Can Employers Lower KPIs After Sick Leave in the Philippines?

A comprehensive guide to the rules, limits, and remedies under Philippine labor law

Overview

Key Performance Indicators (KPIs) are part of an employer’s “management prerogative.” Philippine law generally allows companies to set, revise, or recalibrate performance targets. But prerogatives are not absolute. KPI changes—especially those imposed right after an employee returns from sick leave—must comply with the Labor Code, jurisprudential standards on good faith, the rule against diminution of benefits, anti-discrimination rules (including accommodations for illness or disability), and due process. When KPI changes are used to disadvantage an employee because they were ill or absent, the change can be illegal and may amount to constructive dismissal or unlawful discrimination.

This article explains when KPI changes are lawful, when they cross the line, and what remedies are available.

The Legal Baseline

1) Management prerogative—broad but bounded

Employers may design job duties, set KPIs, and evaluate performance. Courts uphold changes if they are:

Reasonable and related to business needs;
Done in good faith (not a pretext to push someone out); and
Applied fairly (not singling out one employee without legitimate basis).

2) Security of tenure and constructive dismissal

Employees cannot be dismissed or forced to resign without just or authorized cause and due process. A KPI change that substantially degrades rank, pay, or real opportunities to earn (e.g., crushing sales targets that ensure failure, or removing key accounts without basis) can constitute constructive dismissal even if the employee remains on the payroll.

3) Rule against diminution of benefits

Employers cannot unilaterally reduce benefits that have ripened into a company practice or policy (e.g., predictable commissions/bonuses tied to established KPIs). If KPI recalibration effectively reduces a vested or regularized monetary benefit, it may be an unlawful diminution—especially if:

The benefit was given regularly and deliberately over time, and
There’s no legitimate business reason communicated and documented.

4) Illness, disability, and accommodations

Illness per se is not a just cause for discipline or dismissal. Termination for disease is an authorized cause only if (a) the disease is of such nature that continued employment is prohibited by law or prejudicial to the employee’s health or co-workers, and (b) a competent public health authority certifies it cannot be cured within six months even with proper medical treatment. Separation pay is due in such cases.
Disability laws (e.g., the Magna Carta for Persons with Disability) prohibit discrimination by reason of disability and encourage reasonable accommodation. Adjusting KPIs downward to match temporary medical limits is generally lawful and often advisable; using sickness to impose harsher or punitive KPIs is not.
Maternity and other protected statuses: For context, Philippine law expressly bans adverse actions due to maternity. While “sick leave” is not a special protected status like maternity, retaliation for lawful leave can still be evidence of bad faith and discriminatory treatment.

5) Leave and pay context

The Labor Code guarantees Service Incentive Leave (SIL) of at least 5 days per year (convertible to cash if unused) for eligible employees; many employers grant separate paid sick leave by policy or CBA.
SSS sickness benefit is a social insurance benefit for qualifying sickness/accident absences. Penalizing an employee for availing of SSS sickness benefits or approved sick leave can signal retaliation, undermining the employer’s good-faith defense.

Can KPIs Be Lowered After Sick Leave?

Yes—if done as a reasonable accommodation to an employee’s temporary or permanent medical limitations, or as part of a good-faith company-wide recalibration. No—if the change is retaliatory, discriminatory, or results in unlawful diminution of benefits or constructive dismissal.

Lawful scenarios (generally):

Temporary, documented accommodation: After medical clearance indicating temporary restrictions, the employer reduces sales quotas or output KPIs for a recovery period, without cutting base pay or unduly limiting future prospects.
Uniform, prospective recalibration: The company updates KPIs across a team or business unit, gives reasonable notice, explains the business rationale (e.g., new product mix, market conditions, systems migration), and implements the change prospectively.
Employee-requested flex: The employee asks for modified duties/targets as part of a return-to-work plan supported by medical advice; employer agrees and documents the arrangement.

Unlawful or risky scenarios (often challenged):

Targeting the returning employee: Only the recently ill employee’s KPIs are tightened or their accounts are stripped without valid, documented reason.
Retroactive changes: KPIs for a completed or ongoing evaluation period are lowered or the formula is changed after the fact to depress bonus/commission.
Hidden pay cut or benefit withdrawal: KPI changes that predictably slash earnings or remove regular incentives—especially where those incentives have become a company practice.
Pretext for exit: Aggressive KPIs immediately after sick leave, paired with write-ups and “PIPs” designed to fail, may evidence constructive dismissal.

Due Process and Documentation: What Employers Must Do

Communicate early and clearly. Provide written notice of KPI changes, rationale, effective date, and how they apply to ongoing evaluation periods.
Apply changes prospectively. Avoid retroactive impact on earned commissions/bonuses unless a signed policy reserves that right (and even then, apply with caution).
Be consistent. Prefer unit-wide changes over individual-targeted tweaks—unless individualized changes are accommodations supported by medical documentation.
Avoid discrimination. Do not penalize lawful absences or conditions. If the KPI shift is tied to the employee’s health situation, frame and document it as a reasonable accommodation, not a penalty.
Offer a feedback path. Provide an avenue (meeting, grievance process) to discuss feasibility, clarify metrics, and adjust timelines during reintegration.
Keep records. Preserve memos, policy updates, meeting notes, and any medical clearances or restrictions (handled with confidentiality).

