Sunday, December 23, 2007

Compensation Conundrum: 13th month

One might surmise that The Philippines is widely thought to be something of workers paradise if you spend time in the Mabuhai lounge at the Ninoy Aquino International Airport. There is some truth to the this idea — the Department of Labor (DoLE) does tend to presume employee complaints against management are valid and in the absence of definitive evidence to the contrary will often rule on a worker's behalf.
I suspect that this derives from an attempt to level the playing field in an economic environment where the gulf between rich and poor can be immense and the lack of meaningful government social intervention means that people are often at the mercy of their employers. See the quoted decree below (tough to find, by the way):

Presidential Decree No. 851: Requiring All Employers to Pay their Employees a 13th-Month Pay
WHEREAS, it is necessary to further protect the level of real wages from the ravage of worldwide inflation; WHEREAS, there has been no increase in the legal minimum wage rates since 1970; WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may properly celebrate Christmas and New Year. NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the powers vested in me by the Constitution, do hereby decree as follows:
Section 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment, a 13th-month pay not later than December 24 of every year. (Note: The salary ceiling of P1,000 was removed by President Corazon Aquino in 1986 through Memorandum Order No. 26, which provides: "Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby required to pay all their rank-and-file employees a 13th-month pay not later than December 24 of every year.")
Section 2. Employers already paying their employees a 13th-month pay or its equivalent are not covered by this Decree.
Section 3. This Decree shall take effect immediately.
Done in the City of Manila, this 16th day of December 1975.

While computation approaches vary somewhat, the fact of the matter is that you have to pay this for non-managers (and expatriates aren't entitled either), and you need to pay before the 24th of December to stay legal in the Philippines. Many companies leave this for late in the year or simply go into denial. It pays to plan ahead since missing this important payout will create internal chaos with managing your people (since most count on this to make Christmas) and the legal impact could far exceed the outlay for extra salary.

1 comment:

Brand Archipelago said...

In a quick update, Manila Bulletin journalist, Raymund F. Antonio, cites Labor and Employment Secretary Arturo Brion with some guidance on the matter. "An employer may give his or her employees one-half of the 13th month pay before the opening of the regular school year and the remaining half on or before December 24."

"The 13th month pay should not be less than one-twelfth of the total basic salary earned by an employee in a calendar year whether he is paid on a full-time, part-time or paid with guaranteed salary and commission," he further clarified.