1. The Legal Basis of Holiday Pay

Holiday pay in the Philippines is primarily governed by:

Labor Code of the Philippines (Presidential Decree No. 442, as amended), particularly provisions on holiday pay and premium pay.
Implementing Rules and Regulations (IRR) of the Labor Code.
DOLE issuances interpreting coverage and exemptions, especially for retail/service establishments and special groups.
Republic Act No. 9178 (Barangay Micro Business Enterprises Act of 2002) for BMBEs.

At its core, holiday pay means payment of the employee’s regular daily wage even if no work is performed on a regular holiday, subject to rules and exemptions.

2. Two Kinds of Holidays and Why It Matters

Philippine law distinguishes holidays because entitlement differs:

A. Regular Holidays

Examples include New Year’s Day, Araw ng Kagitingan, Labor Day, Independence Day, Christmas Day, Rizal Day, Eid’l Fitr/Eid’l Adha (as declared), etc.

General rule: If the employee does not work, they are still paid 100% of daily wage. If the employee works, they are paid 200% of daily wage for the first 8 hours.

B. Special (Non-Working) Days

Examples include Ninoy Aquino Day, All Saints’ Day, last day of the year, etc.

General rule: “No work, no pay,” unless there is a company policy, CBA, or practice giving pay. If the employee works, they get 130% of daily wage for the first 8 hours.

3. General Rule: Most Employees Are Entitled

Under Philippine labor standards, holiday pay is a mandatory benefit for employees who are:

Rank-and-file employees, whether monthly-paid or daily-paid,
In the private sector,
Covered by the Labor Code, and
Not falling under an express exemption.

The size of the business does not automatically remove holiday pay obligations, unless a specific law or regulation grants an exemption.

4. Key Question: Are Small Cooperatives or Micro Businesses Exempt?

Short answer:

Sometimes yes, sometimes no — it depends on the business’s legal classification and registration, and the employee’s role.

Let’s break it down carefully.

5. Employees of Cooperatives

A. If the Cooperative Has an Employer–Employee Relationship

Cooperatives can employ people in two broad ways:

Members who are also workers (e.g., worker-members), and
Non-member employees hired like in any private company.

Holiday pay rules apply only if there is an employer–employee relationship. The four-fold test is used: hiring, payment of wages, power of dismissal, and control.

B. Worker-Members vs. Employees

Worker-members who own and manage the cooperative and share in its surplus are often treated as co-owners, not employees.
If they are genuinely worker-members (with real membership rights, votes, and profit-sharing), their benefits are governed by cooperative bylaws, not necessarily by labor standards like holiday pay.

However, labels don’t control. If a “member” is functionally treated as a regular employee under control and wages, labor standards may still apply.

C. Non-Member Employees

Non-members hired by a cooperative are treated like any private employees. They are generally entitled to holiday pay, unless another exemption applies (e.g., retail/service small establishment exemption discussed below, or BMBE).

Bottom line for cooperatives:

Non-members: entitled to holiday pay as a rule.
Worker-members: entitlement depends on whether they are true co-owners or effectively employees.

6. Employees of Micro Businesses

A. Micro Businesses Under Ordinary Law

A business being “small” or “micro” by itself is not an exemption under the Labor Code.

So if it is:

a sole proprietorship, partnership, corporation, or cooperative,
not registered as a special exempt entity, and
not within a specific exemption category,

then holiday pay is still due.

B. Special Exemption for Barangay Micro Business Enterprises (BMBEs)

Under RA 9178, a business registered as a BMBE with a valid Certificate of Authority enjoys certain exemptions.

BMBE employees are generally exempt from:

Minimum wage law, and
Holiday pay, service incentive leave, and other wage-related benefits, depending on DOLE interpretations and implementing rules.

Important: The exemption applies only if all conditions are met, especially:

The enterprise is properly registered as a BMBE,
It has a valid and subsisting Certificate of Authority,
It has not exceeded asset limits under the law, and
The employee is not otherwise covered by special laws or agreements granting benefits.

If the business is not registered, it cannot claim BMBE exemption.

So:

Registered BMBE: typically not required to grant holiday pay.
Unregistered micro business: must grant holiday pay.

7. Small Retail/Service Establishments Exemption

The Labor Code IRR recognizes an exemption for:

Retail and service establishments regularly employing not more than five (5) workers.

If ALL of these are true:

The business is retail or service,
It regularly employs 5 or fewer workers, and
Employees are rank-and-file in that establishment,

then holiday pay may be exempt.

