Employment Law: Salary Deductions for Absences

Employment Law: Salary Deductions for Absences in the Philippines
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I. Introduction

The practice of deducting wages from employees who are absent from work is a common concern in Philippine employment relations. Employers and employees alike often seek clarity on the rules surrounding salary deductions, especially as they relate to absences, tardiness, and other causes. This article aims to provide an overview of the key legal principles, statutory provisions, and applicable regulations governing salary deductions for absences in the Philippines.

II. Legal Framework in the Philippines

  1. The Labor Code of the Philippines (Presidential Decree No. 442, as amended)

    • Wage Deductions: The general rule on wage deductions is found in Article 113 (formerly Article 105) of the Labor Code, which specifies that no employer can make deductions from the wages of an employee unless:

      1. It is authorized by law (e.g., withholding taxes, Social Security System contributions, PhilHealth, Pag-IBIG),
      2. It is with the written consent of the employee for insurance, union dues, or other similar purposes, or
      3. It is authorized by a collective bargaining agreement or similar agreement.

    • Minimum Wage Protection: The Labor Code also emphasizes that deductions must not reduce an employee’s compensation below the applicable minimum wage, except for those expressly allowed by law.

  2. Implementing Rules and Regulations (IRR) of the Labor Code

    • Further details on permissible and impermissible deductions are found in the IRR issued by the Department of Labor and Employment (DOLE). In general, salary deductions for absences (and other instances) must comply with these requirements to avoid violations.

  3. No Work, No Pay Principle

    • The prevailing doctrine is that an employee is entitled to be paid only for days or hours actually worked, unless the absence is covered by paid leaves (e.g., service incentive leave, vacation leave, sick leave). For unexcused or unauthorized absences beyond the allotted leave credits, employers have the right to deduct the corresponding amount from the employee’s wages.

  4. Service Incentive Leave (SIL) under the Labor Code

    • After one year of service, employees (in certain categories of employment) are entitled to a minimum of five (5) days of paid service incentive leave. Should an employee use SIL for an absence, that day should be paid, and thus, no wage deduction is made. Once the SIL (and any other employer-granted leave credits) is exhausted, the employer may validly make deductions for further absences.

III. Authorized Versus Unauthorized Deductions

  1. Authorized Deductions
    The Labor Code and its IRR clarify that salary deductions are permitted if:

    • Mandated by Law: Examples include withholding tax, SSS, PhilHealth, and Pag-IBIG contributions.
    • Employee-Authorized: If the employee has provided a written authorization (e.g., union dues, salary loans, insurance premiums).
    • Collective Bargaining Agreement (CBA): If a CBA specifically provides for certain deductions.

  2. Unauthorized Deductions

    • Any deduction that does not fall under the above categories—especially if not consented to by the employee and not authorized by a CBA—is generally considered unauthorized.
    • Employers are prohibited from imposing fines or penalties in the form of salary deductions for disciplinary reasons. Disciplinary sanctions must not take the form of wage reductions, unless they relate strictly to the time an employee did not work (which is governed by the “no work, no pay” principle rather than an actual “fine”).

IV. Salary Deductions for Absences

  1. Daily-Paid Employees

    • Employees who are paid on a daily basis typically follow the no work, no pay principle. If they do not report to work, they simply do not receive wages for that day.
    • The absence of a daily-paid employee typically does not require an additional deduction because there is no wage to deduct from in the first place; rather, the employee simply does not earn wages on days they are absent.

  2. Monthly-Paid (or Semi-Monthly-Paid) Employees

    • For monthly or semi-monthly-paid employees, a common practice is that the employee’s wage for the pay period is computed assuming attendance for all regular workdays. Any absence without available leave credits is then reflected as a deduction.
    • Leave Credits: If an employee still has leave credits (vacation/sick leave/SIL), the employer should first utilize those available credits. If the employee’s absence extends beyond their available leave, the pro-rated salary deduction may be made for the excess days of absence.

