Dear Attorney,
I hope you can assist me. My previous employer has not paid my salary, 13th-month pay, incentive, and insurance benefits. I am seeking your legal advice on whether they are legally allowed to withhold my salary and benefits.
—Concerned Employee
Insights
Employee’s Right to Unpaid Salary, 13th-Month Pay, and Benefits in the Philippines
Under Philippine law, employees are entitled to receive compensation for services rendered, including statutory benefits such as the 13th-month pay. Non-payment of wages, benefits, or withholding of such payments without lawful justification constitutes a violation of the Labor Code of the Philippines.
1. Right to Salary and Payment for Work Rendered
The basic right to compensation is enshrined in Article 94 of the Labor Code, which mandates that wages must be paid in full on or before the agreed pay period. An employer cannot arbitrarily withhold the salary of an employee, as the right to payment is a fundamental obligation in the employment relationship.
Exceptions to Salary Withholding
Employers are allowed to withhold wages only under certain conditions:
- Authorized deductions such as income tax, Social Security System (SSS) contributions, Pag-IBIG, and PhilHealth.
- Court-ordered deductions as in the case of garnishment or legal claims.
Even if there is a disciplinary issue with the employee, employers cannot withhold wages as a form of penalty without legal grounds or following due process.
2. 13th-Month Pay
The 13th-Month Pay Law, or Presidential Decree No. 851, requires all employers to pay their rank-and-file employees 13th-month pay, regardless of the nature of their employment or the amount of their salary. Failure to provide this mandatory benefit is a violation of law and can lead to a legal claim against the employer.
- Who is entitled? All rank-and-file employees, provided they have worked for at least one month during the calendar year, are entitled to the 13th-month pay.
- When should it be paid? The payment of the 13th-month pay must be made on or before December 24 of each year.
3. Incentives and Insurance
While not all employees are automatically entitled to incentives or insurance under the law, it depends on what has been agreed upon in the employment contract or company policy. If these benefits were offered as part of the compensation package, withholding them would also violate contractual obligations.
A. Incentives
Incentive schemes are typically discretionary but, once committed to by the employer through a contract or company policy, they become enforceable rights. If the employer promised incentives, they are obligated to fulfill that promise unless justified otherwise.
B. Insurance
If the employer included insurance coverage as part of the employment benefits, then this too must be honored. Any failure to secure insurance, if agreed upon, could lead to a breach of contract.
4. Legal Remedies for Unpaid Wages and Benefits
When an employer fails to pay the salary or benefits, an employee has several legal recourses:
A. Filing a Complaint with the Department of Labor and Employment (DOLE)
An employee can file a complaint with the DOLE for unpaid wages, 13th-month pay, incentives, or benefits. The Labor Standards Division typically handles these complaints, especially when the employee has been terminated or is no longer with the company.
B. Filing a Case in the National Labor Relations Commission (NLRC)
If the issue is unresolved at DOLE, the employee may escalate the matter by filing a case for illegal withholding of wages or other money claims before the NLRC. The employee may also claim damages for moral and exemplary damages depending on the circumstances.
C. Small Claims Court
For claims involving minor amounts (below the threshold set by law), an employee can file a case in the Small Claims Court without the need for legal representation. This is particularly helpful in speeding up the resolution of the issue.
D. Criminal Action
While rare, the non-payment of wages could potentially lead to criminal charges under Republic Act No. 8188, which penalizes the non-payment of lawful wages. Employers found guilty may face fines and imprisonment for their non-compliance with labor standards.
5. Prescriptive Period for Filing Claims
Under Article 291 of the Labor Code, money claims arising from employer-employee relationships must be filed within three years from the time the cause of action accrued. This means employees have three years to file a claim for unpaid wages, 13th-month pay, or other benefits.
6. Penalties for Employers
Employers who fail to pay wages and benefits can face severe penalties. Under Republic Act No. 6727, employers must pay the unpaid wages, along with potential penalties and interest, as determined by the court. Continuous non-compliance can lead to the suspension or revocation of business permits and licenses.
Conclusion
Employees in the Philippines are entitled to their full salary, including the mandatory 13th-month pay, as well as any other benefits agreed upon with their employer. Withholding wages or benefits without a valid reason is against Philippine labor laws and can result in legal action. Employees who experience such issues can seek remedies through the DOLE, NLRC, or Small Claims Court, depending on the complexity and size of the claim. Employers must act responsibly and comply with the Labor Code to avoid legal consequences.