Wage Deduction Limits in the Philippines (Legal Article)

1) The short legal frame: “No work, no pay” vs. “wage deductions”

In Philippine labor law, deducting pay because an employee did not work (an absence) is usually treated as a straightforward application of the “no work, no pay” principle. That is different from an additional “penalty” deducted from wages (a fine, punitive charge, or extra amount beyond the value of the time not worked).

So the key question is often:

Allowed: Employer does not pay the wage corresponding to time not worked (unpaid absence).
Restricted/usually illegal: Employer deducts more than the wage corresponding to time not worked (a punitive deduction), unless the deduction falls under a recognized lawful category and follows legal requirements.

This distinction matters because Philippine law tightly regulates wage deductions, even when an employee violated a rule.

2) Governing rules and where they come from

In the private sector, wage deductions are governed mainly by:

The Labor Code provisions on wages and wage deductions (and their renumbered/updated counterparts as amended), and
The Implementing Rules and Regulations (IRR) for wage payment and authorized deductions, plus relevant DOLE issuances and long-standing labor standards principles.

Basic policy: Wages are protected. The law assumes employees need wages for subsistence, so employers can’t freely subtract amounts just because they want to discipline someone.

3) What counts as an “absence” in wage-deduction analysis

Common scenarios:

Whole-day absence (with or without notice; with or without approval).
Partial-day absence (late arrival, undertime, extended break).
Absence covered by leave credits (service incentive leave, vacation leave, sick leave under company policy/CBA).
Absence covered by statutory leave (maternity, paternity, parental leave for solo parents, leave for VAWC, special leave for women, etc.).
Work suspension / no work due to employer or fortuitous events (not always treated as employee “absence”).

The legality of “deducting” depends on which category applies.

4) The “no work, no pay” rule and its limits

A. When an employer may withhold pay for absences

As a general rule, if the employee did not render work, the employer does not have to pay for that time—unless a law, contract, CBA, or company policy provides otherwise. That means:

Unpaid absence (AWOL or simply no leave credits): Employer may deduct the equivalent wage for the day(s)/hours not worked.
Hourly/daily-paid workers: straightforward—don’t pay for the period not worked.
Monthly-paid employees: the employer typically “docks” the salary by converting the monthly pay into a daily/hourly equivalent and subtracting the time not worked.

B. Limits: you cannot “double punish” through wages

Even if an employee’s absence violates policy (e.g., AWOL), the employer’s discipline should usually take forms like:

written warning,
suspension,
or dismissal (for just cause, with due process),

not an extra wage penalty (cash fine), unless it is specifically lawful.

5) Lawful vs. unlawful wage deductions (core concept)

Philippine wage protection rules generally allow deductions only when they are:

Required or authorized by law (e.g., withholding tax; SSS/PhilHealth/Pag-IBIG contributions where applicable; court-ordered garnishment in proper cases; other statutory deductions);
Authorized by the employee in writing and not otherwise prohibited (e.g., certain insurance premiums, loan amortizations, union dues/agency fees consistent with rules); or
Authorized by regulations / DOLE under recognized categories and subject to safeguards.

Absence-related docking is not treated as a “special deduction” if it simply corresponds to unworked time. But if the employer deducts more than the value of unworked time, it becomes a wage deduction that must independently qualify as lawful—and many “absence fines” do not.

6) Can employers impose “fines” for absences, tardiness, or undertime?

General rule: punitive fines taken from wages are legally risky

A policy that says “₱500 penalty for every late arrival” or “₱1,000 for every unexcused absence,” deducted from wages, is often problematic because:

it is not simply nonpayment for unworked time, and
it is a deduction for the employer’s benefit or a disciplinary fine, which wage protection rules generally restrict unless clearly authorized and properly handled.

What employers commonly may do instead

Dock only the time not worked (minutes/hours/days), properly computed; and/or
Impose disciplinary sanctions (warning/suspension) using due process.

7) How to compute lawful docking for absences (practical)

Because disputes often come from “wrong math,” employers should compute docking transparently.

A. Daily-paid or hourly-paid employees

Daily-paid: Deduction = 1 day wage per day absent.
Hourly-paid: Deduction = hourly rate × hours absent.

B. Monthly-paid employees (common in offices)

Employers typically convert monthly salary into a daily/hourly equivalent. There are different compliant computation methods depending on how the monthly rate is defined (and whether it already covers rest days/holidays). In practice, employers often use one of these approaches:

Calendar-day factor method (commonly used when the monthly salary is intended to cover the entire year spread)
- Daily equivalent ≈ (Monthly rate × 12) ÷ 365
Working-days factor method (commonly used when monthly salary is understood as covering only the working days in the year)
- Daily equivalent ≈ Monthly rate ÷ average working days per month (varies by employer schedule)

Best practice: Use the method consistent with (a) your pay structure, (b) your company policy/contract, and (c) minimum wage compliance—then apply it consistently.

C. “Tardiness/undertime docking” (minutes)

Allowed approach:

Deduct only the equivalent of minutes/hours not worked.

Risky/usually improper approaches:

“One hour deduction for every minute late”
“Half-day deduction for any tardiness”
“Double docking” (deducting time not worked and deducting an extra penalty amount)

8) Leave credits: when an “absence” should not reduce pay

If the employee has a paid leave entitlement that covers the day, then the absence should be treated as a paid leave, not an unpaid absence.

