wage distortion and 13th month pay

PRESIDENTIAL DECREE NO. 851 

RULES AND REGULATIONS IMPLEMENTINGPRESIDENTIAL DECREE NO. 851

   By virtue of the powers vested in me by law, the following rules and regulations implementing Presidential Decree No. 851 are hereby issued for the guidance of all concerned. 

Section 1. Payment of 13th-month Pay. - All employers covered byPresidential Decree No. 851, hereinafter referred to as the "Decree" , shall pay to all their employees receiving a basic salary of not more than P1,000 a month a thirteenth-month pay not later than December 24 of every year. 

Sec. 2. Definition of certain terms. - As used in this issuance:chanroblesvirtuallawlibrary

(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year; 

(b) "Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.Sec. 3. Employers covered. - The Decree shall apply to all employers except to:chanroblesvirtuallawlibrary

(a) Distressed employers, such as (1) those which are currently incurring substantial losses or (2) in the case of non-profit institutions and organizations, where their income, whether from donations, contributions, grants and other earnings from any source, has consistently declined by more than forty (40%) percent of their normal income for the last two (2) years, subject to the provision of Section 7 of this issuance; 

(b) The Government and any of its political subdivisions, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the Government; 

(c) Employers already paying their employees 13-month pay or more

in a calendar year or its equivalent at the time of this issuance; 

(d) Employers of household helpers and persons in the personal service of another in relation to such workers; and 

(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned.As used herein, workers paid on piece-rate basis shall refer to those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same. 

The term "its equivalent" as used in paragraph c) hereof shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less than 1/12th of the employees basic salary, the employer shall pay the difference. 

Sec. 4. Employees covered. - Except as provided in Section 3 of this issuance, all employees of covered employers shall be entitled to benefit provided under the Decree who are receiving not more than P1,000 a month, regardless of their position, designation or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one month during the calendar year. 

Sec. 5. Option of covered employers. - A covered employer may pay one-half of the 13th-month pay required by the Decree before the opening of the regular school year and the other half on or before the 24th day of December of every year. 

In any establishment where a union has been recognized or certified as the collective bargaining agent of the employees therein, the periodicity or frequency of payment of the 13th-month pay may be the subject of agreement. 

Nothing herein shall prevent employers from giving the benefits provided in the Decree to their employees who are receiving more than One Thousand (P1,000) Pesos a month or benefits higher than those provided by the Decree. 

Sec. 6. Special feature of benefit. - The benefits granted under this issuance shall not be credited as part of the regular wage of the employees for purposes of determining overtime and premium pay, fringe benefits, as well as premium contributions to the State Insurance Fund, social security, medicare and private welfare and retirement plans. 

Sec. 7. Exemption of Distressed employers. - Distressed employers shall qualify for exemption from the requirement of the Decree upon prior authorization by the Secretary of Labor. Petitions for exemptions may be filed within the nearest regional office having jurisdiction over the employer not later than January 15, 1976. The regional offices shall transmit the petitions to the Secretary of Labor within 24 hours from receipt thereof. 

Sec. 8. Report of compliance. - Every covered employer shall make a report of his compliance with the Decree to the nearest regional labor office not later than January 15 of each year. 

The report shall conform substantially with the following form: chanroblesvirtuallawlibrary

REPORT ON COMPLIANCE WITH P.D. NO. 8511. Name of establishment 2. Address 3. Principal product or business 4. Total employment 5. Total number of workers benefited 6. Amount granted per employee 7. Total amount of benefits granted 8. Name, position and tel. no. of person giving informationSec. 9. Adjudication of claims. - Non-payment of the thirteenth-month pay provided by the Decree and these rules shall be treated as money claims cases and shall be processed in accordance with the Rules Implementing the Labor Code of the Philippines and the Rules of the National Labor Relations Commission. 

Sec. 10. Prohibition against reduction or elimination of benefits. - Nothing herein shall be construed to authorize any employer to eliminate, or diminish in any way, supplements, or

other employee benefits or favorable practice being enjoyed by the employee at the time of promulgation of this issuance. 

Sec. 11. Transitory Provision. - These rules and regulations shall take effect immediately and for purposes of the 13th-month pay for 1975, the same shall apply only to those who are employees as of December 16, 1975. 

Manila, Philippines, 22 December 1975.

