Introduction

In the Philippine labor landscape, the computation of wages for monthly-paid employees involves specific methodologies to ensure compliance with labor laws and fairness in compensation. Central to this are the "factors" or divisors used to determine equivalent daily rates from monthly salaries, particularly the 313-day and 365-day factors. These factors play a crucial role in calculating deductions for absences, overtime pay, holiday premiums, and payments for work on rest days. Additionally, the treatment of pay for unworked rest days is governed by provisions in the Labor Code of the Philippines (Presidential Decree No. 442, as amended) and related Department of Labor and Employment (DOLE) issuances. This article provides a comprehensive examination of these concepts, including their legal foundations, applications, differences, and practical implications for employers and employees.

Understanding Monthly-Paid Employees

Monthly-paid employees receive a fixed salary for each calendar month, regardless of the number of working days in that month. This contrasts with daily-paid or hourly-paid workers, whose compensation is based on actual days or hours worked. Under Philippine law, monthly-paid status implies a stable income stream, but it raises questions about how this salary accounts for non-working days such as rest days, holidays, and absences.

The Labor Code does not explicitly define "monthly-paid" versus "daily-paid," but jurisprudence and DOLE guidelines distinguish them based on payment structure. Monthly-paid employees are typically salaried professionals, supervisors, or rank-and-file workers whose pay is not docked for unworked regular days unless absences are unauthorized. However, the inclusion of pay for unworked rest days in the monthly salary depends on company policy, collective bargaining agreements (CBAs), or the computation method employed.

The Concept of Factors in Wage Computation

Factors, also known as divisors, are numerical values representing the estimated number of paid days in a year. They are used to convert monthly salaries into equivalent daily rates for various purposes, such as:

Deducting pay for unexcused absences.
Computing overtime, night shift differentials, or premium pay for work on special days.
Determining benefits like service incentive leave (SIL), 13th-month pay, or separation pay.
Assessing whether the monthly salary already includes compensation for unworked rest days or holidays.

The formula for the equivalent daily rate (EDR) is:

[ EDR = \frac{\text{Monthly Salary} \times 12}{\text{Factor}} ]

The choice of factor affects the EDR: a higher factor results in a lower EDR, implying that the monthly salary covers more non-working days (e.g., rest days and holidays). Conversely, a lower factor yields a higher EDR, suggesting the salary primarily compensates for worked days only.

DOLE guidelines, including the Handbook on Workers' Statutory Monetary Benefits and various department orders, endorse the use of specific factors based on the employment terms and whether non-working days are compensated.

The 365-Day Factor

The 365-day factor assumes that the monthly salary compensates the employee for all days in the year, including rest days, regular holidays, and special non-working days, even if unworked. This factor is derived from the average number of days in a non-leap year (365), encompassing:

Approximately 251-261 working days (depending on a 5-day or 6-day workweek).
52 weekly rest days (typically Sundays).
12 regular holidays (as per Republic Act No. 9492 and subsequent proclamations, including New Year's Day, Araw ng Kagitingan, Labor Day, Independence Day, National Heroes Day, Bonifacio Day, Christmas Day, Rizal Day, and four movable holidays like Maundy Thursday, Good Friday, Eid'l Fitr, and Eid'l Adha).
Special non-working days (varying annually, but typically 3-5, such as Chinese New Year, EDSA Revolution Anniversary, Black Saturday, Ninoy Aquino Day, All Saints' Day, and additional days declared by the President).

When to Use the 365-Day Factor

This factor applies when:

The employment contract, company policy, or CBA explicitly states that the monthly salary includes pay for unworked rest days, regular holidays, and special days.
The employee is not required to work on rest days or holidays but still receives full pay.
There is no separate compensation provided for work on these days beyond the basic salary.

In such cases, the monthly salary is "all-inclusive," meaning no additional premium is due for unworked non-working days. However, if the employee works on a rest day or holiday, they may still be entitled to premium pay under Articles 92-94 of the Labor Code (e.g., 200% for regular holidays, 130% for rest days).

Implications

Using the 365-day factor results in a lower EDR, which benefits employers by reducing the base for overtime or premium calculations. For employees, it ensures steady income without deductions for standard non-working days. However, it may lead to disputes if employees perceive their effective daily pay as diluted.

Example

Assume a monthly salary of PHP 20,000.

[ EDR = \frac{20,000 \times 12}{365} \approx PHP 657.53 ]

For an unexcused absence of one day, the deduction would be PHP 657.53.

The 313-Day Factor

The 313-day factor assumes that the monthly salary compensates only for days actually worked or paid holidays, excluding unworked rest days. It is calculated as:

365 total days minus 52 weekly rest days = 313 days.

This factor accounts for a 6-day workweek where Sundays (or the designated rest day) are unworked and unpaid unless the employee renders service.

When to Use the 313-Day Factor

This factor is appropriate when:

The employee works a 6-day schedule and is not paid for unworked rest days.
Company policy does not include rest day pay in the monthly salary.
The employment is such that pay is primarily for productive days, common in certain industries like manufacturing or retail where rest days are strictly off-days without compensation.

In these scenarios, the monthly salary does not cover unworked rest days, so if an employee works on a rest day, they receive additional pay (100% premium under Article 93, or 130% if it coincides with a holiday).