Employee Playbook: What To Do If Your KPIs Were Lowered After Sick Leave

A) Spot the issue

Ask yourself:

Was I singled out compared to peers?
Did the change reduce my realistic ability to earn commissions/bonuses or harm my rank?
Was the change retroactive?
Did the employer explain and document a valid business reason?
Does the change contradict an established practice or policy?

B) Build your file

Collect:

KPI policies (old vs. new), commission plans, handbooks, memos, PIP documents;
Performance dashboards, sales allocations, account reassignments;
Medical certificates, fit-to-work notes, and any restrictions;
Emails or chat logs around your leave and return;
Pay slips before/after the KPI change showing impact.

C) Engage internally first

Clarify in writing: Ask HR/your manager to explain the reason, scope, and duration; request alignment with medical guidance if you need accommodation.
Propose alternatives: Suggest temporary targets or phased return.
Use the grievance process in your handbook/CBA.

D) External remedies (if unresolved)

DOLE Single Entry Approach (SEnA) File a Request for Assistance (RFA) at the DOLE Regional Office for mandatory conciliation-mediation. This is low-cost, fast, and often resolves disputes on KPI, commissions, or policy changes.
NLRC / Labor Arbiter If settlement fails and there’s significant monetary loss or adverse action, file a complaint for any combination of:
- Illegal/constructive dismissal (reinstatement, backwages, damages),
- Unlawful diminution of benefits,
- Non-payment/underpayment of commissions and other wage-related claims,
- Damages for bad faith.
Burden of proof: The employer must prove the lawful cause and due process for dismissal or materially adverse changes; for money claims, you must substantiate amounts (policies, historical payouts, computations).
Disability discrimination route (if applicable) Where illness qualifies as a disability, consider a discrimination complaint premised on denial of reasonable accommodation or adverse treatment because of disability. (You may raise these facts within your labor case as well.)
SSS and benefits coordination If the dispute intersects with SSS sickness benefits (e.g., refusal to process employer’s advance), you may coordinate with SSS while pursuing labor remedies for any retaliatory KPI actions.

Practical Tests and Examples

Accommodation vs. penalty test: Accommodation: “Your doctor recommends light duty for 8 weeks. We’ll reduce your output target by 30% and keep your commission tiering unchanged.” Penalty: “Because you were sick, we’re doubling your close rate target this quarter, and moving two prime accounts away.”
Prospective vs. retroactive test: Prospective: “Starting next month, the team’s quarterly KPI mix changes from 70/30 revenue/retention to 60/40.” Retroactive: “We are revising last month’s KPI weights so your achieved bonus is now disqualified.”
Uniform vs. singled-out test: Uniform: “All Southeast sales reps will adopt the new quotas due to a product pivot.” Singled-out: “Only you will shift to a new KPI mix because you were absent.”

Employer Checklist (Compliance)

Written KPI policy with change clause and notice periods
Prospective implementation; no retroactive clawbacks
Documented business rationale; leadership sign-off
Uniform application, unless documented medical accommodation
Confidential handling of medical data; integrate fit-to-work notes
Clear grievance/appeal path; minutes of meetings
Monitoring for unintended pay suppression (diminution risk)

Employee Checklist (Action)

Gather policies, e-mails, pay slips, and performance data
Ask HR for a written explanation and time-bound review
If needed, submit medical documentation to request accommodation
Compute before/after impact on commissions/bonuses
Elevate via grievance; if unresolved, file SEnA then NLRC case as warranted

Remedies and Potential Outcomes

Reinstatement of prior KPIs or reasonable accommodation terms
Payment of underpaid commissions/bonuses (with legal interest)
Reversal of adverse ratings/PIP actions based on unfair KPI changes
Damages (moral/exemplary) for bad faith or discriminatory conduct
Illegal/constructive dismissal relief: reinstatement without loss of seniority and full backwages, or separation pay in lieu of reinstatement if warranted
Separation pay for authorized termination due to disease (if lawfully invoked with proper medical certification)

Bottom Line

KPI changes are not illegal per se, even right after sick leave.
They become problematic when retaliatory, discriminatory, retroactive, or engineered to suppress earnings—or when they ignore medical restrictions instead of accommodating them.
Employees should document everything, engage in good-faith dialogue, and use DOLE/NLRC remedies if necessary. Employers should plan, document, and communicate—and view post-illness KPI adjustments as a temporary accommodation tool, not a punitive measure.

This guide is for general information in the Philippine context and is not a substitute for tailored legal advice. For specific situations, consult a Philippine labor lawyer or DOLE Regional Office.