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Writing a legal article on due process and salary increases

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Due Process for Disciplinary Actions That Affect Salary Increases

Philippine legal framework and practical guide

Disclaimer: This article is for educational purposes only and is not a substitute for individualized legal advice. Where specific issues arise, consult a qualified Philippine labor-law or public-sector specialist.

1. Why this matters

In both the private and public sectors, the prospect of a salary increase—whether a statutory wage adjustment, a bargained CBA raise, a performance-based “merit” increment, or a government salary-step upgrade—forms a crucial part of an employee’s compensation package. Employers can lawfully withhold or postpone such increases as a disciplinary sanction, but only after satisfying Philippine due-process requirements. Failure to observe those requirements exposes employers to money claims, damages, and, in dismissal cases, reinstatement.

2. Legal sources at a glance

Area	Key provisions	Core take-aways
Constitution	Art. III §1 (Due Process Clause); Art. XIII §3 (right to just and humane conditions of work)	Government and private action alike must comply with substantive and procedural due process.
Labor Code of the Philippines (Pres. Decree 442, as amended)	Art. 100 (prohibition against elimination or diminution of benefits); Art. 113 & 116 (unlawful deductions); Art. 297-299 (just causes & termination procedure); Book VI, Rule I, Sec. 2-7 of the Omnibus Rules; DO 147-15 (2015 Implementing Rules on Termination)	Employers may impose sanctions—including affecting pay—for just cause and with due process. Unauthorized deductions from earned wages are prohibited, but withholding a future, yet-to-accrue increase is allowed if procedurally compliant.
Wage Orders & NWPC Guidelines	Regional boards’ wage adjustments	Statutory wage increases (minimum-wage corrections) are mandatory and cannot be withheld as punishment.
Civil Service Law & Rules	RA 6770, Exec. Order 292 Book V; 2017 RACCS; Salary Standardization Acts (RA 6758, RA 11466)	For government personnel, denial or deferment of a salary-step increment or merit raise is an administrative penalty requiring notice, hearing, and CSC approval.
Jurisprudence	See § 8 infra	Supreme Court decisions flesh out “twin-notice” rule, concept of “reasonable opportunity,” and when withholding pay constitutes an illegal deduction versus a valid sanction.
Company Policy / Codes of Conduct / CBA	Employer’s own regulations	Binding if reasonable, published, and not contrary to law or morals. May specify that certain infractions trigger forfeiture of merit increases.

3. Understanding salary increases

Statutory wage orders. These periodically raise the minimum wage. They are automatic, inalienable, and cannot be waived.
Across-the-board or CBA increases. These arise from collective bargaining or company announcements (e.g., “all staff get ₱1,000 more starting July”). Once promised, they become a benefit covered by Article 100; arbitrary withdrawal is barred.
Merit or performance-based increments (private sector) / salary-step increments (public sector). These are contingent—an employee must satisfy performance standards and sometimes good-conduct requirements. Management may, by valid policy, forfeit or defer them as a penalty.

4. When can an employer lawfully withhold a salary increase?

There is a legitimate cause. The act or omission must violate a written company rule, CBA provision, or statutory duty.
Penalty is proportionate and expressly provided.
- Example: the Code of Conduct states that accumulation of three tardiness infractions within a quarter “shall result in forfeiture of the next merit increase.”
Twin-notice and hearing requirements are strictly observed.
No violation of Article 113 (no deductions from wages that have already vested).

Tip for employers: Treat the forfeiture or deferral of a raise as if it were a minor suspension: document everything.

5. The due-process template (private sector)

A. Substantive due process

There must be substantial evidence of the infraction (not mere accusation).
The penalty must be listed in the company’s rules or reasonably implied from a “management prerogative” clause.
Penalties must be applied consistently (no selective enforcement).

B. Procedural due process (the “twin-notice” rule)

Step	What to serve	Timing / contents
1. Notice to Explain (NTE)	Written charge, facts in detail, rule violated, possible penalty (e.g., forfeiture of next merit increase).	Serve within a reasonable period (DO 147-15 suggests 5 calendar days) from discovery of the offense.
2. Opportunity to be heard	Written explanation and/or hearing. The employee may present evidence or counsel.	Must be genuine. A 24-hour deadline is too short (Abbott Labs v. Alcaraz, G.R. 192571, Jan 23 2013).
3. Notice of Decision	States facts, evidence, rule breached, and the specific sanction (e.g., “Your 2025 merit increase is hereby forfeited”).	Serve promptly after deliberation; indicate the effective date and available remedies (grievance, NLRC, etc.).

Failure in any of these steps converts the sanction into an illegal deduction or constructive dismissal (if no raise renders pay below minimum).

