Letter from a Concerned Employee:

Dear Attorney,

I have been working for the same employer for several years now, and I have reached a point where I consider myself well-versed in our company’s operations. Recently, I noticed that some of our newer hires—who are considered casual employees—appear to be receiving the same wage rate as those of us who have been with the organization for five years or more and have attained regular status. I am a bit confused and concerned about this situation. Is this scenario legally permissible under Philippine labor laws? Shouldn’t longer-tenured, regular employees be entitled to a higher rate or better compensation package compared to newer, casual hires?

I would deeply appreciate any guidance or clarification you can provide. Thank you for taking the time to consider my inquiry.

Sincerely,
A Dedicated Worker

Legal Article: A Comprehensive Analysis of Wage Parity Between Casual and Long-Term Regular Employees Under Philippine Labor Law

As the best lawyer in the Philippines, I will meticulously dissect the issue raised regarding the apparent parity of wages between newly hired casual employees and longer-tenured, regular employees who have served for five years or more. This analysis will rest upon the key principles found in the Labor Code of the Philippines, the relevant rules and regulations issued by the Department of Labor and Employment (DOLE), pertinent jurisprudence of the Supreme Court, as well as the broader notions of fairness, non-discrimination, and equitable treatment that underscore the Philippine legal framework on employment.

1. Defining the Concepts: Casual vs. Regular Employment

Under Philippine law, employees are generally classified either as “regular” or “non-regular” (which may include “casual,” “project-based,” “seasonal,” or “fixed-term” employees). The Labor Code of the Philippines, specifically Book VI, Title I, Chapter III, establishes the criteria that define regular employment. An employee who has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer is considered a regular employee after a certain period—commonly after the probationary period, which should not exceed six months.

A “casual” employee, on the other hand, is one who is engaged to perform work which is not usually necessary or desirable to the usual business of the employer. In practice, however, many employers often use the term “casual” loosely to refer to employees who may be newly hired or not yet regularized. Strictly speaking, if the tasks performed are integral to the business, and the employee has been continuously employed beyond the allowable probationary period without an extension justified by law, that employee should already be deemed regular, regardless of whether the employer labels them as casual.

2. The Principle of Non-Discrimination and Equal Treatment

Philippine labor law emphasizes fairness and non-discrimination. Article 3 of the Labor Code declares that the State shall afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate employer-employee relations. While this principle does not automatically guarantee that a regular employee of five years’ service must be paid more than a newly hired casual employee, it does promote an environment where arbitrary differences in pay without a legal or rational basis could be challenged.

Additionally, the 1987 Constitution of the Philippines supports the principle of social justice in all phases of national development and mandates the protection of the rights of workers and the promotion of their welfare. This may not directly translate to a statutory right to wage increases purely on the basis of tenure, but it forms the backdrop against which laws and regulations are interpreted.

3. Wages, Wage Rates, and Freedom of Management Prerogative

The setting of wage rates in a private company is generally considered a matter of management prerogative, subject to compliance with minimum wage laws and non-discrimination principles. Employers are free to set pay scales, salary structures, and job levels as long as these comply with the minimum wage set by the regional wage boards, and they do not discriminate on grounds prohibited by law (such as gender, race, or religion). This principle of management prerogative also means that an employer may choose to start new hires at a certain rate, even if that rate is identical or close to what existing employees—whether regular or casual—are receiving.

There is no explicit provision in the Labor Code that requires employers to automatically increase the wages of employees simply because they have achieved regular status or because they have remained with the company for a certain number of years. While many companies do provide merit-based increases, seniority increments, or longevity pay to reward loyalty, experience, and skill, these are often a matter of company policy, collective bargaining agreement (CBA) stipulations, or voluntary employer practice rather than a direct statutory mandate.

4. Minimum Wage Laws and Regional Wage Boards

All employers in the Philippines are mandated to pay at least the applicable minimum wage as determined by Regional Tripartite Wages and Productivity Boards (RTWPBs) per region. These boards issue Wage Orders specifying the minimum wage in their respective jurisdictions. The minimum wage serves as the floor, ensuring that both casual and regular employees are not compensated below that standard.

