Dear Attorney,

Greetings! I hope this letter finds you well. I am writing to seek your professional opinion regarding a situation involving the withholding of part of my salary. According to the employer, it is their company policy to hold a portion of the compensation, yet this policy was never mentioned in my signed employment contract, nor was it discussed during the HR orientation. I am concerned about the legality of this practice, especially since it was not explicitly agreed upon at the time I signed my contract.

I would greatly appreciate any insight or guidance you might provide on this matter, including any legal remedies or next steps I could pursue under Philippine labor laws. If my rights as an employee have been violated, I would like to know how I might be able to address this issue in the most efficient and lawful manner.

Thank you for your time and consideration. I look forward to hearing your advice regarding my situation.

Sincerely,

A Concerned Employee

LEGAL ARTICLE ON PHILIPPINE LABOR LAW PERTAINING TO WITHHELD SALARY AND COMPANY POLICY

In the Philippines, salary-related disputes are governed by the Labor Code of the Philippines, the rules and regulations promulgated by the Department of Labor and Employment (DOLE), and relevant jurisprudence. The issue of withholding salary, especially when the alleged basis for such withholding was neither discussed during contract negotiations nor included in the employment contract itself, raises various concerns under Philippine labor laws. Below is a meticulous examination of the key legal principles, relevant laws, and procedures that pertain to withheld salaries in the context of an employment relationship.

Definition of Wages and the Right to Compensation

Under Article 97(f) of the Labor Code of the Philippines, the term “wage” is broadly defined to include remuneration or earnings, however designated, for work done or to be done. This definition underpins the right of every employee to receive the correct compensation for services rendered. The fundamental right of an employee to be paid for work performed is enshrined in the constitutional and statutory framework protecting labor rights.

In practice, wages must be paid in legal tender and at the intervals specified by law (i.e., at least once every two weeks or twice a month). Any practice or arrangement that alters the timely payment of wages should be grounded in valid legal or contractual stipulations, provided such arrangements do not contravene the minimum standards set by law.
Contractual Obligations and Company Policy

The employment contract serves as the primary agreement between an employer and an employee. It stipulates the terms and conditions that both parties must follow. Company policies, on the other hand, can supplement the contract when such policies are lawfully promulgated and made known to employees. However, for a policy to be enforced, it generally must meet basic legal standards:
- Legality: The policy must not contradict any provision of the Labor Code or other applicable laws and regulations.
- Reasonableness: The policy must be fair and not unduly oppressive to employees.
- Notice and Acceptance: Ideally, the employee should be well-informed about the policy upon or before commencement of employment, or at least within a reasonable time thereafter. When policies are introduced mid-employment, employees should receive notice and ideally provide their consent.
If a company policy on salary withholding was never discussed with the employee during contract signing or during HR orientation, and if such a policy is not reflected in any written document the employee agreed to, then the enforceability of that policy is questionable. Employers cannot unilaterally impose conditions on wages if these conditions were not validly communicated or consented to by the employee, especially if such a practice effectively denies the employee timely access to the compensation he or she has already earned.
Prohibition Against Withholding or Deductions from Wages

Under Article 113 of the Labor Code, certain wage deductions are authorized (e.g., for insurance contributions or union dues), but these must comply with the requirements set out by law. Employers are prohibited from making deductions that are not expressly permitted by the Labor Code or by other legal provisions, unless the employee has voluntarily consented in writing. Deductions not covered by law, or those imposed without the employee’s prior knowledge or consent, can be construed as illegal.

