Employee Rights When Excluded From a Salary Increase
Philippine Legal Perspective (Private-Sector Employees)
“While an employer is generally free to set pay scales, that prerogative ends where the Constitution, the Labor Code, statutes against discrimination, collective agreements, and established company practice begin.”
1. Salary Increases in Philippine Labor Law – Where Do They Come From?
| Source of the Raise | Nature | Is it Demandable? | Typical Triggers |
|---|---|---|---|
| a. Statutory/Wage-Order Increase (Labor Code, RA 6727) | Mandatory | Yes. Failure = illegal wage underpayment | New wage order of the Regional Tripartite Wages & Productivity Board (RTWPB) or a law (e.g., Cost-of-Living Allowance statutes) |
| b. Collective Bargaining Agreement (CBA) | Contractual | Yes. A CBA is a law between the parties; non-compliance = ULP | Periodic step increases, merit matrices, anniversary increases |
| c. Established Company Practice/Policy | Equitable obligation | Yes, if practice is: (1) deliberate; (2) consistent over a long period; (3) not dependent on company’s discretion¹ | Annual “across-the-board” or “loyalty” raises |
| d. Management-Prerogative Merit Increase | Discretionary | No, unless applied in a discriminatory or unreasonable manner | Performance appraisal, attainment of KPIs |
¹ See: Wesleyan University v. Wesleyan University Faculty & Staff Ass’n, G.R. No. 181806, March 12 2014 – the Court treated a long-observed bonus practice as demandable.
2. When Can You Be Lawfully Left Out?
| Legitimate Ground | What the Employer Must Show | Due-Process Safeguards |
|---|---|---|
| Sub-par performance | Objective appraisal results, metrics communicated in advance | Individual appraisal meeting; opportunity to contest ratings |
| Pending disciplinary case | Written notice of charges; observance of twin-notice rule | Suspension or demotion can never include pay lower than statutory minimum |
| Probationary status (if the raise is tied to regularization) | Clear probationary standards in employment contract | Non-regularization if standards unmet must follow Art. 296-297, Labor Code |
| Job classification excluded by CBA or policy (e.g., supervisors vs. rank-and-file) | CBA clause or policy wording that is reasonable and non-discriminatory | Good-faith bargaining; no union-busting intent |
3. When Is Exclusion Illegal?
Violation of Wage Orders / Statutes Example: RTWPB-issued Wage Order No. NCR-24 raises the minimum to ₱645/day. Paying ₱610 (even after “appraisal”) is unlawful wage underpayment.
Discriminatory Practice – barred by:
- Constitution (Art. III & XIII, equal protection & social justice)
- Labor Code (Art. 133-136, prohibiting gender discrimination)
- RA 10911 (Anti-Age Discrimination)
- RA 11510 (Anti-Discrimination in Employment of Women) Exclusion motivated by sex, age, religion, union affiliation, HIV status, etc., is void.
Union Busting / Unfair Labor Practice (ULP) – withholding a slated increase to active unionists while giving it to non-union members violates Art. 258-260 Labor Code; liable for ULP.
Breach of Non-Diminution of Benefits – once the employer has consistently granted an across-the-board raise (or any economic benefit) for years, unilateral withdrawal or selective denial is prohibited.²
Bad-faith Selectivity – jurisprudence condemns “capricious or whimsical” denial devoid of objective criteria (e.g., Ramada Hotel v. Hotel Employees Union, NLRC CA No. 11234-93).
² See: Australian International Corp. v. NLRC, G.R. No. 124319, April 28 1999.
4. What Remedies Are Available to the Employee?
| Forum | What You Can Claim | Prescriptive Period |
|---|---|---|
| a. DOLE Regional Office (Single-Entry Assistance Desk / Article 128 visitorial power) | Wage differentials, legal interest, penalties | 3 years for money claims; none for labor standards inspections |
| b. NLRC (Labor Arbiter) | Illegal deduction, unfair labor practice, moral & exemplary damages, attorney’s fees | 3 years (Art. 306), 1 year for ULP, 4 years for tort-like damages |
| c. Grievance Machinery & Voluntary Arbitration (if CBA exists) | Enforcement of CBA-promised raise, backwages, CBA damages | 10-day grievance filing (typical), then arbitration |
| d. Commission on Human Rights (if discrimination involves protected class) | Non-binding recommendation; prosecution under anti-discrimination laws | Within period provided in special law |
| e. Civil Service Commission / Courts (public-sector workers) | Enforcement of Salary Standardization Law tranches | 1 year for personnel action complaints |
5. Procedural Roadmap for an Aggrieved Employee
Gather Proof
- Payslips of colleagues who received the increase
- Your own payslips before & after the effective date
- Copy of CBA, memo, or wage order
- Performance evaluations, notices, or emails concerning the raise
Internal Steps
- HR Inquiry: Write a respectful letter asking for reasons & documentary basis.
- Grievance Procedure: If unionized, lodge a grievance within the CBA timelines.
External Complaint
- SEAD / DOLE Hotline 1349: Quick resolution for clear wage-order violations.
- NLRC Complaint: For ULP or discrimination, file verified complaint; attach proof; avail of mandatory conciliation.
Maintain Professional Conduct Retaliatory acts by the employer (suspension, harassment) may constitute constructive dismissal. Record every incident.
6. Frequently Asked Questions
| Question | Answer |
|---|---|
| Is “equal pay for equal work” expressly in the Labor Code? | Yes, Art. 133 makes it unlawful to discriminate against women by paying lesser compensation for work of equal value. The principle extends, by jurisprudence, to all protected classes. |
| Can my employer give only high performers a raise? | Yes—if objective performance criteria were set in advance, uniformly applied, and communicated. Otherwise, it is arbitrary. |
| Our CBA grants a ₱1,500 across-the-board raise each May. Management says profits are down, so only half will be released. Is that legal? | No. CBA provisions are mandatory; partial compliance is a unilateral contract breach and an unfair labor practice. |
| I was denied the raise while on maternity leave. Legit? | No. The law treats maternity leave as service rendered. Denial can be gender discrimination under Art. 133 and RA 11210 (105-Day Expanded Maternity Leave Act). |
| How long do I have to sue? | Money claims: 3 years from accrual; ULP: 1 year; discrimination under RA 10911: 3 years; but act promptly while evidence is fresh. |
7. Best-Practice Pointers for Employers
- Document Performance Metrics – publish appraisal matrices early.
- Apply Criteria Uniformly – avoid manager-by-manager discretion without HR vetting.
- Communicate Results – hold feedback sessions; issue written notices of denial with reasons.
- Respect Established Practices – if an annual raise has become a company tradition, memorialize it or renegotiate formally; do not surprise employees.
- Train Supervisors – on anti-discrimination statutes and wage-order compliance.
8. Key Take-Aways
- An employee cannot insist on a raise unless it is mandated by law, wage order, CBA, or established company practice.
- Selective denial is permissible only when based on reasonable, transparent, and non-discriminatory criteria.
- Exclusion that violates a statute, CBA, constitutional right, anti-discrimination law, or the non-diminution rule opens the employer to money claims, damages, and even criminal penalties under special laws.
- Internal remedies first, legal remedies second—but do not let prescription periods lapse.
Disclaimer: This article is for general educational purposes and does not constitute legal advice. For case-specific guidance, consult a Philippine labor-law practitioner or the nearest DOLE office.