A. Service Incentive Leave (SIL)

Qualified employees generally earn SIL (commonly 5 days/year) unless legally exempt (e.g., certain covered categories, or those already enjoying at least 5 days paid leave under company policy/CBA). If the absence is charged to available SIL, then no salary docking should occur for that day.

B. Company leaves / CBA leaves

If the employer grants vacation leave/sick leave and the employee has credits, the day is normally paid when approved/chargeable.

C. Statutory leaves (illustrative)

Depending on eligibility and the applicable law:

Maternity leave (SSS-based benefit; employer obligations vary depending on circumstances and policy)
Paternity leave
Solo parent leave
VAWC leave
Special leave for women (e.g., for gynecological surgery, subject to law conditions)

For statutory leaves that are paid under law or benefit systems, “docking” may be improper if it defeats the legal benefit.

9) Special case: “Forced leave,” work suspensions, or employer-caused no work

Not all “no work” situations are employee absences.

Examples:

Employer tells employee not to report (e.g., preventive suspension, floating status in certain contexts, operational shutdowns).
Work is unavailable due to business reasons (fact-specific).
Work suspension due to calamities or public orders (often covered by specific rules/advisories, and can be complex).

In these cases, docking may trigger separate legal issues (e.g., due process for preventive suspension; rules on temporary layoffs/floating status; good faith business necessity; or special labor standards guidance during emergencies).

10) Other common deductions employers mix up with “absence penalties”

Employers sometimes label a deduction as “absence penalty” when it’s really one of the following:

A. Cash advances or salary loans

Deductions are often permitted with employee consent and clear documentation. However:

The deduction scheme should not be oppressive or used as disguised discipline.

B. Company property loss/damage

Philippine rules typically require safeguards before charging employees, such as:

proof of responsibility,
opportunity to explain, and
reasonable limitation on the amount and manner of deduction (often done gradually, not as a sudden full take-out from wages).

C. Uniforms, tools, deposits

These are high-risk. Wage protection rules generally disfavor deductions that shift ordinary business costs to employees, unless clearly lawful and properly agreed.

11) Wage deduction limits and “floor rules” employers must respect

Even when a deduction is arguably authorized, employers should respect these boundaries:

No deduction unless it fits a lawful category (law/valid authorization/regulation).
No deduction as retaliation for asserting labor rights.
No deductions that effectively cause underpayment of legally required wages for work actually performed (minimum wage, holiday pay where applicable, premium pay rules, etc.).
Transparency: deductions should be reflected in payslips/payroll and supported by documents (authorizations, loan schedules, union check-off agreements, etc.).
Proportionality and due process where fault is alleged (loss/damage; accountability-based deductions).

For absence docking specifically:

The safe rule is: Deduct only the equivalent pay for the time not worked, unless another lawful deduction basis applies.

12) Kasambahay (Domestic Workers): stricter deduction protections

For domestic workers under the Kasambahay law, deduction rules are even more protective. A common legal feature in this area is:

deductions for loans/advances are typically capped per pay period and tightly regulated,
and employers generally cannot deduct business costs or impose arbitrary fines from wages.

If the worker is a kasambahay, do not assume the “regular employee” deduction practices apply.

13) Documentation and policy: what employers should have (and what employees should ask for)

Employer best practices

Clear written policy on attendance, leave conversion, and salary docking computations.
Written leave approvals/denials.
Accurate timekeeping records.
Clear payslips showing how deductions were computed.
Written employee authorizations for non-statutory deductions.

Employee best practices

Keep copies/screenshots of schedules, DTR logs, leave applications, approvals, payslips.
Ask HR for the formula used for docking monthly pay.
Ask whether an absence was charged to leave credits or treated as unpaid.

14) When deductions become actionable (employee remedies)

If an employer deducts amounts that are not lawful (e.g., punitive fines, unauthorized deductions, deductions not supported by records), employees may pursue:

Company-level grievance procedures (if any), then
DOLE assistance/mediation (e.g., through SEnA or labor standards enforcement, depending on the case), and/or
Money claims for illegal deductions/underpayment, typically subject to the prescriptive period for money claims (commonly three years in labor standards contexts).

Potential consequences for employers can include orders to refund незаконные/illegal deductions and pay wage differentials, and exposure to broader labor standards findings if the practice is systemic.

15) Practical “legality checklist” for absence-related deductions

Use this quick test:

A. Is the employee being paid less only because they did not work?

If yes: likely permissible as “no work, no pay,” provided the absence is not covered by paid leave or a paid statutory benefit.

B. Is the employer deducting something extra (a fine/penalty) on top of time not worked?

If yes: likely unlawful unless it clearly falls under a lawful deduction category with proper authorization and safeguards.

C. Was the absence chargeable to leave credits or protected leave?

If yes: docking may be improper.

D. Is the computation consistent and documented?

If no: even a theoretically valid docking can become disputable.

16) Bottom line

In the Philippines, employers can generally dock pay for absences to the extent of actual time not worked—that is normal wage computation. But employers usually cannot impose punitive “absence penalties” by deducting extra amounts from wages unless the deduction is independently lawful (authorized by law or valid authorization and compliant safeguards).

If you want, tell me the situation you’re dealing with (monthly or daily pay, the exact policy wording, and what appeared on the payslip), and I can map it to the most likely lawful/unlawful categories and the common compliance pitfalls.