A company in the Philippines cannot automatically hold your commission just because a customer asked for or received a refund. The answer depends on one practical question: was the commission already earned under your employment contract, commission plan, company policy, or established company practice? If it was already earned, it is generally treated as part of your wage and should not be withheld arbitrarily. If the commission was clearly conditional—for example, payable only after full collection, after the refund period expires, or only if the sale is not cancelled—the company may have a stronger basis to delay, reverse, or “charge back” the commission.

The Short Answer

A company may hold, deduct, or reverse a commission because of a refund only if there is a valid legal or contractual basis.

Usually, this means one of the following is true:

The written commission plan says commissions are earned only after the sale becomes final.
The policy clearly allows a commission “chargeback” if the customer cancels, returns the product, or receives a refund.
The commission was paid as an advance, not yet as final earned compensation.
The employee has a proven, due, and demandable accountability to the company.
The employee gave written consent to a lawful deduction, or the deduction is otherwise authorized by law.

But if the company is simply saying, “The customer refunded, so we will hold all your commissions,” without a clear policy, computation, explanation, or proof, that may be an illegal withholding of wages.

Are Commissions Considered Wages in the Philippines?

Yes, commissions can be considered wages.

Article 97(f) of the Labor Code defines “wage” broadly. It includes remuneration payable under a written or unwritten employment contract, whether fixed or computed on a time, task, piece, or commission basis. In Toyota Pasig, Inc. v. De Peralta, G.R. No. 213488, November 7, 2016, the Supreme Court held that commissions fall within the definition of wages when they are compensation for services rendered. The Court also said that when an employee specifically claims unpaid commissions, the employer bears the burden of proving payment or non-entitlement because payroll and company records are normally in the employer’s possession. (Supreme Court E-Library)

This matters because once a commission is treated as a wage, the employer cannot treat it casually as a discretionary favor.

A commission may be described by the company as an “incentive,” “sales bonus,” “success share,” “rebate,” or “variable pay,” but the label is not controlling. What matters is its real nature. If it is paid as compensation for closing sales, generating revenue, or performing sales work, it may be treated as wage-related compensation.

When Is a Commission “Earned”?

This is usually the most important issue.

Philippine law does not require all employers to pay commissions. In Atienza v. TKC Heavy Industries Corporation, G.R. No. 217782, June 23, 2021, the Supreme Court explained that there is no law requiring employers to grant commissions, so the employee must first prove the existence of an agreement, policy, or company practice granting commission. Once entitlement is shown, the court will look at the terms and the evidence of services rendered. (Supreme Court E-Library)

A commission is usually considered earned when the condition for earning it has happened. That condition may be:

Commission trigger	Practical meaning
Upon booking of sale	Commission is earned once the sale is recorded or approved
Upon signing of contract	Commission is earned once the customer signs the agreement
Upon delivery	Commission is earned once the product or service is delivered
Upon full payment or collection	Commission is earned only after the company receives payment
After refund/cancellation period	Commission becomes final only after the customer can no longer refund or cancel
Upon company approval	Commission depends on internal validation, but approval cannot be withheld in bad faith

This is why employees should ask for the exact commission rule being applied. A company cannot fairly rely on a “refund rule” that was never disclosed, never practiced, or selectively applied only when it wants to avoid paying.

The Legal Basis: What Philippine Law Says

Article 97(f), Labor Code: commissions may be wages

The Labor Code expressly includes compensation computed on a commission basis within the definition of wage. This is the foundation for treating many sales commissions as protected compensation, not mere gifts.

Article 113, Labor Code: wage deductions are limited

Article 113 of the Labor Code generally prohibits employers from making deductions from wages except in specific cases, such as:

insurance premiums with the employee’s consent;
union dues authorized by the employee or recognized through check-off; or
deductions authorized by law or regulations issued by the Secretary of Labor and Employment.

A customer refund is not automatically one of these exceptions.

Article 116, Labor Code: withholding wages without consent is prohibited

Article 116 makes it unlawful to directly or indirectly withhold any amount from a worker’s wages, or induce the worker to give up part of the wages, by force, stealth, intimidation, threat, or other means without the worker’s consent.

In simple terms: an employer cannot just say, “We are holding your pay until we decide what to do.”

