Delayed Salary Increase under Local Wage Orders in the Philippines

Apr 6

Below is an in-depth discussion of the legal framework, key considerations, and practical implications concerning delayed salary increases under local wage orders in the Philippines. This article addresses the pertinent laws and regulations, the role of government agencies, timelines and procedures, and employer-employee remedies and liabilities. The aim is to provide a comprehensive look into why and how wage increases can be delayed, what the law says about delayed compliance, and what both employers and employees in the Philippines should keep in mind.

1. Overview of the Philippine Minimum Wage Framework

1.1 Constitutional Mandate

The 1987 Philippine Constitution enshrines the policy of providing for a “living wage” and promoting social justice in all phases of national development. This is the fundamental basis for instituting minimum wage mechanisms that protect workers from unreasonably low compensation.

1.2 Labor Code Provisions

The primary law governing employment terms—including wages—in the Philippines is the Labor Code of the Philippines (Presidential Decree No. 442, as amended). Under the Labor Code, workers are entitled to receive at least the minimum wage prescribed by law or wage orders.

Article 99: Mandates that all workers shall be paid not less than the minimum wage rates prescribed by regional wage orders.
Article 127: Grants authority to government agencies to periodically adjust the wage rates.

1.3 The Regional Wage Boards

The power to fix and revise minimum wage rates is vested in the Regional Tripartite Wages and Productivity Boards (RTWPBs). Each region in the Philippines has its own wage board that conducts public hearings and consults with various stakeholders—labor, management, and government—to issue wage orders.

National Wages and Productivity Commission (NWPC): Supervises and reviews the activities of the RTWPBs.

Local wage orders are the instrument through which the RTWPBs periodically adjust the minimum wage in their respective regions. Because economic conditions vary from region to region, wage rates are set regionally rather than through a single nationwide standard.

2. Issuance and Effectivity of Local Wage Orders

2.1 Public Hearings and Consultations

Before any wage order is issued, the RTWPB is mandated to conduct public hearings or consultations where stakeholders can present their positions. Factors such as inflation rate, cost of living, the needs of workers and their families, and the capacity of business to absorb wage increases are considered.

2.2 Publication Requirement

Once a wage order is approved by the RTWPB, it must be published in at least one newspaper of general circulation in the region. As a rule, the wage order takes effect 15 days after its publication unless the order specifies another date.

2.3 Coverage

A wage order typically covers all private-sector employees in the region, regardless of the type of employment (e.g., regular, probationary, contractual). However, certain categories of employers or employees may be exempted or granted deferments (for example, distressed establishments or certain micro-enterprises), subject to specific guidelines.

3. Understanding Delayed Salary Increases: Reasons and Mechanisms

3.1 Reasons for Delays

Late Release of the Wage Order: If the wage board’s processes (hearings, evaluations) take a long time, the eventual date of effectivity might be later than initially expected.
Administrative or Financial Constraints: Employers, particularly smaller businesses or distressed establishments, sometimes struggle to immediately comply with the new wage rates.
Exemptions or Deferments: The wage board may grant exemptions or defer implementation for specific categories of businesses if they meet the criteria for financial distress or other conditions spelled out in the wage order.

3.2 Deferment vs. Non-Compliance

Deferment: Official permission granted by the RTWPB to delay full compliance with a wage order. Employers must apply for deferment following the procedures specified in the wage order or by the RTWPB.
Non-Compliance: Failure to comply with the wage increase without seeking or securing any lawful exemption or deferment. This is typically considered a labor law violation.

4. Legal Basis for the Timely Implementation of Wage Orders

4.1 Labor Code and NWPC Guidelines

The Labor Code, in tandem with NWPC Guidelines No. 01, Series of 2007 (or subsequent guidelines), outlines that wage increases must be effective from the date indicated in the wage order. Thus, compliance is not optional: once the wage order is effective, covered employers are obliged to adjust their workers’ pay accordingly.

4.2 Retroactivity Principle

Most wage orders explicitly state that if wages are not adjusted on the date the wage order takes effect, the employer must retroactively pay the difference to the affected employees. This means that workers should receive back pay for any shortfalls if their employer delays the salary increase.

5. Valid Exemptions and Extensions

5.1 Criteria for Exemptions

Wage orders or their accompanying implementing rules may identify categories of establishments eligible for partial or total exemption from coverage. Common grounds include:

Distressed Establishments: Those operating under financial losses or bankruptcy proceedings.
New Business Enterprises: Under specific conditions and timeframes set by the wage board.
Retail/Service Establishments Employing Not More Than a Certain Number of Workers: Depending on the regional wage order’s guidelines.

5.2 Procedure for Exemption

An employer must file an application for exemption or deferment with the concerned RTWPB within the timeline set in the wage order (often within 75 days from the order’s publication). The employer must present sufficient evidence—such as audited financial statements—to prove the need for exemption or deferment.

