Claiming Unpaid Salaries for Agency Workers in the Philippines
This practical legal guide is written for workers hired through manpower/contracting agencies (“agency workers”) and for HR/compliance teams of principals and contractors. It synthesizes the governing rules under the Labor Code (as amended), pertinent department orders and labor advisories, and leading doctrines from Philippine jurisprudence.
1) Who counts as an “agency worker”?
An agency worker is hired by a contractor/subcontractor and deployed to a principal to perform work under a service agreement (e.g., janitorial, logistics, merchandising, BPO support). Two models exist:
- Legitimate job contracting – the contractor has substantial capital, independent business, and exercises control over its employees’ work.
- Labor-only contracting (LOC) – prohibited. Indicators include: contractor lacks substantial capital; supplies only people (no equipment/independent business); and the principal controls the work or the deployed work is directly related to the principal’s business. If LOC is found, the principal is deemed the direct employer.
Why this matters: It determines who you can sue and who must pay—but even in legitimate contracting, the principal and contractor are solidarily liable for labor-standards monetary claims (e.g., wages, 13th month, OT).
2) What wages and benefits must be paid?
Agency workers are entitled to all labor-standards benefits applicable to rank-and-file employees, including:
- Timely wages: at least twice a month, within 16 days between paydays; no kickbacks or deposit requirements.
- Minimum wage: per regional wage order where the worker is actually assigned.
- Overtime pay: +25% (ordinary day), +30% (rest day/special day), with higher rates when combined with holidays/rest days.
- Night shift differential: +10% for work from 10:00 p.m. to 6:00 a.m.
- Holiday pay: Regular holiday—100% if unworked; 200% if worked (plus OT rules). Special non-working—“no work, no pay,” but +30% if worked.
- Service Incentive Leave (SIL): at least 5 days per year convertible to cash if unused (unless lawfully exempt).
- 13th-month pay: at least 1/12 of basic salary earned within the calendar year, payable on or before December 24 (or pro-rated on separation).
- Service charges (if applicable): 100% distributed to covered employees.
- Final pay on separation: last salary + SIL conversion + prorated 13th month + any other due amounts, generally within 30 days from separation (unless an earlier company policy applies).
- Lawful deductions only: statutory contributions/taxes, or those authorized in writing and for the worker’s benefit. Deductions for losses/damages require due process and proof of fault.
3) Who is liable if salaries aren’t paid?
- Primary employer (contractor): directly liable to pay its employees.
- Principal: solidarily liable with the contractor for labor-standards violations (e.g., unpaid wages, holiday pay), whether or not the contracting is legitimate.
- If labor-only contracting is found, the principal becomes the direct employer and is fully liable for all employment obligations (including security of tenure).
Practical effect: You may claim against both contractor and principal. If one is insolvent, you may collect from the other.
4) What counts as “unpaid salaries”?
- Entire or partial non-payment on a payday
- Delayed payment beyond statutory cut-offs
- Underpayment (below minimum wage or incorrect OT/holiday rates)
- Illegal deductions (e.g., “uniform deposit,” cash bond without due process)
- Withholding of final pay due to “pending clearance” without legal basis
5) Deadlines (Prescriptive Periods)
- Money claims (wage differentials, OT, 13th month, holiday pay, SIL pay, illegal deductions): 3 years from when each claim accrues (usually each payday).
- Illegal dismissal (if also claiming backwages/reinstatement): 4 years from dismissal.
- Criminal actions for certain wage violations: generally 3 years (but these are rare and typically follow a DOLE compliance process).
Tip: Don’t wait. File while documents and witnesses are fresh.
6) Where and how to claim (choose the most strategic path)
A) Conciliation–Mediation (SEnA)
- What it is: A quick, mandatory first step for most labor disputes.
- How: File a Request for Assistance (RFA) at the DOLE Regional/Field Office where you worked or where the contractor/principal is located.
- Why use it: Faster, informal; can result in immediate settlement (full or installment), with both contractor and principal in attendance.
B) DOLE Labor Inspection / Compliance Order
- What it is: DOLE’s visitorial and enforcement powers allow it to inspect worksites and issue Compliance Orders for labor-standards violations regardless of amount.
- How: Lodge a complaint at the DOLE Regional Office; request inspection of the principal’s site where you were deployed.
- Best for: Systemic issues (minimum-wage underpayment, unpaid OT/holiday pay across many workers), and when you want solidary liability enforced swiftly.