Notes:

This is not a blanket exemption for all small businesses — only retail/service types.
“Regularly employing” looks at the normal workforce, not temporary dips.
Once the workforce exceeds five, holiday pay protection attaches.

8. Other Exempt Employees (Regardless of Business Size)

Even if the business is not exempt, certain employees may be:

Managerial employees,
Officers or members of managerial staff,
Domestic helpers / kasambahays (covered instead by the Kasambahay Law with its own holiday rules),
Persons in the personal service of another,
Workers paid purely by result (piece-rate, takay, pakyaw, etc.), unless they are in fact controlled like regular employees,
Field personnel whose time and performance are unsupervised,
Workers of establishments already exempted by special law (e.g., BMBEs).

Exemptions are interpreted strictly. If doubt exists, the presumption leans toward coverage.

9. Conditions to Receive Holiday Pay

For covered employees, regular holiday pay is owed if they are:

Present or on paid leave on the workday immediately preceding the holiday.

If the employee is absent without pay the day before, the employer may validly withhold holiday pay, unless:

the absence is for a legitimate reason and company practice says otherwise, or
the employee is on approved leave with pay.

10. How Holiday Pay Is Computed (Covered Employees)

A. If Not Worked on a Regular Holiday

100% of daily wage

B. If Worked on a Regular Holiday

200% of daily wage for first 8 hours
Plus overtime premium if beyond 8 hours

C. If Holiday Falls on Rest Day and Worked

260% of daily wage for first 8 hours (200% holiday premium × 30% rest day premium)

D. Special Non-Working Day (if worked)

130% of daily wage for first 8 hours
If rest day too, higher premium applies.

11. Application to Common Scenarios

Scenario 1: Small sari-sari store with 3 workers

Type: retail
Workers: ≤5 → Exempt from holiday pay (retail/service small establishment exemption), unless employer voluntarily grants.

Scenario 2: Small tailoring shop with 4 workers, not BMBE

Type: service
Workers: ≤5 → Exempt from holiday pay.

Scenario 3: Small online food business with 2 riders, not BMBE

Type: may be service, but depends on classification
If treated as service establishment and ≤5 workers → likely exempt.
If not clearly retail/service in IRR sense, or actually bigger workforce → covered.

Scenario 4: Micro bakery registered as BMBE

→ Exempt from holiday pay due to BMBE status.

Scenario 5: Cooperative employs a bookkeeper who is not a member

→ Entitled to holiday pay (regular Labor Code rule), unless coop is also BMBE or retail/service exemption applies.

Scenario 6: Worker-member of a transport cooperative

→ Depends:

if truly co-owner/worker-member under bylaws, holiday pay not automatic;
if functionally an employee under control and wage, may be entitled.

12. What If the Employer Gives Holiday Pay Anyway?

Even if legally exempt (BMBE or ≤5 retail/service), holiday pay can still become enforceable if granted through:

Company policy,
Employment contract,
Collective bargaining agreement, or
Long-standing practice (company practice doctrine).

Once it ripens into practice, withdrawing it may require:

valid business reason,
notice, and
non-diminution of benefits compliance.

13. Enforcement and Remedies

If a covered employee is denied holiday pay, they may:

File a complaint with DOLE (for labor standards enforcement), or
File a case with NLRC for money claims where appropriate.

Potential employer liabilities include:

payment of unpaid holiday pay,
possible damages or attorney’s fees in certain cases.

14. Practical Guidance for Employers and Employees

For Employers (small coop or micro business):

Determine your status: Are you retail/service with ≤5 workers? Are you a registered BMBE?
Keep proof of exemption: BMBE Certificate of Authority, workforce records.
Classify workers correctly: Don’t rely on labels like “member” to avoid standards if actual facts show employment.
Be consistent: If you voluntarily pay holidays, treat it carefully to avoid unintended company practice.

For Employees:

Ask for the business’s basis for exemption (e.g., BMBE certificate, number of workers).
Check your role: Managerial, field personnel, or piece-rate rules may affect coverage.
Document work and pay if you plan to assert a claim.

15. Conclusion

Employees of small cooperatives or micro businesses in the Philippines are generally entitled to holiday pay, unless:

The enterprise is a retail/service establishment with five (5) or fewer workers, or
The enterprise is a registered BMBE with a valid Certificate of Authority, or
The worker falls under a personal/positional exemption (managerial, field personnel, etc.), or
The worker is a true cooperative worker-member governed mainly by cooperative law and bylaws rather than labor standards.

In labor law, exemptions are narrow, and coverage is the default. When in doubt, the facts of employment — not the size or label of the entity — control entitlement.