Question: Is an employer allowed to place employees on layoff status and provide only basic pay during the layoff period?
In the Philippines, layoffs and other temporary suspensions of work are governed by the Labor Code of the Philippines. Under Article 301 (formerly Article 286), employers have the right to temporarily suspend operations for a period not exceeding six months due to a range of valid causes such as economic downturns, lack of work, or other business exigencies. This is known as "floating status" or temporary layoff. However, certain rules apply to this arrangement:
Layoff Duration and Conditions
Employers are permitted to place employees on temporary layoff for a period of up to six months. During this time, employees are not required to report for work, and the employment relationship is maintained. If the suspension exceeds six months, the layoff may be considered a constructive dismissal, and the employees are entitled to separation pay unless a different arrangement is agreed upon.
Compensation During Layoff
While on layoff status, employees are generally not entitled to their regular wages since no actual work is performed. However, there are specific provisions concerning benefits and pay computation that vary depending on the employer's policies, collective bargaining agreements (CBAs), or company practices. In many cases, companies may choose to provide financial assistance or partial compensation, but this is not a legal obligation unless agreed upon by both parties.
The idea of paying only the "basic pay" during the layoff period may be allowable if stipulated in an employment contract, CBA, or a company policy. The employer must ensure that any arrangement does not contravene labor laws, particularly regarding minimum wage standards and other statutory benefits like the 13th-month pay.
Employee Rights and Remedies
Employees have the right to be informed of the reason for the layoff, and communication regarding the duration and the terms of the layoff should be clear. Employees who feel that their rights have been violated, such as those placed on an indefinite layoff or receiving less compensation than mandated, can seek recourse through the Department of Labor and Employment (DOLE) or by filing a complaint with the National Labor Relations Commission (NLRC).
It is important for both employers and employees to have a mutual understanding of the terms governing layoffs and pay computation to avoid potential disputes. Proper documentation and communication are crucial in ensuring that any temporary suspension of work adheres to the law.