- Outcome: A Compliance Order directing payment; DOLE may issue a writ of execution. Appeals go to the Secretary of Labor (often with bond requirements for employers).
C) Art. 129 Small Money Claims (Regional Director)
- Scope: ≤ ₱5,000 per employee and no reinstatement sought.
- Note: Less used in practice because inspection powers can cover any amount, and NLRC can bundle claims.
D) NLRC (Labor Arbiter) Case
File here if:
- You also claim illegal dismissal (reinstatement/backwages/separation pay);
- There is a dispute on employer–employee relationship;
- You want to consolidate all monetary claims (regardless of amount) and have them reduced to a judgment.
Process: Mandatory conference ➜ position papers ➜ decision. Appeals go to the NLRC Commission, then Rule 65 to the Court of Appeals.
Who to sue: Contractor and principal (solidary liability). Plead labor-only contracting in the alternative if indicators exist.
Strategic note: If your primary goal is prompt wage payment across many workers, an inspection-driven Compliance Order can be faster. If dismissal/tenure is in play, NLRC is the correct forum.
7) Evidence you should gather (and how to get it)
- Employment & deployment papers: employment contract, deployment orders, ID, timekeeping rules, policy manuals.
- Service agreement details: agency assignment letters; anything showing the principal’s control/supervision.
- Pay records: payslips, payroll summaries, ATM transaction history, cash vouchers, remittance advice; screen photos of pay apps/portals.
- Work schedules & proof of hours: DTRs, biometrics logs, gate passes, emails/texts/Viber/Teams instructions, supervisor chat messages.
- Regional wage orders & rates: to show the correct minimum wage at the place and time of assignment.
- Holiday/rest day assignments: memos, duty rosters.
- Resignation/termination documents and clearance communications.
- Witness statements: short, dated narrations signed by co-workers; attach IDs if possible.
If the contractor/principal withholds records: In DOLE inspections and NLRC cases, non-production of payroll/time records can lead to adverse inferences against the employer. Ask the officer or arbiter to compel production.
8) How to compute typical claims (quick formulas)
Replace “basic rate” with your daily or hourly base pay depending on your payroll scheme.
- Underpayment to minimum wage = (Regional minimum – basic rate) × days actually worked within the claim period.
- Overtime (OT) pay = OT hours × basic hourly rate × OT premium (1.25 on ordinary days; 1.30 on rest days/special days; apply holiday/rest-day multipliers first before OT premium).
- Night shift differential = hours between 10 p.m.–6 a.m. × basic hourly × 0.10.
- Regular holiday pay (unworked) = basic daily rate (if eligible).
- Regular holiday pay (worked) = basic daily × 2.00 (plus OT premium if OT).
- Special non-working day (worked) = basic daily × 1.30 (plus OT premium if OT).
- SIL conversion = (unused SIL days) × basic daily rate.
- 13th-month pay (separation mid-year) = (sum of basic salaries actually earned Jan–separation) ÷ 12.
- Illegal deductions refund = sum of unauthorized deductions (+ legal interest if awarded).
Courts/DOLE typically apply legal interest (currently 6% per annum) from the time the amount is judicially or administratively demanded until full payment, depending on the decision.
9) Signs of labor-only contracting (useful in pleadings)
- Contractor lacks substantial capital (e.g., minimal paid-up capital; no tools/equipment).
- Workers perform functions directly related to the principal’s main business.
- Control test points to principal (work schedules set by principal, supervision by principal’s managers).
- Contractor does not carry on a distinct business; its people are mixed with principal’s workforce.
- Repeated “5-month” cycling to avoid regularization.
- In-house agency owned/controlled by the principal.
Plead these facts so the adjudicator may declare LOC and treat the principal as employer.
10) Special scenarios
- Contractor disappears or shuts down: Proceed against the principal on solidary liability; ask DOLE/NLRC to pierce the veil if evidence shows alter-ego relations.
- Client non-payment to contractor: Not a defense against paying workers.
- Change of contractor (“retendering”): Claims remain with the former contractor and the principal (solidarily). A successor contractor isn’t liable unless it assumes liabilities or there’s merger/transfer of business.
- Project/seasonal set-ups: Monetary benefits still apply for hours/days actually worked; separations follow project/season rules but unpaid wage claims remain enforceable.
- Mass claims/group complaints: Nominate worker representatives and attach a matrix of claimants with periods, rates, and computed claims.
11) Procedure playbook (step-by-step)
Demand letter to contractor and principal (email + registered mail). Give 5–7 calendar days to comply; attach computations and IDs.