Presidential Decree No. 851 (otherwise known as Thirteenth Month Pay Law), as

amended by Memorandum Order No. 28, requires all employers to pay their employees a

13th month pay not later than December 24 of every year.

Historical Backdrop.

Originally, when PD 851, issued by Pres. Marcos, took effect on December 16, 1975, only

employees receiving a basic salary of not more than P1,000 a month were entitled to 13th

pay.

On August 13, 1986, Pres. Aquino, through Memorandum Order No. 28, removed the salary

ceiling of P1,000. With the removal of the salary ceiling, all rank and file employees become

entitled to a 13th month pay regardless of the amount of their monthly basic salary (unless

their employers are exempted from the application of PD 851).

Employees Covered by 13th Month Pay Law.

All rank-and-file employees, regardless of their designation or employment status, and

irrespective of the method by which their wages are paid, who have worked at least one

month during the calendar year are entitled to 13th month pay.

Rank and File Employees Meaning.

As stated above, only rank-and-file employees are entitled to 13th month pay. Managerial

employees are excluded from the coverage of the law.

The Labor Code distinguishes a rank-and-file employee from a managerial employee. It

provides that a managerial employee is one who is vested with powers of prerogatives to lay

down and execute management policies and/or to hire, transfer, suspend, lay-off, recall

discharge, assign or discipline employees, or to effectively recommend such managerial

actions.

All employees not falling within this definition are considered rank-and-file employees.

Amount of 13th Month Pay.

The 13th month pay shall be in the amount not less than 1/12 of the total basic

salary earned by the employee within the calendar year.

Computation

Only basic salary is included in the computation of 13th month pay. Allowances and

monetary benefits which are not considered or integrated as part of the regular or basic

salary, such as the cash equivalent of unused vacation and sick leave credits, overtime,

premium, night differential and holiday pay, and cost-of-living allowances, shall be excluded

from the computation.

However, these salary-related benefits should be included as part of the basic salary in the

computation of the 13th month pay if by individual or collective agreement, company

practice or policy, the same are treated as part of the basic salary of the employees.

Time of Payment of 13th Month Pay.

The required 13th month pay shall be paid not later than December 24 of each year. An employer, however, may give to his employees one half of the required 13th month

pay before the opening of the regular school year and the other half on before the 24th of

December of every year. The frequency of payment of this monetary benefit may be the

subject of agreement between the employer and the recognized/collective bargaining agent

of the employees.

Employees excluded from coverage of 13th month pay law.

1. Managerial employees;

2. Those covered under the civil service law;

3. Those already receiving 13th month pay or its equivalent. Christmas bonus, mid-year bonus,

cash bonuses and other payments amounting to not less than 1/12 of the basic salary are

treated as equivalent of 13th month pay;

4. Household helpers and persons in the personal service of another; and

5. Those paid on purely commission, boundary, or task basis, and those who are paid fixed

amount for performing specific work except those paid on a piece-rate basis.

13th Month Pay of Certain Types of Employees

Employees paid on commission basis.

Employees paid on a purely commission basis are not entitled to 13th month pay. They are

expressly excluded from the coverage of PD 851. However, employees paid on partly

commission basis, i.e., those guaranteed with a fixed wage aside from the commission, are

entitled to 13th month pay.

Computation. In the computation of the basic salary of employees paid partly on commission

basis, we must distinguish between the two types of commission:

1. Commission as an incentives or encouragement to ensure productivity, i.e., productivity

bonus; and

2. Commission as a direct remuneration for service rendered.

Commission that take the form of an incentives or encouragement to ensure productivity,

e.g., productivity bonus, does not form part of the basic salary. As such, it may be excluded

from the computation of 13th month pay. Only the fixed or guaranteed wage is required to be included in the computation (see Boie Takeka case, 1993.)Basic salary = Fixed wage (commission is excluded)

On the other hand, commission that takes the form of a direct remuneration for services

rendered should be included in the computation of the basic salary. That is, it should be

added to the guaranteed wage of the employee in computing his “basic salary” (see Philippine Duplicators v. NLRC, 1993.)

Basic salary = Fixed wage + Commission

13th Month Pay of Employees with Multiple Employers.

Employees with multiple employers are entitled to 13th month pay from all their private

employers.

Thus, if an employee works in two or more private firms, he is entitled to the pay from both

or all of them. If he is a government employee, but works part time in a private enterprise,

he is entitled to 13th month pay from the private enterprise.

