Introduction

In the Philippines, labor laws provide protections and benefits to employees, including compensation for work performed on holidays. Holiday pay, often referred to as "double pay" when employees work on designated holidays, is a key entitlement under the Labor Code. However, this benefit is not universal and includes specific exemptions, particularly for smaller establishments. This article examines whether employees in small restaurants—typically classified as service establishments—are entitled to holiday double pay. It explores the relevant provisions of the Labor Code of the Philippines (Presidential Decree No. 442, as amended), implementing rules, and related jurisprudence, focusing on the context of small-scale operations in the food service industry.

The discussion covers the types of holidays, the general rules on holiday pay, exemptions for retail and service establishments, the classification of restaurants, methods for determining employee count, implications for employers and employees, and potential remedies for violations. Understanding these rules is crucial for restaurant owners, managers, and workers to ensure compliance and fair treatment.

Types of Holidays in the Philippines

Philippine law recognizes two main categories of holidays: regular holidays and special non-working days. These are declared annually through presidential proclamations, based on Republic Act No. 9492 (Holiday Economics Law) and other statutes.

Regular Holidays: These include fixed dates such as New Year's Day (January 1), Araw ng Kagitingan (April 9), Labor Day (May 1), Independence Day (June 12), National Heroes Day (last Monday of August), Bonifacio Day (November 30), Christmas Day (December 25), and Rizal Day (December 30). Movable dates include Maundy Thursday, Good Friday, Eid'l Fitr, and Eid'l Adha. There are typically 12 regular holidays in a year.
Special Non-Working Days: These are additional days like Chinese New Year, Black Saturday, Ninoy Aquino Day (August 21), All Saints' Day (November 1), All Souls' Day (November 2), and the last day of the year (December 31). Special local holidays may also be declared by local governments or the President.

The distinction is important because compensation rules differ between these categories, with regular holidays generally offering higher premiums.

General Rules on Holiday Pay

Under Article 94 of the Labor Code, every employee covered by the law is entitled to holiday pay. The key provisions are:

Unworked Regular Holidays: Employees receive 100% of their regular daily wage, provided they were present or on paid leave the working day immediately preceding the holiday.
Worked Regular Holidays: Employees are paid 200% of their regular daily wage (commonly called "double pay"). If the holiday falls on a rest day, an additional 30% premium applies, resulting in 260% pay, or 300% if overtime is involved.
Unworked Special Non-Working Days: No pay unless there is a company policy, collective bargaining agreement (CBA), or voluntary practice providing otherwise.
Worked Special Non-Working Days: Employees receive an additional 30% of their regular daily wage (130% total). If it falls on a rest day, it becomes 150%, or 169% with overtime.

These rules apply to all private sector employees, including regular, probationary, casual, and seasonal workers, but exclude certain categories like government employees, managerial staff, field personnel, family members dependent on the employer, domestic workers, personal service providers, and piece-rate workers (as specified in Article 82 of the Labor Code).

Holiday pay is computed based on the employee's basic wage, excluding allowances, bonuses, or other variable pay. For hourly workers, it is prorated based on hours worked. Absences without pay before the holiday may disqualify an employee from unworked holiday pay.

Exemptions from Holiday Pay

While holiday pay is a standard benefit, the Labor Code provides explicit exemptions. Article 94(a) states: "Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers."

This exemption applies specifically to:

Retail Establishments: Those principally engaged in selling merchandise directly to consumers for personal or household use, such as grocery stores or boutiques.
Service Establishments: Those providing services to the public, including restaurants, hotels, barber shops, and repair shops.

The exemption covers only the payment for unworked regular holidays (the 100% pay when not working). For worked holidays, even in exempt establishments, employees are generally entitled to their regular wage without the mandatory premium, unless a CBA, company policy, or voluntary agreement provides for additional compensation. However, Department of Labor and Employment (DOLE) advisories and jurisprudence suggest that premiums for worked holidays may still be required under the principle of non-diminution of benefits or if the establishment has a history of paying them.

For special non-working days, the exemption logic extends similarly: no mandatory pay for unworked days, and only a potential 30% premium for worked days if not exempted, but small establishments often operate without these obligations.