File SEnA RFA at the DOLE office with jurisdiction; name both contractor and principal. Bring IDs, deployment proof, and computations.
If unresolved, decide path:
- Inspection/Compliance Order (good for systemic underpayment, quicker enforcement against both parties), or
- NLRC case (if dismissal or contested relationship issues exist).
Attend conferences; push for payroll/time record production.
Secure order/decision; if the employer appeals without bond (when required), move to dismiss appeal.
Execution: Garnish bank accounts, levy on properties, or request DOLE writ execution assistance.
Criminal referral (if egregious or repeated non-payment): ask DOLE for endorsement to prosecutors under the Labor Code’s penal provisions.
12) Venue and parties
- Venue: Where the employee worked, where the respondent resides/does business, or the DOLE/NLRC regional office covering the principal’s site.
- Parties to name: Your employer-contractor, its officers (if appropriate), and the principal (for solidary liability). Use the complete registered names and addresses.
13) Settlements and releases
- Settlements during SEnA/NLRC are valid if voluntary, with clear terms and correct computations.
- Avoid “quitclaims” that are unconscionably low or obtained by coercion; these can be nullified.
- Insist on net-of-tax, net-of-deductions amounts, and specify payment dates and mode (cashier’s check/bank transfer).
14) Employer defenses you can anticipate (and how to counter)
“No employer–employee relationship.”
- Show control, timekeeping, supervision, disciplinary memos; argue LOC if indicators exist.
“We paid through the ATM/pay app.”
- Ask for payroll journals, ATM payroll credit proofs, and acknowledgment receipts; compare to time records.
“Client didn’t pay us.”
- Not a defense under the Labor Code; solidary liability applies.
“Deductions were for losses/damages.”
- Require due process papers, incident reports, and proof of fault/negligence; otherwise seek refund.
“You’re project-based/casual, not regular.”
- Even if so, wage and benefits for actual work remain due; regularization issues are distinct from unpaid salaries.
15) Worker-friendly computation checklist (attach to your filing)
- Dates actually worked and rate per day/hour
- Minimum wage in assignment region on each relevant date
- OT hours, rest day/holiday work logs
- Night hours (10 p.m.–6 a.m.)
- SIL accrued/used; conversion
- 13th month earned (per month’s basic pay)
- Illegal deductions list
- Interest claim and demand date
- Solidary liability prayer vs. principal
16) Plain-language sample demand (adapt as needed)
Subject: Demand for Payment of Unpaid Wages and Statutory Benefits To: [Contractor’s Registered Name] and [Principal’s Registered Name] I was engaged by [Contractor] and deployed to [Principal] at [worksite] from [dates] as [position]. My statutory wages and benefits remain unpaid/underpaid as follows: [bullet list with amounts and dates]. Under the Labor Code and contracting rules, you are solidarily liable to pay these amounts. Kindly remit ₱[amount] within 5 calendar days from receipt to [bank details] and provide copies of payroll/time records. Otherwise, I will file a case with DOLE/NLRC and seek interest, attorney’s fees, and enforcement. Sincerely, [Name, address, contact]; cc: DOLE Regional Office [Region].
17) Remedies on appeal & enforcement
- DOLE Compliance Orders: appeal to the Secretary of Labor; employers usually need to post a bond to stay execution of monetary awards.
- NLRC Decisions (Labor Arbiter): appeal to the Commission within 10 calendar days; to stay monetary awards, employers must post a bond equal to the award. Next recourse is Rule 65 to the Court of Appeals on jurisdictional errors.
- Execution: Move promptly for writ of execution; request garnishment of bank accounts and levy on personal/real property.
18) Practical tips for agency workers
- Always name both the contractor and principal in your filings.
- Compute per component (minimum wage differential, OT, holiday, NSD, SIL, 13th month, illegal deductions) and sum by month.
- Keep screenshots and chat logs with supervisors at the principal—these show control and support LOC or solidary liability.
- If many co-workers are affected, file as a group and ask for inspection.
- If you resign or your contract ends, file immediately; don’t exceed the 3-year prescriptive period for money claims.
Final word
Agency arrangements do not dilute wage protections. Whether the contractor is legitimate or labor-only, the law ensures that workers are paid—and that the principal shares liability when things go wrong. If your salary is unpaid or underpaid, assert your rights promptly using the pathways above, document everything, and pursue the forum that best fits your goals (quick compliance via DOLE inspection or comprehensive relief via the NLRC).