[LETTER FROM THE WORKER TO THE LAWYER]

Dear Attorney,

I am writing to seek legal advice regarding the manner in which my employer computes my salary. Currently, I earn a fixed amount of PHP 7,883.75 for each cutoff, which I divide by thirteen (13) working days. By doing so, I find that my daily rate ends up being below PHP 610. There are times when I actually work thirteen (13) or fourteen (14) days within a cutoff, but my employer claims that the cutoff count is limited to twelve (12) days.

I would like to know if I am entitled to any additional compensation or if there is any discrepancy that I should address with my employer. I greatly appreciate any guidance you can provide on this matter.

Thank you very much, and I look forward to your advice.

Sincerely,
Concerned Worker

[LEGAL ARTICLE ON PHILIPPINE LABOR LAW PERTAINING TO THE CONCERN]

In the Philippines, the determination of wages, daily rates, and payroll computations is governed by the Labor Code of the Philippines (Presidential Decree No. 442), as well as by rules and regulations issued by the Department of Labor and Employment (DOLE). Understanding how to properly compute wages is critical in ensuring that employees are fairly compensated and that employers remain compliant with labor standards. This legal article provides a meticulous exploration of salary computation methods, lawful pay rates, and the remedies available to employees who believe they are not receiving correct wages.

1. Overview of Philippine Labor Laws on Wages

1.1 Statutory Basis of Wages
Under the Labor Code, employees are entitled to receive at least the minimum wage established by law. The determination of the minimum wage is typically handled at the regional level, where Regional Tripartite Wages and Productivity Boards (RTWPBs) issue wage orders that set the daily minimum wage rates for their respective regions. The amounts vary depending on factors like the cost of living, economic conditions, and the classification of the region.

1.2 Payment of Wages
Article 103 of the Labor Code provides that wages shall be paid at least once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days. The method of wage computation—whether daily rate, monthly rate, or piecework rate—should be clearly established in employment contracts or company policies. Employers must ensure that the compensation structure meets statutory requirements, which includes holiday pay, overtime pay, night shift differentials, and premium pay for rest days, depending on the nature of the job and relevant labor regulations.

1.3 Working Days vs. Calendar Days
In the Philippines, common payroll practices involve dividing the monthly salary by a set number of working days (e.g., 26 for daily computations in some instances or 22 days in others, depending on whether Saturdays are included as workdays). Some employers use 313 or 261 factor days to determine the equivalent daily rate for monthly-paid employees, if the monthly-paid employees are deemed to have certain benefits included. The key element is clarity and consistency with labor laws, such as ensuring that the daily rate does not fall below the statutory minimum wage.

2. Daily-Rate Computation: Key Considerations

2.1 Identifying the Employee Category
Employees in the Philippines may be classified as daily-paid or monthly-paid workers.

Daily-Paid Employees are paid based on the number of days worked in a given period. If a daily-paid employee works five (5) days per week, the actual days worked multiplied by the daily rate is used to calculate compensation.
Monthly-Paid Employees often receive a fixed monthly salary that already factors in their wages for working days, rest days, and special non-working days.

It is important to confirm which classification is applicable in a given employment arrangement, because this classification determines how wages, leaves, and overtime rates are computed.

2.2 Fixed Salary vs. Actual Days Worked
In many companies, a monthly or semimonthly compensation scheme is used, wherein an employee receives an agreed fixed amount per cutoff. However, that fixed amount should still correspond to an appropriate daily rate. For instance, if an employer has agreed to pay a monthly wage of PHP 16,000, the employee might receive PHP 8,000 each semimonthly cutoff if the business practice is to split the monthly salary into two equal halves. Nonetheless, the essential question is whether the daily rate or the total wages for each period meet the minimum wage and other labor standard requirements.

2.3 Minimum Wage Compliance
Even in arrangements where pay is “fixed,” the actual pay per day—when divided based on the actual days worked—should not fall below the minimum wage set by law for the region. If, after breaking down the fixed amount, the daily rate is below the minimum, the employer may be violating the Labor Code and DOLE regulations.

2.4 Cutoff Discrepancies
The concern arises if an employer says, “We only count 12 days per cutoff,” while the employee actually works for 13 or 14 days. This discrepancy can lead to underpayment if the employer does not account for the additional days. The employer must track attendance accurately and must pay wages for all days worked. If an employer sets a semimonthly system but extends the actual working days beyond what is accounted for, adjustments must be made to ensure that employees receive pay for any extra days worked.

3. Entitlement to Additional Compensation

3.1 Overtime Pay
If an employee works beyond the normal eight (8) hours a day, the employer is generally required to pay overtime compensation, which is equivalent to the hourly rate plus at least twenty-five percent (25%) for work performed beyond eight (8) hours. If the overtime occurs on a holiday or rest day, the rate increases to at least thirty percent (30%). Underpayment due to miscalculation of days might also be intertwined with inadequate overtime compensation if the employee was required to work extra hours.