If a company decides to peg a casual employee’s wage at exactly the same rate as that of a five-year regular employee, and if both meet or exceed the prevailing minimum wage, this practice, in and of itself, is not unlawful. The decision may raise internal employee morale issues or fairness concerns from a human resource perspective, but not necessarily a legal violation, unless it can be shown that the wage structure discriminates on impermissible grounds.

5. Seniority and Tenure-Based Pay Increases

In many workplaces, employers voluntarily adopt pay structures that reward employees based on length of service, accumulated experience, and proven competence over time. Such seniority-based pay policies may be documented in a company’s Employee Handbook, HR guidelines, or internal policies. When a labor union is present, such increments may be stipulated in the Collective Bargaining Agreement (CBA), ensuring that employees who have reached certain milestones in service gain entitlements to higher wages or additional benefits.

If a CBA exists and provides for incremental wage increases or other incentives as employees reach certain seniority milestones, the employer must comply with that agreement. Failure to do so would constitute a breach of contract and could lead to grievances, labor cases, or other legal actions.

However, if no such agreement or internal policy exists—i.e., if the wage determination process does not incorporate tenure as a deciding factor—then the employer is not legally bound to differentiate wages based solely on length of service. Regular employees, despite their longer tenure, may find their wage rate close to or identical with the rates given to newly hired casual employees.

6. Job Classification and Pay Scales

The concept of “equal pay for equal work” is often invoked to argue that employees performing the same job functions with similar qualifications, skill sets, and responsibilities should receive similar compensation. The legal backdrop in the Philippines recognizes the principle of fairness but does not rigidly mandate uniformity if there are reasonable distinctions.

For instance, consider the possibility that a newly hired casual employee possesses specialized skills, industry certifications, or educational qualifications that match or exceed those of a five-year regular employee. If the employer sets a pay scale based on skill level and job requirements rather than seniority, both employees could lawfully earn the same wage, provided it complies with minimum wage laws and is not a form of prohibited discrimination.

Conversely, if an employer were to provide different wage rates to employees who perform essentially the same tasks and hold the same qualifications, but discriminate based on gender, religious affiliation, or any other unlawful criterion, this would run afoul of labor laws. However, paying equal wages to a newly hired casual and a long-tenured regular employee is typically not an unlawful act. It might be considered unusual or disappointing from the perspective of the more senior employee, but it is not inherently illegal.

7. The Role of Jurisprudence and DOLE Regulations

Philippine jurisprudence on wage discrimination and pay parity commonly revolves around issues of illegal dismissal, regularization, and minimum wage compliance, as well as discrimination based on protected attributes. There is less case law specifically stating that tenure alone mandates wage differentials. The Supreme Court often defers to the principle that, absent a contractual stipulation or collective bargaining requirement, employers have discretion over their wage structures, subject to complying with labor standards and non-discriminatory practices.

Likewise, DOLE regulations and advisories emphasize compliance with minimum wage laws, overtime pay, holiday pay, and other labor standards. DOLE does not generally prescribe detailed pay structures beyond these fundamental labor standards. Employers thus have broad flexibility in designing pay scales, as long as these do not violate the basic tenets of labor law.

8. Understanding the Concept of “Wage Distortion”

A related concept worth discussing is “wage distortion.” Wage distortion occurs when modifications to minimum wages or other pay adjustments create a situation where the gap between pay levels of different job categories narrows or disappears, undermining previously established hierarchies or pay scales. In such cases—commonly arising when minimum wage rates are increased by law—employers and employees (often through their union representatives) are encouraged to negotiate adjustments to correct the distortion. This process is guided by the principle that while the law can raise the floor, the employer and union must maintain reasonable differentials that reflect job worth, responsibility, and seniority.

However, if there is no recognized wage distortion scenario—for instance, if the employer’s pay structure has always been flat or if the employer has chosen to pay everyone at a similar rate—then the concept of wage distortion would not necessarily apply. Wage distortion claims often arise from external changes in legal wage requirements, not merely from dissatisfaction that a newly hired employee earns the same wage as a long-tenured regular employee.