A “withholding” of salary, if not covered by law or voluntarily agreed upon by the employee, may function similarly to an unauthorized deduction. This can be treated as a violation of labor standards, and the employer may be held liable for unpaid wages or for money claims.
Legal Justifications for Holding an Employee’s Salary

In certain exceptional cases, the employer may have a reasonable basis to withhold part of an employee’s salary. Such justifications might include:
- Court Orders or Garnishments: If a court has ordered that part of an employee’s salary be garnished, the employer would be legally bound to comply.
- Taxes and Government-Mandated Contributions: Employers are required to deduct and withhold taxes, Social Security System (SSS) contributions, PhilHealth, and Pag-IBIG contributions. These are mandated by law and do not necessitate explicit employee consent.
- Clear, Written Agreements on Salary Structure or Bond: If the employee expressly signed an agreement regarding a bond or a salary deferment arrangement, the employer could be justified in withholding certain amounts.
Aside from these explicit exceptions, any “company policy” that results in the indefinite withholding of wages without the employee’s clear, informed consent or specific statutory authorization may be deemed unlawful.
Consequences of Unlawful Withholding of Salary

Employers who unlawfully withhold salaries can be reported to the DOLE, and they may face labor standard violations. The employee may file a complaint for money claims and potentially seek:
- Unpaid Wages: Recovery of the salary that was withheld.
- Damages: In some cases, moral and exemplary damages could be warranted if the withholding was done in bad faith or accompanied by oppressive conduct.
- Penalties and Fines: Depending on the gravity of the violation, the employer may be required to pay administrative fines or be subjected to other sanctions imposed by the DOLE or the National Labor Relations Commission (NLRC).
Procedures for Filing Complaints

An aggrieved employee can typically file a labor complaint in the following ways:
- Single Entry Approach (SEnA): Prior to formal litigation, the DOLE encourages employees to undergo SEnA, a 30-day mandatory conciliation-mediation process designed to facilitate an amicable settlement between the employee and employer.
- Filing a Complaint with the Regional Office of the DOLE: If the matter remains unresolved, the employee may file a formal complaint at the DOLE Regional Office that has jurisdiction over the workplace or the employee’s place of residence.
- Elevating the Matter to the NLRC: For more complex cases or if the dispute is not resolved at the DOLE level, the complaint can be referred to the NLRC, which has the authority to hear and decide labor cases relating to wages and illegal deductions.
Evidentiary Considerations

It is crucial for an employee to gather proof of the agreement regarding wages and to show that the withheld amount was not authorized by any written policy or by the employment contract. Typical evidence could include:
- Employment Contract: To demonstrate the agreed-upon salary and terms and to show the absence of any provision regarding withheld salary.
- Payslips: To compare the actual wages paid with the agreed-upon wages.
- Company Handbook or Policies: If there is any official handbook, it is important to check whether the withholding policy is mentioned. If it is not, that strengthens the employee’s position.
- Correspondences with HR or Supervisors: Any email or written communication that may confirm whether the policy was ever disclosed to the employee.
By presenting evidence showing that the withholding of salary was unexpected, unauthorized, or not contractually permitted, an employee can help establish the employer’s liability for any unpaid wages or illegal deductions.
Relevant DOLE Issuances and Labor Code Provisions
- Article 103 of the Labor Code (Time of Payment): Stipulates that wages shall be paid at least once every two weeks or twice a month.
- Article 116 of the Labor Code (Withholding of Wages and Kickbacks): Prohibits the withholding of wages.
- Article 113–115 of the Labor Code (Deductions from Wages): Sets out the narrow set of circumstances under which wage deductions are permissible.
- DOLE Department Order No. 174, s. 2017: While this pertains mainly to contracting and subcontracting, it reaffirms that an employer must comply with general labor standards, including the timely payment of wages.
Doctrine of Immutability of Contracts

Once the terms of an employment contract have been agreed upon and duly signed, an employer generally cannot unilaterally alter them to the disadvantage of the employee. If an employer implements a “company policy” that imposes a new condition on salary—especially a practice of withholding wages—such a policy may be invalid if it conflicts with the existing employment contract and the Labor Code’s provisions on wages. The Supreme Court of the Philippines has repeatedly emphasized that if there is a discrepancy between an employment contract and a unilateral policy, the original stipulations of the contract will usually prevail, provided they do not violate existing laws or public policy.
Implications of Non-Disclosure During Hiring Process

