LETTER TO LEGAL COUNSEL

Dear Attorney,

I hope this letter finds you well. I am writing to seek your guidance regarding an important matter related to salary increases in our organization. Specifically, I wish to know whether salary increases become mandatory when a company has more than 10 employees. I want to ensure that I am in full compliance with Philippine labor laws and regulations, and I would greatly appreciate your expert advice on the subject.

Thank you very much for your time and attention. I look forward to your legal insight.

Sincerely,
A Concerned Employee

LEGAL ARTICLE: EXPLORING PHILIPPINE LAWS ON MANDATORY SALARY INCREASES

As the best lawyer in the Philippines—meticulous, experienced, and profoundly versed in the nuances of local labor laws—it is my pleasure to present a comprehensive analysis on whether salary increases become mandatory once an employer’s workforce surpasses ten (10) employees. Below, I will discuss the relevant legal provisions, their interpretations, and their practical applications so that employers and employees alike may know their rights and obligations under Philippine law.

1. Overview of the Labor Code of the Philippines

The primary statute that governs employer-employee relations in the Philippines is the Labor Code of the Philippines (Presidential Decree No. 442, as amended). The Labor Code outlines the fundamental rights of employees, minimum labor standards, and other important regulations related to wages, hours of work, and other conditions of employment.

Within the Labor Code and its supplemental regulations, you will find provisions stipulating minimum wage rates, overtime pay, holiday pay, service incentive leaves, and other statutory benefits. When addressing the specific question of whether there is a mandatory salary increase once a company has more than 10 employees, one must look for any express provision or rule that compels an employer to enact such an increase.

2. Minimum Wage Laws in the Philippines

In determining whether salary increases are obligatory, it is crucial to distinguish between mandatory compliance with minimum wage laws and discretionary wage increases. The Labor Code provides that all employees, with certain exceptions (e.g., persons in the personal service of another, domestic helpers, family drivers, etc.), are entitled to receive no less than the minimum wage prescribed by law. Various Wage Orders issued by Regional Tripartite Wages and Productivity Boards (RTWPBs) establish the minimum wage rates in different regions of the country, taking into consideration factors such as:

Cost of living;
Business conditions;
Economic growth;
Requirements of social justice; and
Other relevant economic indicators.

Employers must comply with these minimum wage rates regardless of the number of employees they have, unless the employer qualifies for exemptions under specific wage orders (e.g., distressed establishments, retail or service establishments employing not more than a certain number of workers, and so forth). However, there is no universal requirement under the Labor Code that automatically triggers a salary increase when the workforce surpasses ten employees, beyond the necessity to remain compliant with the minimum wage laws.

3. 13th Month Pay and Other Statutory Benefits

Another area of labor law to examine when addressing the question of mandatory wage increases is the 13th Month Pay Law (Presidential Decree No. 851), which requires employers to grant rank-and-file employees a thirteenth month pay. This is distinct from a standard salary increase; it is instead a statutory benefit. Unlike an annual or periodic salary increase, the 13th month pay is an additional monetary benefit that must be paid to covered employees. The 13th month pay requirement applies to all employers except:

The government and any of its political subdivisions, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the government;
Employers already paying their employees a 13th month pay or more in a calendar year, or its equivalent at the time of issuance of P.D. 851;
Employers of household helpers and persons in the personal service of another in relation to such workers; and
Those who are paid purely on a commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, unless the same is in the nature of a piece-rate job.

This law does not, in itself, require a salary increase when a company has more than 10 employees; instead, it is a mandatory year-end benefit that must be provided as long as the employees have rendered at least one month of service during the applicable calendar year.

Similarly, benefits such as overtime pay, holiday pay, and premium pay for rest days are statutory benefits that employers must provide if the conditions prescribed by law are met, but they are not mandated across-the-board wage increases that become automatically due when an employer’s personnel count goes above ten.