Implications

The 313-day factor yields a higher EDR, increasing the base for premiums and benefits. This can be advantageous for employees in terms of higher overtime rates but may result in deductions for unworked rest days if not covered by policy.

Example

Using the same PHP 20,000 monthly salary:

[ EDR = \frac{20,000 \times 12}{313} \approx PHP 766.77 ]

For an absence, the deduction is PHP 766.77, higher than under the 365-factor, reflecting that rest days are not embedded in the salary.

Comparing the 313 and 365 Factors

Aspect	313-Day Factor	365-Day Factor
Basis	Excludes unworked rest days (365 - 52)	Includes all days, worked or unworked
EDR Calculation	Higher EDR (salary for fewer days)	Lower EDR (salary spread over more days)
Pay for Unworked Rest Days	Not included; separate pay if worked	Included; no separate pay needed
Typical Application	6-day workweek without rest day pay	All-inclusive salary for monthly-paids
Impact on Overtime/Holidays	Higher base for premiums	Lower base for premiums
Legal Suitability	When policy excludes rest day pay	When policy includes all non-working days

The choice between factors must align with actual company practices to avoid underpayment claims. Misapplication can lead to labor disputes, as seen in cases like Union of Filipro Employees v. Nestle Philippines, Inc. (G.R. No. 88710-13, 1990), where the Supreme Court emphasized that divisors must reflect the true nature of compensation.

Pay for Unworked Rest Days

Under Article 93 of the Labor Code, employers must provide a rest period of at least 24 consecutive hours after every six days of work. If the rest day is unworked, there is no automatic entitlement to pay unless:

Provided by company policy, practice, or CBA.
The employee has worked for at least six days in the preceding week (for holiday pay linkage under Article 94).
The monthly salary is computed using a factor that includes rest days (e.g., 365).

If unworked rest days are not compensated, the factor should be 313 or similar. However, many employers adopt the 365-factor to simplify payroll and comply with the "no work, no pay" principle only for unauthorized absences, while deeming rest days as paid.

For work on rest days:

If not a regular holiday: +30% premium (Article 93).
If a special non-working day: +50% if worked (DOLE rules).
Employee consent is required for work on rest days, except in emergencies.

DOLE encourages policies that pay for unworked rest days to promote work-life balance, and violations can result in backpay orders from the National Labor Relations Commission (NLRC).

Other Related Factors and Variations

While 313 and 365 are the most common, other factors may apply:

393.5-Day Factor: Used when including paid rest days (52 x 1.5 for premium assumption) plus holidays, but less common.
302-Day Factor: For 5-day workweeks excluding Saturdays and Sundays (365 - 52 - 11 holidays, adjusted).
314-Day Factor: Sometimes used for 6-day workweeks including some holidays but excluding unworked rest days.
Leap years adjust to 366, but averages are used.

Factors for special non-working days vary annually based on presidential proclamations (e.g., Proclamation No. 90 for 2023 holidays). Employers must update computations accordingly.

Legal Basis and Jurisprudence

Labor Code Articles: 82-96 (Hours of Work, Wages, Holidays, Rest Days).
DOLE Issuances: Department Order No. 118-12 (Rules on Employment of Homeworkers, referencing factors); Handbook on Workers' Statutory Monetary Benefits (2022 edition).
Supreme Court Rulings:
- Mercidar Fishing Corp. v. NLRC (G.R. No. 112574, 1998): Monthly salary does not automatically include holiday pay unless proven.
- Chartered Bank Employees Association v. Ople (G.R. No. L-44717, 1985): Divisors must be reasonable and based on paid days.
- Insular Bank of Asia and America Employees' Union v. Inciong (G.R. No. L-52415, 1984): Confirmed use of 365 for all-inclusive salaries.

Employers must document the factor used in payroll records to defend against claims.

Practical Considerations and Examples

Example 1: Absence Deduction

Monthly salary: PHP 15,000. Using 365-factor, EDR ≈ PHP 493.15. One-day absence deduction: PHP 493.15. Using 313-factor, EDR ≈ PHP 575.08, deduction: PHP 575.08.

Example 2: Rest Day Work

If working on a rest day (no holiday), premium is 130% of EDR. With 365-factor: Premium = 1.3 x 657.53 ≈ PHP 854.79 (for PHP 20,000 salary). With 313-factor: 1.3 x 766.77 ≈ PHP 996.80.

Employers should conduct audits to ensure factor consistency. Employees can file complaints with DOLE for miscomputations, potentially leading to restitution.

Challenges and Compliance Tips

Disputes: Common issues arise from unclear policies, leading to underpayment claims. Resolution through DOLE conciliation or NLRC arbitration.
Tax Implications: EDR affects withholding tax computations under BIR rules.
Industry Variations: Factories may use 313 for shift workers; offices prefer 365.
Tips for Employers: Adopt a clear policy in employee handbooks; use payroll software with DOLE-approved factors.
Tips for Employees: Review payslips for divisor transparency; consult DOLE for rights.

Conclusion

The 313 vs. 365 factors represent fundamental approaches to wage computation in the Philippines, balancing employer costs with employee rights to fair pay, including for unworked rest days. Proper application ensures legal compliance, prevents disputes, and fosters equitable labor relations. Employers must align their chosen factor with actual practices, while employees should be aware of their entitlements under the Labor Code. Continuous reference to updated DOLE guidelines is essential, as holiday declarations and economic conditions may influence these computations.