Dear Attorney,
I recently received the final pay computation from my former employer, and I was surprised to see that the amount was negative. Not only do I not receive anything, but I’m also expected to pay back over Php 3,000. They deducted all my incentives and bonus, including my 13th-month pay. I want to ask if this is legal. Can an employer deduct from my 13th-month pay like this? What steps can I take to address this situation?
Sincerely, A Concerned Employee
Insights
In the Philippines, deductions from an employee’s pay are regulated by the Labor Code and related laws. Understanding the legality of these deductions, particularly in relation to the 13th-month pay, is crucial.
1. 13th-Month Pay is Protected by Law
Under Presidential Decree No. 851, all rank-and-file employees in the private sector are entitled to receive a 13th-month pay. This is a mandatory benefit and should not be subject to arbitrary deductions. While some deductions, such as government-mandated contributions (e.g., SSS, PhilHealth, and Pag-IBIG) or taxes, are allowable, any other forms of deductions, especially those that result in a negative balance, are generally prohibited.
2. Unauthorized Deductions
The law prohibits employers from making deductions from an employee's wages without the employee's written consent. Specific exceptions may apply, such as deductions for loans, or court-ordered payments, but these are clearly defined under Article 113 of the Labor Code. Employers cannot unilaterally deduct amounts owed to them by the employee from the 13th-month pay or other legally mandated benefits, especially without explicit written authorization.
3. Final Pay Computation and Offsetting Debts
In situations where an employee is alleged to owe the company money (such as unpaid loans or advances), the employer can negotiate repayment. However, even in such cases, deductions from the 13th-month pay are not automatically allowed. The practice of offsetting company debts against the employee’s final pay is legal only if it adheres to specific conditions, such as obtaining the employee's consent or through a court ruling. Deductions that are not properly documented or authorized can be challenged.
4. Remedies for Employees
If your employer has wrongfully deducted amounts from your 13th-month pay, including bonuses or other entitlements, you may file a complaint with the Department of Labor and Employment (DOLE). This will allow you to clarify whether these deductions were legal and, if found unlawful, recover the amounts deducted.
You may also file a claim for illegal deductions if no proper procedure was followed. In such cases, you can request DOLE’s assistance in facilitating the recovery of your full final pay. DOLE mediates disputes between employees and employers, and it may provide you with a speedy resolution without having to go through the courts.
In summary, deductions from your final pay, particularly your 13th-month pay, must follow strict legal guidelines. If you believe that the deductions were improper, you can challenge these through the appropriate channels.