13th Month Pay of Private School Teachers.

Private school teachers are entitled to 13th month pay regardless of the numbers of months

they work in a year, provided it is at least one month.

Payment of 13th Month Pay to Resigned or Separated Employees.

Employees who resigned or were separated during the calendar year shall be entitled to

13th month pay in proportion to the length of time he worked during the year, provided it is

at least one month.

The payment may be demanded by the employee upon the cessation of employment.

Example

1. Assuming an employee earning a basic salary of P12,000.00 per month had worked for at

least 9 months at the time of his separation, how much is his 13th month pay? Answer:

P9,000.00.

Computation: (P12,000.00 x 9 months) ÷ 12 = P9,000.00

Cases

1. For 2 to 3 years, Sevilla Trading, allegedly by mistake, added the night premium, maternity leavepay, etc., in the computation 13th month pay. The court ruled

that the inclusion may no longer be withdrawn if it has already ripened into a company

practice. Nota bene: There is no specific rule as to how many years are necessary to constitute “company practice”. (Sevilla Trading v. AVA Tomas, GR No. 152456.)

2. Employees paid according to “boundary” system are not entitled to 13th mo pay. Boundary

system is where the employees do not receive fixed wages, but retain only those sums in

excess of the “boundary” or fee they pay to the owners or operators of their vehicles. They are akin to employees paid on purely commission basis. (R&E Transport v. Latag, G.R. No. 155214.)

3. Drivers who are paid on commission basis, but with guaranteed minimum wage in case their commission be less than their basic minimum, are entitled to 13th month pay. (PACIWU v. NLRC, GR No 107994.)

References

1. Presidential Decree No. 851, effective December 16, 1975.

2. Revised Rules and Regulations Implementing Presidential Decree No. 8

Republic of the Philippines

Congress of the Philippines

Metro Manila

Second Regular Session

Begun and held in Metro Manila, on Monday, the twenty-

fifth day of July, nineteen hundred and eighty-eight

[REPUBLIC ACT NO. 6727]

AN ACT TO RATIONALIZE WAGE POLICY DETERMINATION BY ESTABLISHING THE MECHANISM

AND PROPER STANDARDS THEREFOR, AMENDING FOR THE PURPOSE ARTICLE 99 OF, AND

INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126 AND 127 INTO, PRESIDENTIAL DECREE

NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, FIXING

NEW WAGE RATES, PROVIDING WAGE INCENTIVES FOR INDUSTRIAL DISPERSAL TO THE

COUNTRYSIDE, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

     Sec. 1. This Act shall be known as the "Wage Rationalization Act."

    Sec. 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages and to

promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for

the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to

enhance employment generation in the countryside through industry dispersal; and to allow business and

industry reasonable returns on investment, expansion and growth.

    The State shall promote collective bargaining as the primary mode of setting wages and other terms

and conditions of employment; and, whenever necessary, the minimum wage rates shall be adjusted in a

fair and equitable manner, considering existing regional disparities in the cost of living and other socio-

economic factors and the national economic and social development plans.

    Sec. 3. In line with the declared policy under this Act, Article 99 of Presidential Decree No. 442, as

amended, is hereby amended and Articles 120, 121, 122, 123, 124, 126 and 127 are hereby incorporated

into Presidential Decree No. 442, as amended, to read as follows:

    "Art. 99. Regional Minimum Wages. - The minimum wage rates for agricultural and non-agricultural

employees and workers in each and every region of the country shall be those prescribed by the Regional

Tripartite Wages and Productivity Boards."

    "Art. 120. Creation of the National Wages and Productivity Commission. - There is hereby created a

National Wages and Productivity Commission, hereinafter referred to as the Commission, which shall be

attached to the Department of Labor and Employment (DOLE) for policy and program coordination."

