer to pay an illegally
dismissed employee the whole amount of his salaries plus
all other benefits, bonuses and general increases to which
he would have been normally entitled had he not been
dismissed and had not stopped working.

24. A.2.7. The rule on the inclusion of allowances in the separation pay is applicable to termination for
authorized causes
The computation laid down in the
abovementioned cases of Insular Life and
Soriano was applied in the case of Planters
Products, Inc. vs. NLRC. Thus, the computation
of separation pay of retrenched employees
includes the allowances regularly received by
the terminated or retrenched employees

25. A.3. Commission forms part of wage
The Labor Code, in the definition of wage
provides in part that:
(f) "Wage" paid to any employee shall mean
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 xxx" [Emphasis and
underscoring supplied]
Commission is the recompense, compensation
or reward of an employee, agent, salesman,
executor, trustee, receiver, factor, broker or bailee,
when the same is calculated as a percentage on the
amount of his transactions or on the profit of the
principal.

26. A.3.1. There is neither law that requires payment of commission nor formula for computation
The Supreme Court held that there is no law
which requires employers to pay commissions, and
when they do so, as stated in the Letter-Opinion of
the Department of Labor and Employment dated
February 19, 1993, "there is no law which prescribes
a method for computing commissions. The
determination of the amount of commissions is the
result of collective bargaining negotiations,
individual employment contracts or established
employer practice.
Since there is no law which requires employers
to pay commissions it is incumbent upon the
employee to prove that that there is indeed an
agreement between him and his employer for
payment of the same.

27. A.3.2. The employee should present credible evidence to prove entitlement to commission
In another case, the employee presented
a Memorandum from his employer stating
that he would be receiving a 20% overriding
commission, including sales commission and
interest income on all sales he had
successfully obtained. Yet, the Court still
struck down employee's claim for unpaid
commissions, stating that the employee
should present evidence, such as credible
documents, to prove his claim. Vague and
doubtful sales documents, the origins of
which have not been proven, are considered
insufficient to establish a claim for payment of
commissions.

28. A.3.3. Should separation pay computation include commission?
The Supreme Court held that sales
commissions should be included in the
separation pay.

29. A.3.5. Are commissions included in the computation of 13th-Month Pay?
The construction given by former DOLE
Director Sanchez and Secretary Sanchez was
adopted and reiterated by then Secretary of
Labor Franklin M. Drilon in promulgating, on
16 November 1987, the "Revised Guidelines
on the Implementation of the 13th Month Pay
Law." Item No. 5 (a) of these Revised
Guidelines, which provides that employees
who are paid a fixed or guaranteed wage plus
commission are also entitled to the mandated
13th month pay, based on their total earnings
during the calendar year, i.e., on both their
fixed or guaranteed wage and commission.

30. A.4. Bonus is not part of wage
A bonus is 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. Generally, a bonus is not a
demandable and enforceable obligation."
The granting of a bonus is basically a
management prerogative which cannot be
forced upon the employer who may not be
obliged to assume the onerous burden of
granting bonuses or other benefits aside from
the employees' basic salaries or wages."

31. A.4.1 Instance when bonus is considered part of the wage
Generally, a bonus is not a demandable
and enforce- able obligation. It is so only when
it is made part of the wage or salary or
compensation. When considered as part of
the compensation and therefore demandable
and enforceable, the amount is usually fixed.
If the amount would be a contingent one
dependent upon the realization of the profits,
the bonus is also not demandable and
enforceable."

32. A.5. 13th-Month pay is included in the definition of "wage"
Since 13th-month pay forms part of the
employee's wage, any deduction therefrom
shall not be allowed.
The evident intention of Presidential
Decree No. 851 is to grant an additional
income in the form of the 13th month pay to
employees not already receiving the same so
as "to further protect the level of real wages
from the ravages of world-wide inflation."
Clearly, as additional in- come, the 13th
month pay is included in the definition of
wage under Article 97(f) of the Labor Code.

33. A.6. Gratuity pay is not part of wage
The Supreme Court defines "gratuity" as
one not in- tended to pay a worker for actual
services rendered. It is a money benefit given
to the workers whose purpose is "to reward
employees or laborers, who have rendered
satisfactory and efficient service to the
company." "
It refers to something given freely, or
without recompense; a gift; something
voluntarily given in return for a favor or
services; a bounty; a tip.
Gratuity is that paid to the beneficiary for
past services rendered purely out of the
generosity of the giver or grantor.

34. 2. Definition of the terms "Employ," "Employer" and "Employee"
"Employer" includes any person acting directly or indirectly
in the interest of an employer in relation to an employee
and shall include the government and all its branches,
subdivisions and instrumentalities, all government-owned
or controlled corporations and institutions, as well as non-
profit private institutions, or organizations.
"Employee" includes any individual employed by an
employer.
Employ means to engage in one's service; to hire; to
use as an agent or substitute in transacting business; to
commission and instruct with the performance of certain
acts or functions or with the management of one's affairs;
and, when used in respect to a servant or hired laborer, the
term is equivalent to hiring, which implies a request and a
contract for a compensation.

35. B. APPLICATION OF RULES ON WAGES
"ART. 98. Application of Title. This Title shall not
apply to farm tenancy or leasehold, domestic service and
persons working in their respective homes in needle work
or in any cottage industry duly registered in accordance
with law." [Underscoring supplied]
The Title referred to in the above article is Title II
which pertains to Wages. So Article 98 basically tells us that
the rules on wages shall not apply to the following:
1. Farm tenancy or leasehold;
2. Domestic service;
3. Family drivers and persons in the personal ser- vice of
another;"
4. Persons working in their respective homes in needle
work;
5. Workers employed in any establishment duly
registered with the National Cottage Industries and
Development Authority (NACIDA) in accordance with
Republic Act No. 3470' 108 provided that such workers
perform the work in their respective homes; and
"Cottage/Handicraft Establishment"