Article 1706, Civil Code: wages may be withheld only for a debt due

The Civil Code says withholding of wages should not be made except for a debt due. In Milan v. NLRC / Solid Mills, Inc., G.R. No. 202961, February 4, 2015, the Supreme Court recognized that employers may have clearance procedures and may withhold amounts for valid accountabilities or debts connected with the employment relationship. But the Court also made clear that this is tied to an actual debt or obligation, not a vague or speculative claim. (Supreme Court E-Library)

This distinction is important. A customer refund is not automatically the employee’s debt. It becomes a possible employee accountability only if the employee agreed to that arrangement, the policy is valid, and the amount is due and properly computed.

Refund vs. Chargeback: What Is the Difference?

Many sales companies use “chargeback” policies. A chargeback means the company reverses or deducts a previously credited commission because the sale did not remain valid.

Common examples:

the customer cancelled the order;
the credit card payment failed;
the customer returned the product;
the sale was fraudulent;
the account was terminated during a lock-in or clawback period;
the customer received a full or partial refund;
the employee was paid commission before the company collected from the customer.

A chargeback is not automatically illegal. But it must be clear, reasonable, and supported by evidence.

The company should be able to show:

the commission policy or contract provision allowing the chargeback;
the transaction involved;
the refund amount;
the commission previously credited or paid;
the exact computation of the reversal;
the payroll period affected; and
why the employee is responsible under the policy.

Without these, a chargeback can become an unlawful deduction or withholding.

When the Company May Validly Hold or Reverse the Commission

A company has a stronger legal position when the commission plan clearly says something like:

“Commissions are earned only upon full collection.”
“Commissions are subject to reversal for cancelled, refunded, or returned sales.”
“Commissions paid before customer payment are advances and may be offset against future commissions.”
“No commission is payable for transactions refunded within 30 days.”
“Commission is payable only for net sales actually collected by the company.”

If the employee accepted this policy, and it has been consistently applied, the company may be able to withhold or reverse the specific commission connected to the refunded sale.

But even then, the company should not overreach. If the refund affected one transaction, the company should not automatically hold unrelated commissions from other valid sales.

When Holding the Commission May Be Illegal

Holding a commission may be illegal or contestable when:

there is no written commission policy;
the company already paid or approved similar commissions before;
the sale was completed and the refund was due to company fault, product defect, inventory issues, or management decision;
the refund happened after the commission was already fully earned;
the company holds all commissions instead of only the disputed amount;
the employer refuses to provide a computation;
the deduction brings the employee below the minimum wage;
the employer uses the refund as retaliation after resignation, complaint, or termination;
the policy was changed after the sale was already made;
the employee never consented to the deduction;
the alleged accountability is not yet liquidated, due, or demandable.

A company also cannot use “pending refund investigation” as an indefinite excuse. If there is a dispute, the employer should investigate promptly, document the basis, and explain the computation.

Common Real-Life Scenarios

Scenario 1: The customer cancelled before paying

If the commission plan says commission is based on collected sales, the employee may not yet be entitled to commission. There may be no unlawful withholding because the commission was not yet earned.

Scenario 2: The employee was already paid commission, then the customer refunded

If the commission plan clearly allows chargebacks for refunds, the company may reverse the commission or offset it against future commissions. But the company should provide a clear computation and should not deduct more than the commission actually connected to that refunded sale.

Scenario 3: The customer refunded because the product was defective

This is different. If the refund was due to product quality, delayed delivery, lack of stock, poor after-sales service, or a company-side problem, the employer should not automatically shift the business loss to the employee unless the commission plan clearly makes the commission conditional on the sale remaining valid.

Scenario 4: The company holds all commissions after resignation

This is a common problem. DOLE Labor Advisory No. 06, Series of 2020 provides that final pay should generally be released within 30 days from separation, unless a more favorable company policy, individual agreement, or collective agreement applies. Final pay includes monetary benefits due to the employee. If earned commissions form part of final pay, they should not be withheld indefinitely. (Department of Labor and Employment)

Scenario 5: The company says, “We will pay once the customer refund issue is resolved”

A short, reasonable verification period may be understandable if the commission is genuinely conditional. But the company should identify:

the customer account;
the refund request date;
the amount involved;
the commission affected;
the expected resolution date;
the policy allowing the hold.

A vague delay with no documents is risky for the employer.

Scenario 6: The employee is an independent contractor or sales agent, not an employee

If there is no employer-employee relationship, the Labor Code rules on wages may not apply. The dispute may be governed by the contract and the Civil Code. The main question becomes: what did the parties agree about commissions, refunds, cancellations, and set-offs?