    "Art. 121. Powers and Functions of the Commission. - The Commission shall have the following powers

and functions:

(a) To act as the national consultative and advisory body to the President of the Philippines and Congress

on matters relating to wages, incomes and productivity;

(b) To formulate policies and guidelines on wages, incomes and productivity improvement at the

enterprise, industry and national levels;

(c) To prescribe rules and guidelines for the determination of appropriate minimum wage and productivity

measures at the regional, provincial or industry levels;

(d) To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards to

determine if these are in accordance with prescribed guidelines and national development plans;

(e) To undertake studies, researches and surveys necessary for the attainment of its functions and

objectives, and to collect and compile data and periodically disseminate information on wages and

productivity and other related information, including, but not limited to, employment, cost-of-living, labor

costs, investments and returns;

(f) To review plans and programs of the Regional Tripartite Wages and Productivity Boards to determine

whether these are consistent with national development plans;

(g) To exercise technical and administrative supervision over the Regional Tripartite Wages and

Productivity Boards;

(h) To call, from time to time, a national tripartite conference of representatives of government, workers

and employers for the consideration of measures to promote wage rationalization and productivity; and

(i) To exercise such powers and functions as may be necessary to implement this Act.

    "The Commission shall be composed of the Secretary of Labor and Employment as ex-officio

chairman, the Director-General of the National Economic and Development Authority (NEDA) as ex-officio

vice-chairman, and two (2) members each from workers and employers sectors who shall be appointed

by the President of the Philippines upon recommendation of the Secretary of Labor and Employment to

be made on the basis of the list of nominees submitted by the workers and employers sectors,

respectively, and who shall serve for a term of five (5) years. The Executive Director of the Commission

Secretariat shall also be a member of the Commission."

    "The Commission shall be assisted by a Secretariat to be headed by an Executive Director and two (2)

Deputy Directors, who shall be appointed by the President of the Philippines, upon recommendation of

the Secretary of Labor and Employment."

    "The Executive Director shall have the same rank, salary, benefits and other emoluments as that of a

Department Assistant Secretary, while the Deputy Directors shall have the same rank, salary, benefits

and other emoluments as that of a Bureau Director. The members of the Commission representing labor

and management shall have the same rank, emoluments, allowances and other benefits as those

prescribed by law for labor and management representatives in the Employees' Compensation

Commission."

    "Art. 122. Creation of Regional Tripartite Wages and Productivity Boards. - There is hereby created

Regional Tripartite Wages and Productivity Boards, hereinafter referred to as Regional Boards, in all

regions, including autonomous regions as may be established by law. The Commission shall determine

the offices/headquarters of the respective Regional Boards.

    "The Regional Boards shall have the following powers and functions in their respective territorial

jurisdiction:

(a) To develop plans, programs and projects relative to wages, incomes and productivity improvement for

their respective regions;

(b) To determine and fix minimum wage rates applicable in their region, provinces or industries therein

and to issue the corresponding wage orders, subject to guidelines issued by the Commission;

(c) To undertake studies, researches, and surveys necessary for the attainment of their functions,

objectives and programs, and to collect and compile data on wages, incomes, productivity and other

related information and periodically disseminate the same;

(d) To coordinate with the other Regional Boards as may be necessary to attain the policy and intention of

this Code;

(e) To receive, process and act on applications for exemption from prescribed wage rates as may be

provided by law or any Wage Order; and

(f) To exercise such other powers and functions as may be necessary to carry out their mandate under

this Code.

    "Implementation of the plans, programs and projects of the Regional Boards referred to in the second

paragraph, letter (a) of this Article, shall be through the respective regional offices of the Department of

Labor and Employment within their territorial jurisdiction; Provided, however, That the Regional Boards

shall have technical supervision over the regional office of the Department of Labor and Employment with

respect to the implementation of said plans, programs and projects.

    "Each Regional Board shall be composed of the Regional Director of the Department of Labor and

Employment as chairman, the Regional Directors of the National Economic and Development Authority

and Department of Trade and Industry as vice-chairmen and two (2) members each from workers and

employers sectors who shall be appointed by the President of the Philippines, upon recommendation of

the Secretary of Labor and Employment, to be made on the basis of the list of nominees submitted by the

workers and employers sectors, respectively, and who shall serve for a term of five (5) years.

"Each Regional Board to be headed by its chairman shall be assisted by a Secretariat."

    "Art. 123. Wage Order. - Whenever conditions in the region so warrant, the Regional Board shall

investigate and study all pertinent facts; and, based on the standards and criteria herein prescribed, shall

proceed to determine whether a Wage Order should be issued.

    Any such Wage Order shall take effect after fifteen (15) days from its complete publication in at least

one (l) newspaper of general circulation in the region.