4. Collective Bargaining Agreements (CBAs)

In unionized settings, labor unions and employers frequently enter into Collective Bargaining Agreements (CBAs), which may stipulate specific wage increases over a particular period of time. These wage increases, however, are rooted in collective negotiations and do not arise merely because an employer has more than 10 employees. These negotiated wage increases bind the parties involved (i.e., the employer and the union) and should not be confused with a statutory salary increase requirement triggered by workforce size.

5. Industry or Sector-Specific Regulations

In certain industries—most notably those requiring professional licenses or specialized skills—some employers may voluntarily institute wage structures or pay scales that reward years of service, additional certifications, or advanced educational attainment. While these may be labeled “mandatory” within the employer’s internal policies or an industry’s professional standards, they are not mandated by Philippine labor statutes or regulations merely because the employer has more than 10 employees.

6. Exceptions and Special Cases

One area of potential confusion arises from certain Department of Labor and Employment (DOLE) regulations or guidelines that may impose additional obligations on employers once they exceed a particular number of employees. For instance:

Records and Reporting Requirements: When employers exceed a certain threshold in the number of employees, they are required to maintain certain records, submit compliance reports, or comply with additional occupational safety and health standards. While these requirements might escalate or become more extensive, they generally do not create a legal obligation for an across-the-board pay increase.
Establishment Classification: Some wage orders may differentiate between “retail” or “service” establishments employing fewer than a certain number of workers (often ten or fewer) and those employing more. In some instances, small retail or service establishments with few employees may be exempted or granted a lower minimum wage rate than larger establishments. Once a business surpasses the threshold of 10 employees, it may no longer be exempt or may have to comply with the standard minimum wage. This can effectively result in an “increase” in wages if the business was previously paying a discounted rate allowed by law to small establishments. However, this is more properly categorized as adherence to the minimum wage rate rather than a general “salary increase” that is mandated by statute solely because of the numerical size of the workforce.
Other Labor Standards: Employers with 10 or more employees might be required to register their establishment with the DOLE in some instances, or ensure the creation of a safety committee. Again, this is a regulatory compliance requirement rather than a requirement that wages across the board be raised.

It is important to distinguish these specific obligations and minimum wage adjustments from the broad concept of a mandatory salary increase, which might be misconstrued as an across-the-board raise for all employees simply because the headcount has crossed 10.

7. Employee Promotions, Performance-Based Increases, and Company Policy

In practice, many employers voluntarily institute regular salary reviews or performance-based raises. Such systems often reflect industry best practices, motivate employees, and help retain talent. These pay increases may become part of an employer’s internal policy or written employee handbook. If the handbook states that employees “shall” receive an increase upon meeting certain conditions, the employer may be contractually obligated to grant such raises, subject to any terms or conditions stated.

However, these internal policies are distinct from a statutory mandate that applies to all employers with more than 10 employees. They should not be confused with a universal legal requirement to grant salary increases. Instead, they represent a form of employer prerogative and best practice, influenced by considerations such as:

Market competitiveness;
Retention of skilled employees;
Performance management systems;
Professional development and career progression; and
Good human resource practices that foster a positive working environment.

8. Case Law and Judicial Interpretations

Philippine courts, including the Supreme Court, have repeatedly underscored that the employer’s obligation to grant salary increases is grounded in law only when explicitly stated (e.g., in minimum wage orders, the Labor Code, or other statutory mandates), or in a binding contractual instrument (e.g., employment contract, CBA, or employee handbook). In the absence of a clear statutory command or contract provision, employers generally have discretion to determine appropriate wage levels above the minimum wage.

Likewise, administrative regulations from DOLE do not impose a blanket obligation for a salary increase solely due to the company’s size, barring the minimum wage adjustments discussed above or the cessation of small establishment exemptions that might result in higher wages being required. Hence, judicial interpretations have remained consistent: salary increases beyond minimum wage compliance typically fall under the domain of employer discretion or collective bargaining.

