Dear Attorney,
I’m running a small start-up business, and we've been struggling due to low sales for several months. Is it legally acceptable to pay our employees based on daily sales, considering the difficult financial situation? We’ve been using most of the sales to replenish inventory and pay wages, but we’re having trouble maintaining cash flow. I’d appreciate your advice on this matter.
Sincerely,
A Concerned Business Owner
Insights
Under Philippine labor law, employers must comply with specific rules regarding the payment of wages, as outlined in the Labor Code of the Philippines. Generally, wages must be paid in full, regularly, and not less than the minimum wage prescribed by law. Any agreement to pay employees on a commission or sales-based system must adhere to certain regulations, especially if it results in the employees receiving less than the mandated minimum wage.
Minimum Wage Law
According to Article 99 of the Labor Code, no employer can pay below the legal minimum wage rates. The minimum wage rates vary depending on the region, industry, and employee classification. Any arrangement that results in paying workers less than the regional wage orders is considered a violation, regardless of the business’s financial situation.
Payment of Wages in Non-Cash Forms
Article 102 of the Labor Code explicitly states that wages should be paid in legal tender and not by means of promissory notes, vouchers, or other similar instruments. While commission-based arrangements are allowed in specific industries (such as sales), they should not replace the payment of wages and must be supplemental. The employer must still ensure that employees are receiving their full wages on time and in compliance with the law.
Emergency Financial Situations
There are no explicit provisions in the Labor Code allowing an employer to reduce or delay payments to employees based on financial struggles. Employees are protected under the Security of Tenure rule, and any reduction in wages could be grounds for filing complaints with the Department of Labor and Employment (DOLE). Employers facing financial difficulties should consider options such as business restructuring or temporary suspension of operations (Article 301), which allows an employer to temporarily halt operations without terminating employees, provided that DOLE is informed and procedures are followed.
Alternative Solutions
Employers in a difficult financial position may explore options like voluntary employee salary adjustments, but only with the consent of the employees and within legal limits. This may involve reducing work hours or other temporary measures allowed under the Labor Code, so long as they comply with DOLE regulations and the proper notifications are made.
In conclusion, while businesses may experience financial hardships, wage payment regulations in the Philippines are strictly enforced. Employers must ensure full compliance with minimum wage laws and payment schedules to avoid legal ramifications. Seeking legal counsel and consulting with DOLE for approved measures to handle financial difficulties is advisable.