Minimum Wage in the Philippines: What Employers and Workers Should Know
Definition and Legal Basis
The minimum wage is the lowest amount an employer can legally pay their workers. It ensures that employees receive fair compensation and is enforceable as a matter of legal right.
Who Sets the Minimum Wage?
The Regional Tripartite Wages and Productivity Boards (RTWPBs) determine the minimum wage in each region. These boards operate under the supervision of the National Wages and Productivity Commission (NWPC).
Factors Considered in Wage Setting
Wage boards consider various economic indicators when setting wage rates, including:
- Cost of living
- Inflation rates
- Socio-economic conditions
- Industry capacity to pay
Regional and Sectoral Differences
Minimum wage rates:
- Vary by region – for instance, Metro Manila has a higher rate due to a higher cost of living.
- Vary by sector – different rates apply to non-agricultural, agricultural, and sometimes specific industries.
Issuance and Review of Wage Orders
Wage orders are:
- Issued periodically to reflect economic changes
- Reviewed upon petition from labor or employer groups
- Binding with the force of law once implemented
Exemptions from Minimum Wage Compliance
Certain establishments may be exempt, such as:
- Distressed businesses
- Newly established businesses outside NCR
- Barangay Micro Business Enterprises (BMBEs)
- Service establishments with fewer than 12 employees
Wage Distortion Issues
A wage distortion occurs when an increase in minimum wage results in narrowing the pay gap between different job levels or categories Employers must correct distortions through negotiations or mechanisms provided by law
Penalties for Non-Compliance
Employers who fail to comply with wage laws may face:
- Fines
- Imprisonment
- Payment of wage deficiencies plus applicable damages
Minimum Wage vs. Other Benefits
The minimum wage does not include the following mandatory benefits:
- 13th-month pay
- Overtime pay
- Holiday pay
- Night shift differential
- Service incentive leave
These must be separately paid and are not considered part of the minimum wage.
This article was prepared by Morfe, Ceneta & Co., and CPAs for general information only and should not be used as a replacement for expert advice.