3.2 Premium Pay for Rest Days and Special Holidays
In cases where employees work on their rest days, special non-working days, or regular holidays, the law prescribes premium rates. For instance, work on a rest day or special non-working day is usually compensated at 130% of the daily rate. Work on a regular holiday is at 200%. Computations may become even more complex if the employer insists on a “fixed daily rate” approach that does not reflect these premium pay requirements.

3.3 13th Month Pay
Under Presidential Decree No. 851, all rank-and-file employees are entitled to 13th-month pay, provided they have worked for at least one (1) month in a calendar year. The formula for 13th-month pay is usually the total basic salary earned during the year divided by twelve (12). If the employer has been miscalculating wages on a monthly basis, the 13th-month pay might also be affected.

3.4 Holiday Pay and Leave Credits
Employees may also be entitled to pay on regular and special non-working holidays, depending on the Labor Code provisions and relevant wage orders. For monthly-paid employees, holiday pay is commonly integrated into the monthly salary, but daily-paid employees must be paid additional compensation for holidays worked. Similarly, leave credits (vacation or sick leaves) should be computed based on daily rates. Where the daily rate is incorrectly set, these leave benefits might also be miscomputed.

4. Potential Legal Violations and Remedies

4.1 Underpayment of Wages
If dividing the semimonthly or monthly pay by the actual days worked reveals a per-day amount less than the applicable minimum wage, there is a clear indication of possible Labor Code violations. Wage Orders in every region must be strictly followed. An employee who receives less than the mandated daily minimum wage may file a complaint with the DOLE.

4.2 Non-Compliance with OT and Holiday Premiums
Failure to pay overtime pay, holiday pay, or rest day premiums also constitutes a violation. Under Department Order No. 178, as well as other DOLE guidelines, employees have recourse to file labor complaints if an employer does not comply with the correct pay rates.

4.3 Illegal Deductions or Salary Deceptions
If an employer claims that the “fixed” salary is all-encompassing but does not properly compensate for extra days, the employee may have grounds to question whether the arrangement leads to illegal deductions or deception regarding actual wages. Any deduction not expressly authorized by law or by the employee is unlawful.

4.4 Filing a Complaint with the DOLE
Employees who suspect that they are underpaid or that wage computations are incorrect can file a complaint with the DOLE Regional Office that has jurisdiction over the workplace. This process usually starts with a consultation or request for assistance (RFA) under the Single Entry Approach (SEnA). If the dispute is not resolved through mediation, it may be escalated to formal adjudication.

4.5 Solidary Liability of Employer and Principal
In some arrangements, the employee might be hired through an agency or a contractor. The principal (the company for which the work is performed) and the contractor may be held solidarily liable for violations of labor standards, including underpayment of wages.

5. Proactive Steps for Employees

5.1 Documentation and Record-Keeping
One of the most important steps an employee can take is to diligently track hours worked, rest days taken, and official holidays. Maintaining personal records—timesheets, payslips, and other relevant documents—can provide essential evidence if the employee decides to question the employer’s payroll computations.

5.2 Request for Payroll Computation Explanation
Employees have the right to inquire about how their wages are being calculated. A formal request for explanation or breakdown can be addressed to the HR department or direct supervisor. The request might include questions such as:

How is the semimonthly (or monthly) rate derived?
What is the official daily rate?
How are additional days or overtime hours factored in?
Is the daily rate compliant with the regional minimum wage order?

5.3 Open Communication
Sometimes, underpayment issues are the result of misunderstandings or administrative errors. It is advisable for employees to communicate concerns to the employer before filing a complaint. A calm and clear approach may result in a quick resolution and backpay of any underpaid wages.

5.4 Seeking DOLE Assistance or Legal Counsel
If attempts at clarification are unsuccessful, the next step would be to consult the DOLE or a lawyer. Employees may benefit from free legal aid clinics offered by unions, non-governmental organizations, or local government units. In certain situations, the Public Attorney’s Office (PAO) may offer assistance for labor-related disputes, although PAO’s coverage may vary depending on resources and policies.

6. Obligations and Best Practices for Employers

6.1 Compliance with Minimum Wage Orders
Employers must ensure that salaries, whether paid daily, weekly, bi-monthly, or monthly, do not fall below the regional minimum wage for each day worked. If employees are hired as monthly-paid workers, then the monthly salary must be sufficient to comply with daily minimum wage requirements for the number of days included in the pay period.

6.2 Accurate Timekeeping Systems
A major factor in correct wage computation is accurate timekeeping. Employers should maintain a reliable record of attendance, absences, and overtime. Under DOLE Department Order No. 183 and related issuances, employers are expected to keep a daily record of time in and time out, or to use an approved bundy clock or a biometric system.

6.3 Fair Pay for Overtime, Holiday, and Premium Work
Employers are obligated to pay extra for overtime, holiday, and premium work. This ensures that employees receive due compensation when they work beyond normal hours or on days off. Transparent and accurate recording of these additional hours is crucial for employers to avoid labor disputes.

6.4 Transparent Pay Slips
Employers must provide pay slips to employees that detail how wages are computed. This is mandated under various DOLE circulars aiming to strengthen workers’ rights to information about their salary. Pay slips typically itemize basic wage, overtime pay, holiday premium pay, deductions (if any), and net pay. Transparent pay slips help both parties avoid confusion.