5.3 Effect of Approval

If the RTWPB approves the exemption, the employer is relieved from implementing the wage increase for the specified period. If a partial exemption is granted, the employer may be allowed a staggered payment scheme or a reduced rate of increase for that exemption period.

6. Consequences of Delayed Salary Increases Without Authorization

6.1 Administrative Liability

Failing to implement the mandated wage increase after the effectivity date, without a valid exemption or deferment, opens the employer to administrative sanctions. The Department of Labor and Employment (DOLE) may conduct inspections and issue compliance orders.

6.2 Civil Liability and Money Claims

Employees who are underpaid because of delayed or non-implemented wage increases are entitled to claim the wage differentials, including any applicable interest. In cases of disputes, employees can file a money claim before the labor arbiters of the National Labor Relations Commission (NLRC).

6.3 Criminal Liability

Under certain aggravating circumstances, willful refusal to pay minimum wage or mandated benefits may be deemed a criminal offense. The Labor Code provides penalties such as fines and imprisonment for repeated or willful violations.

7. Enforcing Wage Orders and Seeking Redress

7.1 Department of Labor and Employment (DOLE) Inspection

DOLE conducts regular and spot inspections to ensure compliance with labor laws, including wage orders. Employers who are found deficient in implementing the correct wage rates can be directed to pay their workers’ back wages immediately.

7.2 Filing of Complaints with the DOLE or NLRC

Employees may file complaints if they do not receive the mandated wage increase. The labor arbiter or DOLE hearing officer can order the employer to:

Pay the amount of wage differentials plus other benefits owed.
Comply with wage orders moving forward.

7.3 Compromise Agreements

In some cases, an employer may negotiate a compromise agreement with employees to settle wage differentials. However, compromise agreements cannot set the wages below the statutory or minimum levels prescribed by law. Furthermore, the employees’ right to the minimum wage is generally non-waivable.

8. Practical Considerations for Employers

Audit and Forecasting
Employers should carefully review regional wage orders and ensure their payroll systems are updated before the order’s effectivity. Proper financial forecasting helps mitigate the risk of delayed implementation.
Documentation
Maintain organized documentation, including proof of published wage orders, payroll records, and notices of wage adjustments. This helps in case of an audit or complaint.
Legal and Accounting Advice
Consulting with labor law specialists or accountants can help businesses determine whether they qualify for exemptions or need to apply for any deferment. Prompt application is crucial, as missed deadlines often result in full liability.

9. Practical Considerations for Employees

Knowing the Wage Order
Employees should keep track of the wage orders in their region. These are usually posted on DOLE or NWPC websites, as well as in newspapers of general circulation.
Reviewing Payroll Statements
Check payslips and compute daily/hourly rates in relation to the updated wage orders. If you notice underpayment, raise the matter with HR or management.
Filing a Complaint
If the employer refuses to comply or if there is a significant delay, employees may seek advice from the DOLE or file a formal complaint at the DOLE regional office or the NLRC.

10. Timelines and Retroactivity

Once a local wage order has been published, the 15-day (or as specified) countdown to effectivity begins. Employers are expected to implement the new rates on the order’s effectivity date:

Effective Date: The date stated in the wage order (often 15 days after publication).
Retroactive Pay: If, for any reason, the employer fails to implement on the effective date, the employees are still entitled to the difference, computed from the effective date.
Grace Periods or Exceptions: Only valid if the RTWPB has expressly granted an exemption or deferment. Lacking such an approval, an employer cannot unilaterally delay the wage adjustment.

11. Penalties for Violation

The Labor Code prescribes both administrative and criminal penalties, subject to the circumstances of the violation. DOLE may levy fines or issue compliance orders; continued refusal to comply can elevate the case to the courts or result in more severe sanctions. The Labor Code provides that violators may be penalized with a fine and, in some instances, imprisonment of company officials for repeated or willful failure to pay mandated wages.

12. Conclusion

Delayed salary increases under local wage orders in the Philippines often arise from either an employer’s financial or administrative challenges, or from a lack of clarity about the relevant procedures for exemptions and deferments. However, the fundamental principle in Philippine labor law remains that once a wage order is in effect, covered employers must comply—and any delay typically opens them to back wages, penalties, and possible liability.

To mitigate the risk of violations and disputes:

Employers should promptly review wage orders, update their payroll systems, and consider applying for exemptions or deferments if they legitimately qualify under RTWPB guidelines.
Employees should stay informed of new wage orders, check their payslips regularly, and promptly raise any concerns about potential underpayments.

The government, through the DOLE and NWPC/RTWPBs, is empowered to enforce local wage orders and penalize non-compliance. Ultimately, compliance with local wage orders is not only a legal responsibility but also a step toward ensuring fair labor practices and promoting industrial peace in the Philippines.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

Harold Respicio