    "In the performance of its wage-determining functions, the Regional Board shall conduct public

hearings/consultations, giving notices to employees' and employers' groups, provincial, city and municipal

officials and other interested parties.

    "Any party aggrieved by the Wage Order issued by the Regional Board may appeal such order to the

Commission within ten (l0) calendar days from the publication of such order. It shall be mandatory for the

Commission to decide such appeal within sixty (60) calendar days from the filing thereof.

    "The filing of the appeal does not operate to stay the order unless the person appealing such order

shall file with the Commission an undertaking with a surety or sureties satisfactory to the Commission for

the payment to the employees affected by the order of the corresponding increase, in the event such

order is affirmed."

    "Art. 124. Standards/Criteria for Minimum Wage Fixing. The regional minimum wages to be established

by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum

standards of living necessary for the health, efficiency and general well-being of the employees within the

framework of the national economic and social development program. In the determination of such

regional minimum wages, the Regional Board shall, among other relevant factors, consider the following:

(a) The demand for living wages;

(b) Wage adjustment vis-à-vis the consumer price index;

(c) The cost of living and changes or increases therein;

(d) The needs of workers and their families; 

(e) The need to induce industries to invest in the countryside;

(f) Improvements in standards of living;

(g) The prevailing wage levels;

(h) Fair return of the capital invested and capacity to pay of employers;

(i) Effects on employment generation and family income; and

(j) The equitable distribution of income and wealth along the imperatives of economic and     social

development.

    "The wages prescribed in accordance with the provisions of this Title shall be the standard prevailing

minimum wages in every region. These wages shall include wages varying with industries, provinces or

localities if in the judgment of the Regional Board conditions make such local differentiation proper and

necessary to effectuate the purpose of this Title.

    "Any person, company, corporation, partnership or any other entity engaged in business shall file and

register annually with the appropriate Regional Board, Commission and the National Statistics Office an

itemized listing of their labor component, specifying the names of their workers and employees below the

managerial level, including learners, apprentices and disabled/handicapped workers who were hired

under the terms prescribed in the employment contracts, and their corresponding salaries and wages.

    "Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by

any Regional Board results in distortions of the wage structure within an establishment, the employer and

the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be

resolved through the grievance procedure under their collective bargaining agreement and, if it remains

unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing, such dispute

shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within ten (10) calendar days

from the time said dispute was referred to voluntary arbitration.

    "In cases where there are no collective agreements or recognized labor unions, the employers and

workers shall endeavor to correct such distortions. Any dispute arising therefrom shall be settled through

the National Conciliation and Mediation Board and, if it remains unresolved after ten (10) calendar days of

conciliation, shall be referred to the appropriate branch of the National Labor Relations Commission

(NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and decide the dispute within

twenty (20) calendar days from the time said dispute is submitted for compulsory arbitration.

    "The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of

any increase in prescribed wage rates pursuant to the provisions of law or Wage Order.

    "As used, herein, a wage distortion shall mean a situation where an increase in prescribed wage rates

results in the elimination or severe contraction of intentional quantitative differences in wage or salary

rates between and among employee groups in an establishment as to effectively obliterate the

distinctions embodied in such wage structure based on skills, length of service, or other logical bases of

differentiation.

    "All workers paid by result, including those who are paid on piecework, takay, pakyaw or task basis,

shall receive not less than the prescribed wage rates per eight (8) hours work a day, or a proportion

thereof for working less than eight (8) hours.

    "All recognized learnership and apprenticeship agreements shall be considered automatically modified

insofar as their wage clauses are concerned to reflect the prescribed wage rates."

    "Art. 126. Prohibition Against Injunction. - No preliminary or permanent injunction or temporary

restraining order may be issued by any court, tribunal or other entity against any proceedings before the

Commission or the Regional Boards."

    "Art. 127. Non-Diminution of Benefits. - No Wage Order issued by any Regional Board shall provide for

wage rates lower than the statutory minimum wage rates prescribed by Congress."

    Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all workers and

employees in the private sector, whether agricultural or non-agricultural, shall be increased by twenty-five

pesos (P25.00) per day, except that workers and employees in plantation agricultural enterprises outside

of the National Capital Region (NCR) with an annual gross sales of less than five million pesos

(P5,000,000.00) in the preceding year shall be paid an increase of twenty pesos (P20.00), and except

further that workers and employees of cottage/handicraft industries, non-plantation agricultural

enterprises, retail/service establishments regularly employing not more than ten (10) workers, and

business enterprises with a capitalization of not more than five hundred thousand pesos (P500,000.00)

and employing not more than twenty (20) employees, which are located or operating outside the NCR,

shall be paid only an increase of fifteen pesos (P15.00): Provided, That those already receiving above the

minimum wage rates up to one hundred pesos (P100.00) shall also receive an increase of twenty-five

pesos (P25.00) per day, and except that the workers and employees mentioned in the first exception

clause of this section shall also be paid only an increase of twenty-pesos (P20.00), and except further that

those employees enumerated in the second exception clause of this Section shall also be paid only an

increase of fifteen pesos (P15.00): Provide, further, That the appropriate Regional Board is hereby

authorized to grant additional increases to the workers and employees mentioned in the exception

clauses of this Section if, on the basis of its determination pursuant to Article 124 of the Labor Code such

increases are necessary.

    (b) The increase of twenty-five pesos (P25.00) prescribed under this Section shall apply to all workers

and employees entitled to the same in private educational institutions as soon as they have increased or

are granted authority to increase their tuition fees during school year 1989-1990. Otherwise, such

increase shall be so applicable not later than the opening of the next school year beginning 1990.

    (c) Exempted from the provisions of this Act are household or domestic helpers and persons employed

in the personal service of another, including family drivers.

    Retail/service establishments regularly employing not more than ten (10) workers may be exempted

from the applicability of this Act upon application with and as determined by the appropriate Regional

Board in accordance with the applicable rules and regulations issued by the Commission. Whenever an

application for exemption has been duly filed with the appropriate Regional Board, action on any

complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application

for exemption by the appropriate Regional Board.

    In the event that applications for exemptions are not granted, employees shall receive the appropriate

compensation due them as provided for by this Act plus interest of one percent (1%) per month

retroactive to the effectivity of this Act.

    (d) If expressly provided for and agreed upon in the collective bargaining agreements, all increases in

the daily basic wage rates granted by the employers three (3) months before the effectivity of this Act

shall be credited as compliance with the increases in the wage rates prescribed herein, provided that,

where such increases are less than the prescribed increases in the wage rates under this Act, the

employer shall pay the difference. Such increases shall not include anniversary wage increases, merit

wage increases and those resulting from the regularization or promotion of employees.

    Where the application of the increases in the wage rate under this Section results in distortions as

defined under existing laws in the wage structure within an establishment and gives rise to a dispute

therein, such dispute shall first be settled voluntarily between the parties and in the event of a deadlock,

the same shall be finally resolved through compulsory arbitration by the regional arbitration branch of the

National Labor Relations Commission (NLRC) having jurisdiction over the workplace.

    It shall be mandatory for the NLRC to conduct continuous hearings and decide any dispute arising

under this Section within twenty(20) calendar days from the time said dispute is formally submitted to it for

arbitration. The pendency of a dispute arising from a wage distortion shall not in any way delay the

applicability of the increases in the wage rates prescribed under this Section.

    Sec. 5. Within a period of four (4) years from the effectivity of this Act and without prejudice to collective

bargaining negotiations or agreements or other employment contracts between employers and workers,

new business enterprises that may be established outside the NCR and export processing zones whose

operation or investments need initial assistance as may be determined by the Department of Labor and

Employment in consultation with the Department of Trade and Industry or the Department of Agriculture,

as the case may be shall be exempt from the application of this Act for not more than three (3) years from

the start of their operations: Provided, That such new business enterprises established in Region III

(Central Luzon) and Region IV (Southern Tagalog) shall be exempt from such increases only for two (2)

years from the start of their operations, except those established in the Provinces of Palawan, Oriental

Mindoro, Occidental Mindoro, Marinduque, Romblon, Quezon and Aurora, which shall enjoy such

exemption for not more than three (3) years from the start of their operations.

    Sec. 6. In the case of contracts for construction projects and for security, janitorial and similar services,

the prescribed increases in the wage rates of the workers shall be borne by the principals or clients of the

construction/service contractors and the contract shall be deemed amended accordingly. In the event,

however, that the principal or client fails to pay the prescribed wage rates, the construction/service

contractor shall be jointly and severally liable with his principal or client.