7. Practical Illustrations of Wage Computations

7.1 Scenario 1: Daily-Paid Worker

Situation: An employee is paid a daily rate of PHP 610. Suppose the employee works 13 days in a two-week cutoff.
Computation: The employee is entitled to 13 × PHP 610 = PHP 7,930 for that period.
Implication: If the employer only pays PHP 7,320 (which might correspond to only 12 days), the employee is short by PHP 610.

7.2 Scenario 2: Monthly-Paid Worker

Situation: The employee is paid PHP 15,000 per month, split into two pay periods of PHP 7,500 each. The assumption is that 313 factor days or an agreed method is used.
Computation: If the daily equivalent is computed to be above the minimum wage, and the total days are accounted for, the employee should not be shortchanged even if there are 13 or 14 working days in one cutoff.
Implication: Should the employer fail to adjust the daily rate for additional days worked, a deficiency in payment arises.

7.3 Scenario 3: Overtime on a Weekday

Situation: The employee’s daily rate is PHP 610, and the hourly rate is (PHP 610 ÷ 8) = PHP 76.25. If the employee works two (2) hours overtime, the overtime pay is 2 × (PHP 76.25 × 1.25) = 2 × (PHP 95.31) = PHP 190.62.
Implication: If the employer omits these amounts or lumps everything into a fixed salary, it can lead to underpayment.

8. Steps to Resolve the Dispute

Gather Evidence: Compile all payslips, time records, and any documentation that shows hours worked.
Write a Formal Request: Send a written request or letter to the employer or HR department, asking for a breakdown of the semimonthly or monthly pay and an explanation for any discrepancies.
Check DOLE Standards: Compare the actual daily rate to the regional minimum wage, factoring in mandatory benefits and premium pays.
Consider Mediation: If the employer’s response is unsatisfactory, proceed with a formal complaint through the Single Entry Approach (SEnA) at the DOLE.
Pursue Legal Action if Necessary: If no settlement is reached during mediation, file an official labor complaint. Seek legal counsel, especially if the underpayment is substantial or if there is a pattern of non-compliance from the employer.

9. Frequently Asked Questions (FAQs)

Q1: Is it legal for an employer to fix my salary at a certain amount, regardless of the number of days I work in a cutoff?
A1: Yes, as long as the fixed salary meets the daily minimum wage or monthly wage requirements when translated to an hourly or daily rate. All mandatory benefits, overtime pay, and holiday pay still apply. If the fixed salary results in a rate lower than the mandated minimum for the days worked, that is not lawful.

Q2: My employer says that part of my salary already includes holiday and overtime pay. Is this allowed?
A2: Such a setup, often called a “pakyawan” or “all-in rate,” must still comply with the law. Employers cannot simply declare that a lump sum includes overtime and holiday premium without a clear breakdown. If an all-in rate is used, the employer must ensure that the total amount covers all entitlements, and that the basic pay is still above minimum wage.

Q3: Can I get fired for complaining about my wages?
A3: Retaliatory dismissal is illegal. If you are dismissed because you filed a complaint or raised a concern about wages, that could be an illegal dismissal. You may seek remedies, such as reinstatement and back wages, through a labor complaint.

Q4: Will the DOLE help me get my back wages if I’m found to be underpaid?
A4: Yes, DOLE can order the employer to pay back wages for underpayment. Through a labor arbiter’s decision or a voluntary settlement, the employee can recover unpaid salaries, overtime, holiday pay, and other benefits due.

Q5: Do I have to file a complaint immediately, or can I negotiate with my employer first?
A5: It is generally prudent to try to resolve the issue internally through dialogue with management or HR. If negotiations fail, you have the option to file a complaint with the DOLE.

10. Conclusion

The crux of this inquiry revolves around whether the fixed amount of PHP 7,883.75 per cutoff, when divided by the actual number of working days, results in a daily rate that meets or exceeds the minimum wage. Furthermore, if an employee actually works 13 or 14 days, but the employer only accounts for 12 days, there could be an underpayment issue. It is vital that employers keep accurate time records and ensure that employees are compensated for all days worked at no less than the applicable minimum wage, plus any overtime, holiday, or rest day premiums due.

For employees, the best course of action is to document everything meticulously, request a detailed breakdown of the payroll computation, and, if needed, seek assistance from the DOLE or a qualified labor lawyer. The law is clear: every employee should be paid fairly for the work they perform, in accordance with Philippine labor standards.

By understanding these rules and regulations, both employers and employees can foster a more harmonious work environment where individuals are compensated fairly and companies remain compliant with the Labor Code. Proper payroll practices not only protect employees’ rights but also help ensure that employers avoid costly and time-consuming labor disputes.

This comprehensive guide should serve as a resource for workers who find themselves in similar circumstances. If the situation remains unresolved, consulting a legal professional and possibly filing an official complaint might be necessary steps to enforce one’s labor rights.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Always consult with a licensed Philippine labor lawyer or the Department of Labor and Employment for guidance specific to your situation.