  3. Tardiness and Undertime

    • Employers may deduct from wages for late arrivals or undertime (leaving before the end of a scheduled shift) if these are clearly reflected in attendance records and company policy.
    • Deductions must be calculated based on the actual minutes or hours of tardiness or undertime, provided that proper due process is followed if such deductions are challenged.

  4. Holidays and Rest Days

    • Under certain circumstances, employees are entitled to holiday pay and rest day pay if required by law or by company policy. However, if an employee is absent without leave on both the working day immediately prior to a holiday and the working day immediately following the holiday, many employers deem the employee ineligible for holiday pay, resulting in deductions reflecting the absence.
    • Company policies should be consistent with Labor Code provisions regarding holiday and rest day pay, ensuring that any deductions are lawful.

V. Procedural Considerations

  1. Clear Company Policy

    • Employers should have a written policy (e.g., in an employee handbook or HR manual) explaining the rules on attendance, paid/unpaid leaves, and the method of computing wage deductions for absences.
    • The policy must align with the Labor Code and DOLE regulations to avoid potential claims of illegal deductions.

  2. Documentation and Transparency

    • Employers should maintain accurate and complete time records (attendance logs, leave forms).
    • Any deductions for absences must be clearly itemized in the employee’s payslip. Properly indicating the basis for deductions helps prevent disputes and fosters transparency.

  3. Dispute Resolution

    • In case an employee believes a deduction is illegal or excessive, they may file a complaint with the DOLE or the National Labor Relations Commission (NLRC).
    • Employers should be prepared to show documentary evidence that the deduction is legally authorized and computed correctly.

VI. Common Misconceptions

  1. Salary Deductions as Disciplinary Fines

    • Employers sometimes mistakenly impose “fines” by docking pay for tardiness or disciplinary infractions. Philippine labor law generally prohibits monetary fines that do not reflect hours actually not worked.
    • The correct approach: If an employee is tardy, the employer may deduct pay corresponding to the minutes or hours not worked (no work, no pay), but not impose an additional monetary penalty.

  2. Obligatory Payment of Salary Despite Absences

    • Some employees assume that a monthly salary is fixed and should remain the same regardless of absences. However, unless covered by leave credits or a company’s special policy guaranteeing full pay, the employee may validly receive a reduced salary corresponding to the days or hours they did not work.

  3. Payment During Preventive Suspension

    • In disciplinary cases, an employer may place an employee on preventive suspension. The rules on wage entitlement during preventive suspension vary, but generally, preventive suspension (if not exceeding the maximum period allowed by law) is without pay unless a company policy or CBA states otherwise.

VII. Best Practices for Employers

  1. Establish Clear Attendance and Leave Policies

    • Include detailed provisions on paid leaves, conditions for availing leaves, and clear procedures on how absences are deducted from salaries.

  2. Ensure Compliance with the Labor Code and DOLE Issuances

    • Review new or updated DOLE regulations regularly to keep policies current.

  3. Maintain Transparent Payroll Processes

    • Show employees exactly how their wages are computed and itemize any deductions in the payslip.
    • Keep detailed attendance and leave records to defend against potential disputes.

  4. Communicate Policies Effectively

    • During onboarding or upon updating the handbook, provide training or orientation on attendance rules and wage deductions.
    • Encourage employees to ask questions so they fully understand the policy.

VIII. Conclusion

Salary deductions for absences in the Philippines are governed by the principles enshrined in the Labor Code, its IRR, and jurisprudence emphasizing the no work, no pay doctrine. Employers must exercise caution in making deductions, ensuring that they are based on lawful grounds (e.g., authorized by law or employee consent) and that any absences are accurately recorded. Employees, on the other hand, should remain mindful of their leave credits and attendance records to avoid unauthorized or unexpected deductions.

Overall, transparency, clear policies, and proper documentation are key. By adhering to these principles, both employers and employees can maintain a fair and legally compliant work environment.

Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. Employers or employees dealing with specific issues related to salary deductions or absences should consult a qualified labor law practitioner or reach out to the Department of Labor and Employment (DOLE) for guidance.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

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