However, calling someone an “independent contractor” does not automatically make it true. Philippine labor tribunals look at the actual relationship, especially whether the company controlled not only the result of the work but also the means and methods of doing it.

What Employees Should Check First

Before filing a complaint, gather and review the documents that show how commissions are earned.

Important documents include:

Document	Why it matters
Employment contract	May state salary, commission rate, and conditions
Commission plan or incentive policy	Usually contains refund, cancellation, and chargeback rules
Offer letter	May prove promised commission rate
Employee handbook	May include deduction or clearance procedures
Payslips	Show credited, paid, or deducted commissions
Sales reports or CRM screenshots	Prove closed sales and credited accounts
Customer invoices and receipts	Prove payment or collection
Refund notice	Shows whether the sale was fully or partially refunded
Emails or chat approvals	Show management confirmation of entitlement
Resignation or clearance documents	Relevant for final pay disputes
Certificate of employment and final pay computation	Useful after separation

Screenshots help, but original emails, PDFs, signed documents, payslips, and system-generated reports carry more weight.

Practical Step-by-Step Guide If Your Commission Is Being Held

1. Ask for the exact written basis

Send a calm written request to HR, payroll, finance, or your manager.

Ask for:

the policy allowing the hold or deduction;
the customer account involved;
the refund amount;
the affected commission amount;
the computation;
the expected release date;
the person approving the hold.

Keep the request professional. Avoid threats or emotional language because the message may later become evidence.

2. Compare the policy with your actual sales timeline

Create a simple timeline:

date you generated the lead;
date customer signed or ordered;
date customer paid;
date company delivered;
date commission was approved;
date commission was supposed to be paid;
date refund was requested or granted;
date company withheld or deducted your commission.

This helps show whether the commission was already earned before the refund.

3. Ask whether the hold applies only to the refunded sale

If the company is holding all your commissions, ask why unrelated commissions are affected.

A proper chargeback should usually be transaction-specific. Holding unrelated earned commissions can look punitive.

4. Request payroll correction or written dispute review

If the deduction appears wrong, request a written review. Attach your computation and supporting documents.

Use clear wording such as:

“Based on the commission plan, the commission for Account A was already earned upon full payment on [date]. The refund mentioned relates only to Account B. Kindly release the undisputed commissions and provide the written basis for any disputed amount.”

5. File a Request for Assistance under DOLE SEnA

If the employer does not resolve the issue, employees usually begin with the Single Entry Approach (SEnA). SEnA is a mandatory 30-day conciliation-mediation process for labor and employment issues. It was institutionalized under Republic Act No. 10396 and is handled through DOLE, NLRC, NCMB, and other authorized Single Entry Assistance Desks. DOLE’s online ARMS portal also states that a Request for Assistance may be filed by an aggrieved worker, group of workers, union, OFW, kasambahay, or employer. (Supreme Court E-Library) (senawebbapp.azurewebsites.net)

In practice, SEnA is often faster and less formal than immediately filing a full labor case. Many unpaid wage and final pay disputes are settled at this stage.

6. Proceed to the proper labor office if unresolved

If SEnA fails, the matter may be referred to the proper DOLE office or the NLRC, depending on the nature and amount of the claim.

Generally:

Situation	Usual forum
Simple labor standards concern while still employed	DOLE Regional/Provincial/Field Office
Final pay dispute	DOLE office through SEnA/enforcement mechanism
Money claim above ₱5,000 arising from employment	NLRC Labor Arbiter
Illegal dismissal with unpaid commissions	NLRC Labor Arbiter
Independent contractor commission dispute	Regular courts, depending on amount and nature of claim
OFW employment-related money claim	Usually NLRC/DMW-related process, depending on facts

Money claims arising from employer-employee relations generally prescribe in three years from the time the cause of action accrued. In De Guzman v. Court of Appeals, the Supreme Court emphasized that the three-year period applies to money claims arising from employment, even if the claim is based on a written agreement such as a CBA. (Supreme Court E-Library)

What Employers Should Do Before Holding Commissions

A company that wants to avoid disputes should not rely on informal verbal explanations. It should have a clear commission policy.

A good commission policy should state:

when commission is earned;
when commission is paid;
whether commission is based on gross sales, net sales, or collected sales;
what happens if the customer cancels;
what happens if there is a full or partial refund;
whether paid commissions are advances subject to chargeback;
the period during which chargebacks may be made;
whether chargebacks can be deducted from future commissions;
how disputes are reviewed;
how commissions are handled after resignation or termination.