The Omnibus Rules Implementing the Labor Code (Book III, Rule IV) clarify that the exemption is intended to ease the burden on small businesses, recognizing their limited resources. However, this does not absolve employers from other labor standards, such as minimum wage (unless separately exempted under other laws like the Wage Rationalization Act for certain regions or the Barangay Micro Business Enterprises Act).

Application to Small Restaurants

Restaurants, including small eateries, carinderias, and fast-food outlets, are classified as service establishments under DOLE regulations because they provide food and beverage services directly to consumers. Thus, if a restaurant regularly employs fewer than 10 workers, it qualifies for the holiday pay exemption.

Determining "Regularly Employing Less Than Ten Workers": The count includes all employees, whether regular, casual, contractual, or part-time, working at the establishment. Family members who are not dependent on the employer for support are counted if they are paid employees. The term "regularly" refers to the usual or average number of employees over a period, not a snapshot on a holiday. DOLE may investigate payroll records, Social Security System (SSS) contributions, or PhilHealth remittances to verify the count. If an establishment temporarily exceeds 9 employees (e.g., during peak seasons), it may still qualify if the average is below 10.
Entitlement in Small Restaurants: Employees in restaurants with fewer than 10 workers are not entitled to pay for unworked regular holidays. For worked regular holidays, they receive only their basic daily wage, without the mandatory 100% premium (no double pay). This contrasts with larger restaurants, where double pay is required. For special non-working days, no pay for unworked days, and potentially no premium for worked days, though employers are encouraged to provide it voluntarily.
Exceptions Within Exempt Establishments: Managerial employees or supervisors in small restaurants are already excluded under Article 82, regardless of size. Additionally, if a small restaurant is part of a larger chain or franchise with centralized payroll, it may not qualify for the exemption if the total workforce across branches exceeds the threshold—though DOLE typically assesses each branch independently if they operate as separate establishments.

Jurisprudence, such as in cases decided by the National Labor Relations Commission (NLRC) and the Supreme Court (e.g., involving similar exemptions under minimum wage laws), emphasizes that the burden of proving exemption lies with the employer. Failure to prove fewer than 10 employees can result in back payment of holiday benefits.

Related Considerations and Laws

Barangay Micro Business Enterprises (BMBE) Act (Republic Act No. 9178): Registered BMBEs with assets not exceeding P3 million are exempt from minimum wage requirements but not explicitly from holiday pay. However, since many small restaurants register as BMBEs, they may indirectly benefit from relaxed enforcement, though holiday pay remains governed by the Labor Code.
Regional Variations: Wage orders from Regional Tripartite Wages and Productivity Boards (RTWPBs) may influence holiday pay computations, especially for minimum wage earners, but the exemption for small service establishments applies nationwide.
Collective Bargaining Agreements (CBAs): Even in exempt restaurants, a CBA can stipulate holiday pay or premiums, making them enforceable.
COVID-19 and Emergency Adjustments: During the pandemic, DOLE issued advisories allowing deferred holiday pay for distressed establishments, but these were temporary and did not permanently alter the exemption rules for small restaurants.

Implications for Employers and Employees

For small restaurant owners, the exemption provides financial relief, allowing flexibility in operations during holidays when customer demand may fluctuate. However, misclassifying the establishment or undercounting employees can lead to complaints filed with DOLE, resulting in inspections, back wages, damages, and penalties up to P40,000 per violation under the Labor Code.

Employees in small restaurants should be aware that while they may not receive holiday pay, they are still protected by other rights, such as overtime pay, night shift differentials, and service incentive leave (after one year of service). If an employer voluntarily pays holiday premiums, it may become a company practice that cannot be withdrawn unilaterally.

In cases of disputes, employees can file claims with the DOLE regional office or the NLRC. Mediation is often the first step, with appeals possible to the Court of Appeals and Supreme Court.

Conclusion

Employees of small restaurants in the Philippines—those regularly employing fewer than 10 workers—are generally not entitled to holiday double pay for worked regular holidays or pay for unworked holidays, due to the explicit exemption in Article 94 of the Labor Code for retail and service establishments. This provision balances the need for employee protections with the realities of operating micro and small businesses in a competitive industry like food service. However, employers must accurately document their workforce size and comply with all other labor standards to avoid liabilities. For both parties, consulting DOLE or legal experts is advisable to navigate specific circumstances, ensuring fair and lawful practices in the workplace.