Are Micro-Businesses With Fewer Than 10 Employees Covered by the New Minimum Wage Increase? (Philippines)

Short answer

Generally yes. In the Philippines, private-sector workers are covered by regional minimum wage orders regardless of establishment size. Having fewer than 10 employees does not automatically exempt a business from a new minimum wage increase. There are narrow exceptions (e.g., duly registered BMBEs, or firms granted an exemption by the Regional Tripartite Wages and Productivity Board (RTWPB) under NWPC rules). If none of those apply, a micro-business must implement the latest regional minimum wage.

The legal framework at a glance

Constitutional anchor: The State must afford full protection to labor, including a living wage (Art. XIII, Sec. 3).
Wage setting law: Republic Act (RA) 6727 (Wage Rationalization Act) created the National Wages and Productivity Commission (NWPC) and RTWPBs, which issue regional wage orders setting and periodically increasing minimum wages.
Enforcement and penalties: RA 8188 imposes double indemnity (an additional sum equal to unpaid wage differentials) and fines/imprisonment for non-compliance.
Tax treatment: Under the TRAIN Law (RA 10963), minimum wage earners are generally income-tax-exempt on statutory minimum wage and certain related pay (e.g., holiday pay, overtime, night shift differential, hazard pay).
13th month pay: PD 851 requires 13th month pay for rank-and-file employees, including those in micro-businesses, whether or not the firm is exempt from minimum wage (unless a specific statutory exemption applies).

Coverage: who is in, who is out

Covered by wage orders

Private-sector employees, whether paid monthly, daily, piece-rate, or commission (with the minimum applied as the equivalent floor).
Micro-businesses in any industry (retail, service, manufacturing, agriculture, etc.)—size does not remove coverage.

Not covered by wage orders

Government workers and employees of GOCCs with original charters (covered by the Salary Standardization Law, not regional wage orders).
Domestic workers (kasambahay): covered by RA 10361 (Kasambahay Law), which has separate minimum wage rates and rules.

The key exceptions micro-businesses ask about

1) Barangay Micro Business Enterprises (BMBEs)

Statute: RA 9178 (BMBE Law).
Effect: BMBEs are exempt from the minimum wage law; however, they must provide employees with social protection coverage (SSS, PhilHealth, Pag-IBIG) and other legally required benefits (e.g., 13th month pay).
Who qualifies: Enterprises within BMBE size limits (as defined in the law/IRR, typically by asset size excluding land) that secure a BMBE Certificate of Authority from the city/municipality.
Practical tip: The exemption attaches only upon valid BMBE registration. Without the certificate, you cannot treat your firm as exempt.

2) Exemptions granted by the RTWPB/NWPC

Nature: Some wage orders allow temporary, partial, or full exemptions—not automatic—for specific categories, historically including:
- Distressed establishments;
- New business enterprises under defined conditions;
- Retail/service establishments employing not more than 10 workers;
- Firms adversely affected by calamities.
How it works: The employer must apply to the RTWPB within the filing period stated in the wage order and prove eligibility (financial statements, payrolls, etc.).
Outcome: If approved, the board issues a Certificate of Exemption specifying scope and duration. If denied, the firm must pay wage differentials retroactive to the order’s effectivity date.
Important: Policies evolve by region and wage order. Some RTWPBs no longer grant certain categories of exemption. Always check the exact text of the current wage order and NWPC/RTWPB guidelines that apply in your region.

“Fewer than 10 employees”: what it does and does not mean

Does not mean automatic exemption. Headcount by itself does not remove you from coverage.
May affect the applicable rate. Some wage orders create rate categories (e.g., retail/service employing ≤10 workers) with different minimums from general “non-agriculture” rates. If your establishment falls into such a category, you must follow that category’s minimum (and any increases) on time.
May be a basis to apply for exemption only if the current wage order expressly allows it and you apply and are approved.

How to determine your obligation step-by-step

Identify your region. Minimum wages are regional (e.g., NCR, Region III, VII, XI, BARMM).
Read the latest wage order for your region and industry:
- Find the effective date (wage orders generally take effect 15 days after publication in a newspaper of general circulation).
- Determine your sector/category (e.g., Non-Agriculture, Agriculture, Retail/Service ≤10 workers, Plantation/Non-Plantation for agri, etc.).
- Check if any two-tranche or phased increases apply and when each tranche takes effect.
Check for exemption rules in that wage order.
- If applicable, note the deadline, documentary requirements, and the type/extent of exemption.
Assess BMBE status.
- If not duly registered as a BMBE, do not claim the BMBE exemption.
Compute the new pay floor.
- For daily-paid workers: compare current daily wage to the new daily minimum for your category.
- For monthly-paid workers: use the RTWPB’s monthly equivalent or conversion formula.
- For piece-rate/commission workers: ensure the computed equivalent is at least equal to the daily minimum for all hours worked.
Adjust premiums and benefits that ride on basic wage:
- OT pay, night shift differential, holiday pay, service incentive leave conversion, and separation pay must be recomputed using the new basic wage.
- 13th month pay remains required and will reflect higher basic pay as the year progresses.