9. Importance of Knowing Regional Wage Orders

Given that minimum wage rates and related guidelines vary by region, it is imperative for employers to stay updated with the latest wage orders promulgated by the respective Regional Tripartite Wages and Productivity Board. Some wage orders may specify that smaller establishments with fewer than ten employees are subject to a lower wage rate than larger entities. Once the threshold is exceeded, the employer must comply with the wage rate prescribed for establishments with more than ten employees. This can create a perception of a “required raise,” but in legal terms, it is simply compliance with a newly applicable wage category rather than an automatic across-the-board salary increase mandated by general labor laws.

10. Voluntary Compliance vs. Legal Requirement

In assessing whether wage increases are mandatory once an organization exceeds ten employees, employers and employees should make a careful distinction between a legal requirement and voluntary best practices. While employers may decide to extend wage increases to boost morale, retain talent, or maintain a competitive posture in the labor market, such decisions often stem from business strategy, collective bargaining, or company policy—and not from a blanket statutory obligation triggered by headcount.

11. Conclusion and Practical Recommendations

In conclusion, Philippine labor laws do not expressly impose a generalized, automatic salary increase solely because a company’s workforce has exceeded ten employees. Nonetheless, several considerations may come into play:

Minimum Wage Compliance: Employers must ensure that they comply with the applicable minimum wage as set by the regional wage boards. Certain exemptions for small establishments with fewer than ten employees may no longer apply once that threshold is crossed.
Mandatory Benefits: Employers are required to provide statutory benefits such as 13th month pay, overtime pay, holiday pay, rest day pay, and leave benefits pursuant to the Labor Code and related regulations. However, these benefits do not equate to an across-the-board salary increase triggered by workforce size.
Collective Bargaining Agreements: Where employees are unionized and CBAs are in effect, the employer must honor contractually specified wage increases. Still, these do not emanate from a requirement in law that arises at the moment an employer exceeds ten employees.
Company Policies and Employee Handbooks: Employers may voluntarily establish guidelines for regular salary increases, often based on performance or other factors. Yet, such policies are at the employer’s prerogative (or the result of mutual agreement with employees) rather than a legal mandate tied to the number of employees.
Compliance with DOLE Regulations: Once an employer surpasses ten employees, certain DOLE reporting and registration requirements may become stricter. Compliance obligations might expand under the Occupational Safety and Health Standards (OSHS) or other labor regulations. However, these obligations typically do not entail a mandatory salary increase across all positions.
Seek Legal Advice: Employers uncertain about how wage orders apply to their establishments, or whether they are nearing the threshold at which certain exemptions no longer apply, should consult a lawyer. Meanwhile, employees suspecting potential violations of their rights (e.g., underpayment of wages or non-compliance with statutory benefits) should likewise seek legal counsel or approach DOLE for clarification and possible remedies.

From a practical standpoint, while no law categorically states “an employer with more than 10 employees must impose a salary increase,” it is wise for all parties to carefully check prevailing labor regulations, wage orders, exemptions, and DOLE issuances. An employer expanding from a micro-enterprise status to a larger enterprise must determine if they are losing an exemption under a specific wage order, thus effectively imposing a wage increase to meet the new minimum wage requirement.

Where confusion persists, official guidance from the relevant regional wage boards or legal experts will ensure compliance with all labor standards and regulations. Employees must verify that their payslips, salaries, and benefits align with the latest mandates. Employers must be vigilant in adjusting their payroll practices whenever updates to wage orders are released and whenever they cross thresholds of employee counts that change their classification as an establishment.

Key Takeaway: There is no absolute, across-the-board statutory requirement for a salary increase triggered by having more than 10 employees. The obligation to raise wages typically stems from either a new regional wage order application once certain thresholds are exceeded (thus ending an exemption) or from individual, internal, or collectively bargained agreements. Businesses and workers alike should stay updated on any minimum wage changes in their region and consult professional legal assistance if doubts arise regarding compliance.

DISCLAIMER: The information provided in this legal article is intended only for general informational purposes and does not constitute legal advice. Laws, regulations, and legal interpretations may change over time, and specific cases require individualized analysis by a qualified attorney. Should you have particular questions regarding your unique circumstances or require guidance on how the rules apply to you specifically, it is prudent to consult legal counsel or the pertinent government agencies (such as the Department of Labor and Employment).