The policy should be communicated before the employee performs the sales work. Retroactive changes are a common source of labor disputes.

How to Tell If the Hold Is Reasonable or Abusive

A reasonable commission hold usually looks like this:

tied to a specific customer refund;
based on a written policy;
limited to the affected commission;
supported by documents;
explained in writing;
resolved within a reasonable period.

An abusive commission hold often looks like this:

no written policy;
no computation;
all commissions held because of one refund;
indefinite delay;
deduction from unrelated wages;
refusal to release final pay;
sudden policy change after resignation;
threat that the employee will not receive anything unless they sign a quitclaim.

Quitclaims are not automatically invalid, but they are closely examined when employees are pressured to waive earned wages for an unfair amount.

Special Notes for Foreigners, Remote Workers, and Overseas Filipinos

Foreigners working for Philippine companies and Filipinos working remotely for Philippine-based employers often face commission disputes because documents are informal or signed electronically.

Practical points:

If you are treated as an employee of a Philippine company, Philippine labor rules may apply depending on the facts.
If you are abroad, you may need a representative in the Philippines with a Special Power of Attorney (SPA) for certain filings or settlement authority.
If the SPA is executed abroad, Philippine offices may require notarization and apostille or consular authentication, depending on the country and document use.
If your contract says you are an independent contractor, the forum and remedy may change, but the company’s label is not always controlling.
Keep copies of electronic contracts, Slack or Teams messages, CRM records, commission dashboards, and remittance records.

For cross-border commission disputes, the most important practical question is still the same: what document or practice proves when the commission became earned and payable?

Frequently Asked Questions

Can my employer deduct a customer refund from my commission?

Yes, but only if there is a valid basis, such as a clear commission plan allowing chargebacks for refunded or cancelled sales. The deduction should be properly computed and limited to the affected commission.

Can the company hold all my commissions because one customer refunded?

Usually, that is difficult to justify. If only one sale was refunded, the company should explain why unrelated commissions are also being held. Holding all commissions may be unreasonable if other sales were valid and already earned.

What if there is no written commission agreement?

You can still prove entitlement through emails, payslips, sales reports, past practice, offer letters, chat messages, or testimony. Philippine law recognizes written and unwritten employment arrangements, but proof becomes more important when the employer denies the commission.

Are commissions part of final pay after resignation?

They can be, if they were already earned before separation. DOLE Labor Advisory No. 06-20 treats final pay as the total wages or monetary benefits due to the employee, regardless of the cause of separation.

Can my employer delay my final pay until all refunds are resolved?

Only if there is a real, documented, and legally valid accountability or unresolved condition affecting your pay. A company should not use possible future refunds as an indefinite reason to delay final pay.

What if the refund was not my fault?

If the refund was due to product defects, delayed delivery, lack of stock, company policy, or management decision, the company should not automatically make you absorb the loss unless your commission policy clearly and validly makes commissions conditional on the sale remaining final.

Can the company change the commission policy after I already made the sale?

A retroactive change is highly questionable. If you already performed the work and met the existing conditions for commission, the company generally should not apply a new refund or chargeback rule after the fact.

Can I file a DOLE complaint for unpaid commission?

Yes, if you are an employee and the commission arises from your employment. The usual first step is filing a Request for Assistance under SEnA. If unresolved, the case may proceed to the proper DOLE office or NLRC, depending on the facts.

How long do I have to claim unpaid commissions?

For employees, money claims arising from employment generally must be filed within three years from the time the cause of action accrued. Do not wait too long, especially if the unpaid commissions cover multiple pay periods.

What evidence is strongest in a commission dispute?

The strongest evidence usually includes the commission plan, employment contract, payslips, sales reports, customer payment records, refund records, emails approving the commission, and written computations from payroll or finance.

Key Takeaways

A customer refund does not automatically give the company the right to hold your commission.
Commissions may be treated as wages when they compensate employees for services rendered.
The key issue is whether the commission was already earned under the contract, policy, or company practice.
A valid chargeback policy can allow reversal of commissions for refunded or cancelled sales, but it must be clear and properly applied.
Employers should not hold unrelated commissions or final pay indefinitely.
Employees should request the written basis, computation, and transaction details before escalating the dispute.
The usual first step for employee commission disputes is DOLE SEnA, a 30-day conciliation-mediation process.
Employment-related money claims generally prescribe in three years.