Common edge cases

Apprentices/Learners: When engaged under valid DOLE-approved programs, the law allows training allowances (historically below full minimum) only for the training period and subject to strict requirements. Outside approved programs, minimum wage applies.
Probationary employees: Covered; probation is not a basis to pay below the minimum.
Project-based/Seasonal/Casual: Covered while engaged; pay must meet or exceed the applicable minimum for hours/days actually worked.
Part-time employees: Minimum wage applies pro-rata to hours worked; you cannot pay below the hourly equivalent of the minimum.
Commission-paid sales: Commissions are allowed, but total pay for hours worked must not fall below the minimum (plus applicable premium pay).
Service charges (hospitality): Distribution rules apply, but service charges cannot substitute for paying at least the minimum wage.
Board, lodging, or “facilities”: Deductions against wages for facilities are severely restricted and generally require voluntary authorization and DOLE evaluation; they cannot reduce pay below the minimum absent strict compliance.
Family workers/owner’s relatives: If employees under the law (i.e., they render work in exchange for pay and are under control/supervision), minimum wage rules apply.

Compliance, documentation, and risk management

Payroll readiness: Update rates, timesheets, and payroll systems effective on the actual effectivity date of the wage order (and second tranches, if any).
Pay slips: Reflect the new basic wage and all statutory premiums clearly.
Posting: Keep a copy of the current wage order and summary of rates at the workplace.
If applying for exemption:
- File within the deadline and keep proof of filing;
- Maintain financial statements, payrolls, SSS/PhilHealth/Pag-IBIG remittances, and other supporting documents;
- If denied or lapsed, implement the increase and pay retroactive differentials.
Audit trail: Keep payslips and payroll registers for at least three years (the usual prescriptive period for money claims).
Complaints & enforcement: Non-payment/underpayment risks double indemnity under RA 8188, administrative sanctions, and criminal liability.

Practical scenarios

Micro-retail shop with 6 workers (not a BMBE): Covered. Check the wage order; if it has a “retail/service ≤10 workers” rate, use that. If no special category, apply the general non-agriculture rate.
Same shop but duly registered as a BMBE with a current certificate: Exempt from the minimum wage, but must still comply with 13th month, SSS/PhilHealth/Pag-IBIG, and other labor standards.
Distressed 8-employee service firm: Covered. May apply for exemption only if the current wage order allows and you qualify; otherwise, implement the increase.
Household helper employed by a homeowner: Not covered by regional wage orders; instead, follow Kasambahay statutory minimums and rules.

Frequently asked employer questions

Q: Can we and the employees “agree” to keep rates below the new minimum? A: No. Waivers or agreements to receive less than the minimum are void. The employee can still claim the deficiency, and the employer may be liable for double indemnity.

Q: We pay purely by commission—do minimum wages still matter? A: Yes. Over the hours worked, total pay must not fall below the minimum (plus applicable premiums).

Q: If we miss the effectivity date by a few days, can we just start the new rate next cutoff? A: You must pay wage differentials retroactive to the effectivity date (and to any later tranche dates).

Q: Are trainees/ojt students exempt? A: Student interns in bona fide school-sanctioned OJT programs may be unpaid subject to strict rules; otherwise, if they render work as employees, minimum wage rules apply.

Employer checklist (micro-business)

Identify region and category (non-agri/agri/retail-service ≤10, etc.).
Read the current wage order and note effectivity and tranches.
Confirm whether you are a BMBE (with a valid certificate) or whether your region/wage order allows exemptions you can legally apply for.
Adjust rates and premium computations; update payroll.
Ensure compliance with 13th month, SIL, OT, NSD, holiday pay.
Keep payslips and records; prepare for potential inspection.
If exempt/approved: retain the certificate; diarize expiry and conditions.

Bottom line

If you are a micro-business with fewer than 10 employees, you are presumptively covered by any new regional minimum wage increase.
You are not exempt unless you (a) are a duly registered BMBE, or (b) have an approved exemption under the current wage order/RTWPB guidelines.
When in doubt, pay the higher rate and document compliance; the risks of underpayment (double indemnity, penalties, retroactive liabilities) are substantial.

This article provides a general legal overview. For specific cases, review your region’s current wage order and consult counsel to address the facts of your establishment, timing of effectivity, and any available exemptions.