    Sec. 7. Upon written petition of the majority of the employees or workers concerned, all private

establishments, companies, businesses, and other entities with twenty five (25) or more employees and

located within one (1) kilometer radius to a commercial, savings or rural bank shall pay the wages and

other benefits of their employees through any of said banks and within the period for payment of wages

fixed by Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the

Philippines.

    Sec. 8. Whenever applicable and upon request of a concerned worker or union, the bank shall issue a

certification of the record of payment of wages of a particular worker or workers for a particular payroll

period.

    Sec. 9. The Department of Labor and Employment shall conduct inspections as often as possible within

its manpower constraint of the payroll and other financial records kept by the company or business to

determine whether the workers are paid the prescribed wage rates and other benefits granted by law or

any Wage Order. In unionized companies, the Department of Labor and Employment inspectors shall

always be accompanied by the president or any responsible officer of the recognized bargaining unit of

any interested union in the conduct of the inspection. In non-unionized companies, establishments or

businesses, the inspection shall be carried out in the presence of a worker representing the workers in the

said company. The workers' representative shall have the right to submit his own findings to the

Department of Labor and Employment and to testify on the same if he cannot concur with the findings of

the labor inspector.

    Sec. 10. The funds necessary to carry out the provisions of this Act shall be taken from the

Compensation and Organizational Adjustment Fund, the Contingent Fund, and other savings under

Republic Act No. 6688, otherwise known as the General Appropriations Act of 1989, or from any

unappropriated funds of the National Treasury: Provided, That the funding requirements necessary to

implement this Act shall be included in the annual General Appropriations Act for the succeeding years.

    Sec. 11. The National Wages Council created under Executive Order No. 614 and the National

Productivity Commission created under Executive Order No. 615 are hereby abolished. All properties,

records, equipment, buildings, facilities, and other assets, liabilities and appropriations of and belonging to

the abovementioned offices, as well as other matters pending therein, shall be transferred to the

Commission. All personnel of the above abolished offices shall continue to function in a holdover capacity

and shall be preferentially considered for appointments to or placement in the Commission.

    Any official or employee separated from the service as a result of the abolition of offices pursuant to

this Act shall be entitled to appropriate separation pay and retirement and other benefits accruing to them

under existing laws. In lieu thereof, at the option of the employee, he shall be preferentially considered for

employment in the government or in any of its subdivisions, instrumentalities, or agencies, including

government-owned or controlled corporations and their subsidiaries.

    Sec. 12. Any person, corporation, trust, firm, partnership, association or entity which refuses or fails to

pay any of the prescribed increases or adjustments in the wage rates made in accordance with this Act

shall be punished by a fine not exceeding twenty-five thousand pesos (P25,000.00) and/or imprisonment

of not less than one (1) year nor more than two (2) years: Provided, That any person convicted under this

Act shall not be entitled to the benefits provided for under the Probation Law.

    If the violation is committed by a corporation, trust or firm, partnership, association or any other entity,

the penalty of imprisonment shall be imposed upon the entity's responsible officers, including, but not

limited to, the president, vice president, chief executive officer, general manager, managing director or

partner.

    Sec. 13. The Secretary of Labor and Employment shall promulgate the necessary rules and regulations

to implement the provisions of this Act.

    Sec. 14. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with the

provisions of this Act are hereby repealed, amended or modified accordingly. In any provision or part of

this Act, or the application thereof to any person or circumstance, is held invalid or unconstitutional, the

remainder of this Act or the application of such provision or part thereof to other persons or circumstances

shall not be affected thereby.

    Nothing in this Act shall be construed to reduce any existing wage rates, allowances and benefits of

any form under existing laws, decrees, issuances, executive orders, and/or under any contract or

agreement between the workers and employers.

    Sec. 15. This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette

or in at least two (2) national newspapers of general circulation, whichever comes earlier.

Approved,

(SGD) RAMON V. MITRASpeaker of the House of Representatives

(SGD) JOVITO R. SALONGAPresident of the Senate

This Act which is a consolidation of Senate Bill No. 1084 and House Bill No. 23227 was finally passed by

both the Senate and the House of Representatives on June 5, 1989.

 (SGD) QUIRINO D. ABAD SANTOS, JR Secretary of the House of Representatives

(SGD) EDWIN P. ACOBASecretary of the Senate

Approved: June 9, 1989

(SGD) CORAZON C. AQUINO

President of the Philippines