The principle of transparency and good faith underpins labor relations in the Philippines. When employers fail to disclose material terms and conditions during hiring—especially critical aspects of compensation—they risk violating the fundamental principles of informed consent and mutuality of contracts. Although employment-at-will is not recognized in the Philippines (as it is in some other jurisdictions), the good faith of both parties plays a crucial role in the enforcement of employment terms. Non-disclosure of a salary-withholding policy, if it proves prejudicial to the employee, may be construed as a violation of good faith obligations and the duty to bargain fair terms.

Remedies and Potential Courses of Action for the Employee

Confront the Employer and Seek Clarification: Sometimes, the issue can be resolved through open communication. The employee may request a written explanation of the withholding policy and the legal basis for it.
Request Assistance from DOLE: If discussions with the employer fail, employees can file a request for assistance under the Single Entry Approach (SEnA) to attempt an amicable settlement.
File a Formal Complaint for Money Claims or Illegal Deductions: If the matter remains unresolved, the employee can bring the dispute before the DOLE or the NLRC, seeking reimbursement of any withheld wages.
Check for Constructive Dismissal: In extreme scenarios where the withholding of salary is so burdensome that it forces the employee to resign, the employee could consider filing a complaint for constructive dismissal. However, this requires proof that the employer’s conduct was tantamount to a dismissal, making continued employment unbearable.
Engage Professional Legal Counsel: To navigate the complexities of labor law, an employee may benefit from seeking personalized legal advice. A lawyer can provide tailored guidance, assess the facts of the case, and represent the employee in legal proceedings if necessary.

Repercussions for Employers

Employers found liable for labor standards violations can face administrative penalties, reputational damage, and exposure to monetary damages. Under Presidential Decree No. 442 (the Labor Code of the Philippines), DOLE is empowered to inspect establishments and issue compliance orders. Repeated or willful violation of wage-related regulations can lead to more severe penalties.

Importance of Documenting Everything

Both employers and employees should maintain thorough records of all dealings in the employment relationship. Written agreements, policy manuals, pay slips, and communications serve as evidence to either substantiate or refute claims about withheld salaries. Proper documentation often proves decisive in determining the outcome of a labor dispute.

Future Implications and Best Practices

Moving forward, employers are encouraged to develop clear, written policies on payroll procedures, ensuring that these are properly disclosed to employees during onboarding. If a withholding mechanism is utilized—such as a retention of a small portion of salary for security or performance purposes—it must be included as part of the employment contract or in a supplemental agreement that the employee freely consents to. Employees, for their part, should carefully review all contracts and policy documents and ask clarifying questions before signing.

Conclusion and Recommendations

The withholding of an employee’s salary based on a so-called “company policy” that was never disclosed during contract signing or HR orientation raises serious legal concerns under Philippine labor law. The Labor Code mandates timely payment of wages, bars unauthorized deductions, and requires that any alteration to an employee’s terms of compensation be grounded in valid, voluntary agreements or statutory authority.

If an employee suspects that their salary is being withheld without a clear legal or contractual basis, they should first seek clarification from their employer in writing and document all relevant communications. If the employer refuses to rectify the situation, the employee can file a request for assistance at the DOLE or a formal labor complaint. Should administrative remedies fail, elevating the matter to the National Labor Relations Commission or even the courts may be warranted.

Ultimately, transparency, fairness, and strict compliance with the Labor Code are central to a harmonious employer-employee relationship. Employers are well-advised to disclose all compensation-related policies clearly and obtain the informed consent of employees, while employees should remain vigilant about their rights and promptly seek redress when those rights appear to be violated.

Disclaimer: This legal article is intended for general informational purposes only and does not constitute legal advice. For specific questions or concerns regarding your situation, it is best to consult directly with a qualified legal professional in the Philippines.