6. Public-sector twist: Civil Service due process

For national- and local-government employees:

Satisfaction ratings & step increments. A below-“Satisfactory” rating or unresolved Case may, under CSC MC 8-s. 2017, defer a salary-step increment for one year.
RACCS procedure. A formal charge, 15-day answer period, pre-hearing conference, full-blown hearing (if factual issues persist), and a CSC-approved decision are mandatory.
Appeals. Decision of the disciplining authority is appealable to the Commission within 15 days; further recourse lies with the Court of Appeals under Rule 43.

7. Distinguishing withholding future increases vs illegal deductions

Scenario	Legality	Rationale
Employer cancels a promised (already vested) ₱1,500 across-the-board raise after it is due.	Illegal, violates Art. 100.	Benefit has ripened; cannot be reduced.
Employer deducts ₱1,500 from an employee’s already-paid wages to “recover” a monetary shortage without written authorization.	Illegal, violates Art. 113.	Earned wages are protected.
Employer—after due process—declares that employee will not receive the next merit raise scheduled six months hence.	Valid if rules allow and procedure was followed.	No accrued benefit yet; tied to good conduct.

8. Key Supreme Court guideposts

Abbott Laboratories v. Alcaraz (G.R. 192571, 23 Jan 2013)
- Affirmed dismissal but awarded nominal damages because employer rushed the hearing; underscores adequate hearing time.
Sy-Tan v. Court of Appeals (G.R. 143517, 13 Feb 2004)
- Withholding of benefits without proper notice deemed an unlawful deduction.
Pepsi-Cola v. Garcia (G.R. L-46129, 29 Mar 1982)
- “Management’s prerogative must be exercised in good faith;” first formulation of proportionality test.
CSC v. Ontiveros (G.R. 199457, 10 June 2014)
- Denial of salary-step increment vacated because agency did not follow RACCS.

Although the Court has dealt more often with suspensions and dismissals, its reasoning on due-process lapses applies equally to monetary penalties.

9. Practical workflow for employers

Codify. Embed a clear matrix of offenses & penalties (including forfeiture of increases) in the employee handbook / code of conduct.
Publish & orient. Distribute updated rules; secure acknowledgements.
Document infractions meticulously. Time-in records, performance appraisals, audit findings, etc.
Follow the twin-notice rule to the letter. Use templates but tailor to each case.
Deliberate and decide. Keep minutes; ensure that the penalty accords with precedent.
Communicate remedies. Spell out grievance steps to show fairness.

10. Remedies for employees

Private sector

Grievance machinery (if CBA) or company appeal.
National Labor Relations Commission (NLRC). File an illegal deduction or unpaid wages case within 3 years (Art. 306).
DOLE Single-Entry Approach (SEnA). 30-day facilitated mediation before formal NLRC filing.

Public sector

Appeal to CSC within 15 days of receipt of decision.
Court of Appeals (Rule 43) → Supreme Court (Rule 45) if still aggrieved.

11. Intersection with other laws

Data Privacy Act (RA 10173). Employee’s personal data in disciplinary records must be secured.
Anti-Sexual Harassment Act & Safe Spaces Act. Penalties for harassment may include pay-grade freezes.
SEnA & ADR Acts. Encourage out-of-court resolution.
Income-Tax treatment. A deferred increase is not taxable until actually earned; an illegal deduction, once recovered, constitutes taxable income in the year received.

12. Checklist: “Is our salary-increase sanction bullet-proof?”

Infraction and penalty are in writing and pre-communicated.
Penalty is proportionate and consistent with past practice.
Twin-notice complied with (dates and acknowledgements on file).
Employee was given at least 5 calendar days to answer NTE.
Decision explains facts, rule, evidence, and why salary increase is withheld.
Statutory wage hikes not affected.
No pending ULP or CBA violation allegations related to this penalty.
Records kept for 3 years (Labor Code) or 10 years (RACCS) as applicable.

13. Frequently misunderstood points

Myth	Reality
“Salary increases are management prerogative, so we can scrap them anytime.”	Not if they are mandated by wage orders, CBAs, company practice, or have already accrued.
“Holding a merit raise isn’t a ‘penalty,’ so no hearing needed.”	It is a disciplinary sanction affecting compensation—due process applies.
“We can deduct the amount of the planned raise up front and give it back if the employee behaves.”	This violates Article 113 (illegal deductions) and may constitute constructive dismissal.
“Public-sector due-process rules are lighter; it’s just performance management.”	RACCS requirements are often stricter than DOLE’s, including formal charge sheets and CSC review.

14. Conclusion

The power to reward and discipline is inherent in management, but the Philippine Constitution, the Labor Code, and Civil Service rules place salary-related sanctions squarely inside the due-process fence. Employers who pair substantive justification with a meticulous twin-notice procedure can validly withhold future salary increases. Those who shortcut the process risk illegal-deduction findings, back-pay awards, and even damages for moral or exemplary injury.

For employees, vigilance over one’s pay records, familiarity with company or agency procedures, and timely resort to grievance or regulatory channels remain the best shields against unlawful pay suppression.

Prepared 10 May 2025 | Manila, Philippines