9. The Importance of Communication and Good Labor-Management Relations

While the strict legal perspective may not require differentiation in pay based solely on tenure, it is good practice for employers to communicate effectively with their workforce. Transparency about compensation policies, criteria for wage increases, and the rationale behind pay structures helps maintain good labor-management relations. Employees who feel valued and understand how their compensation is determined are generally more satisfied and productive.

If a regular employee believes they should be paid more than a casual employee due to their loyalty, experience, and contributions, they may raise the matter through the company’s internal grievance machinery. If the company has a union, bringing the issue to the union and potentially addressing it through collective bargaining may yield results. Ultimately, while Philippine law sets minimum standards, it often encourages resolution of pay-related disputes through amicable discussions, negotiations, or collective bargaining.

10. Remedies and Avenues for Recourse

If a regular employee believes that the employer’s pay structure violates the law—for example, if it does not comply with minimum wage orders or it constitutes a form of prohibited discrimination—they may seek recourse from DOLE by filing a complaint. DOLE may conduct inspections or mediations to determine if the employer is violating labor standards. Employees may also consider filing a case before the National Labor Relations Commission (NLRC) if they believe that their statutory rights have been infringed.

However, if the crux of the complaint is simply that the employee feels deserving of higher pay than a casual employee due to tenure, without any legal violation, this may not constitute a successful legal claim. It may instead be a matter for internal negotiation, performance evaluation, or labor-management dialogue.

11. Voluntary Benefits, Performance-Based Pay, and Professional Growth

Some employers opt to differentiate long-term regular employees from casual or newly hired employees by providing additional benefits rather than strictly higher base wages. For example, a long-tenured regular employee might receive better healthcare benefits, a retirement plan, additional leave credits, performance bonuses, hazard pay (if applicable), or opportunities for promotion that casual employees typically do not receive. While not mandated by law, these voluntary benefits create a practical distinction that acknowledges tenure and loyalty without necessarily altering the base pay rate.

Merit-based or performance-based pay increases also serve as a way to reward employees who have demonstrated superior performance or gained valuable experience over the years. By linking wage increases to performance rather than mere length of service, employers can maintain equal starting wages for newcomers and experienced employees, while still providing pathways for advancement and higher compensation to those who excel in their roles.

12. The Bottom Line: Legality vs. Perceived Fairness

In conclusion, the legality of having identical wage rates for casual and five-year regular employees depends largely on compliance with labor standards and the absence of discrimination. Philippine labor law does not explicitly mandate that longer-tenured employees must always receive higher pay than newer hires. The key legal requirements are:

Compliance with the minimum wage law.
Adherence to all applicable labor standards (overtime pay, holiday pay, 13th month pay, etc.).
Absence of unlawful discrimination based on protected criteria.
Compliance with any relevant CBA or contractual provisions.

If these conditions are met, the employer typically has the prerogative to set wages as it sees fit. Thus, pay parity between a casual employee and a long-term regular employee is not per se illegal. From a purely legal standpoint, it may be entirely permissible. From an employee relations perspective, however, it may be viewed as demoralizing or unfair if no reason is provided to the workforce. Employers aiming to maintain a stable and motivated workforce often find it in their best interest to recognize tenure and experience, even if not strictly required by law.

13. Practical Recommendations

For employees concerned about wage parity:

Review the company handbook, employment contract, or CBA for any provision on wage increases or tenure-based benefits.
Seek clarification from the human resources department.
If represented by a union, consider discussing the matter with union representatives to explore avenues for negotiation.

For employers:

Ensure transparency about how wages are determined.
Consider acknowledging seniority through benefits, bonuses, or career development opportunities.
Maintain open communication with employees to address concerns before they escalate into disputes.

Ultimately, while Philippine law strongly protects worker rights and promotes fairness, it does not strictly dictate that a worker with five years of service must receive a higher wage than a newly hired casual employee. Provided minimum wage and other standards are met, management prerogative plays a significant role in compensation decisions. The ideal scenario is one where legal compliance, fair labor practices, and sound human resource policies align to foster a positive, productive work environment.